Fremont Company Faces Nearly $1M PPP Settlement

A pandemic-relief loan case out of Fremont just turned into a $950,000 settlement. The company is Innodisk USA, and the core allegation is simple — it took a second-draw Paycheck Protection Program loan even though it did not qualify, then got that loan forgiven anyway. That matters because second-draw PPP money had tighter rules than the first round. On May 4, federal prosecutors said Innodisk USA agreed to pay to resolve the case. (justice.gov) ### What was Innodisk USA accused of doing? The government says Innodisk USA applied for a second-draw PPP loan on March 17, 2021, and certified that it met the program’s eligibility rules when it did not. The allegation is not just that the company made a paperwork mistake. The settlement sa(justice.gov) Claims Act. (justice.gov) ### What made the company ineligible? Second-draw PPP loans came with two big gates. A borrower and its affiliates had to employ no more than 300 people, and the borrower had to show a drop in gross receipts of more than 25% versus an earlier period. Federal lawyers say Innodisk USA failed bo(justice.gov)ere counted, and it had not suffered the required revenue decline. (justice.gov) ### Why do affiliates matter so much? Because PPP was aimed at smaller businesses under economic stress, not larger corporate groups that could look small only by slicing off a U.S. subsidiary. The affiliate rule was basically there to stop that move. If a company is controlled by, or closely(justice.gov)here. (justice.gov) ### What is a second-draw PPP loan? It was the follow-on version of the original PPP program. Congress created PPP in March 2020 to keep workers paid during the COVID shock, but the second-draw loans were narrower. Borrowers had to show they were still under real strain. So this was not free-floating emergency money. It was targeted relief for smaller firms that could prove a meaningful revenue hit. (justice.gov) ### Did the company admit liability? Not exactly. This is a civil settlement, not a criminal conviction, and the government’s standard line in these deals is that the settlement resolves allegations. But the money is real, and so is the signal. Innodisk USA agreed to pay $950,000 to end the case. Federal officials also said the company had sought and obtained forgiveness of the loan despite knowing it was not eligible. (justice.gov) ### Who brought the case forward? A whistleblower did. The case was filed under the qui tam provisions of the False Claims Act by Blockquote, Inc., which sued on behalf of the United States. That matters because a lot of PPP enforcement now runs through this model — private parties flag a cas(justice.gov)e recovery. (justice.gov) ### Why is this still happening in 2026? Because PPP enforcement has a long tail. The loans went out during the pandemic, but audits, civil investigations, and whistleblower suits can keep moving for years. The government is still working through who was actually eligible, who got forgiveness(justice.gov)e is far from over. (justice.gov) ### Bottom line This case is not about a fake company inventing payroll from scratch. It is about a real company allegedly failing eligibility rules that were supposed to keep scarce relief money focused on smaller, harder-hit businesses. Years later, that distinction is still costing companies real money. (justice.gov)