Fremont Company to Pay Nearly $1M Settlement
- Fremont-based Innodisk USA agreed on May 4 to pay $950,000 after federal prosecutors said it wrongly took and kept a second-draw PPP loan. - The government says Innodisk failed both key tests — it was too large once affiliates were counted and lacked the required 25% revenue drop. - The case shows PPP enforcement is still active years later, with whistleblowers and False Claims Act suits driving pandemic-fraud recoveries.
A Fremont tech company just agreed to pay $950,000 to settle a pandemic-loan case. The company is Innodisk USA, and the fight was over a second-draw Paycheck Protection Program loan it allegedly should never have received in the first place. That matters because PPP money was supposed to go to smaller businesses that were actually hit hard by the pandemic. The gap here is simple — the program moved fast in 2020 and 2021, but cleanup is still happening in 2026. (justice.gov) ### What did Innodisk USA allegedly do? Federal prosecutors say Innodisk USA applied for and got a second-draw PPP loan on March 17, 2021, then later obtained forgiveness, even though it was not eligible under the program’s rules. The settlement does not mean there was a trial verdict, but it does resolve the government’s False Claims Act allegations. The total payment is $950,000. (justice.gov) ### Why was the company allegedly ineligible? Second-draw PPP loans came with two big gates. A borrower had to have no more than 300 employees when affiliates were counted, and it had to show a drop in gross receipts of more than 25% versus an earlier period. Prosecutors say Innodisk USA failed both tests — it a(justice.gov)red the required revenue decline. (justice.gov) ### Why do affiliates matter so much? This is the part that trips companies up. PPP eligibility was not always based on the U.S. subsidiary standing alone. If a company was part of a larger corporate family, the headcount and control relationships could matter. Basically, the government’s view is that you do not(justice.gov)to have been central. (justice.gov) ### Who brought the case? The case started under the False Claims Act’s whistleblower setup, also called qui tam. A private company, Blockquote, Inc., filed the action on behalf of the United States. Under the settlement, Blockquote will receive $95,000. The case was filed in federal court in the Northern District of California as *United States ex rel. Blockquote, Inc. v. Innodisk Corp., USA*, case number 3:24-cv-02949-WHO. (justice.gov) ### Why use the False Claims Act here? Because PPP money was federal money, and the False Claims Act is one of the government’s main tools for clawing back funds when it says someone knowingly made false claims to get paid. The law can bring treble damages and penalties, which gives the government leverage even in civil cases. It also gives whistleblowers a financial incentive to come forward. (justice.gov) ### Is this just one leftover pandemic case? No — it fits a broader pattern. DOJ said False Claims Act recoveries topped $2.9 billion in fiscal 2024, and pandemic-relief fraud remained one of its named enforcement priorities. Turns out PPP cleanup has a long tail. The loans went out quickly, but investigations, sealed whistleblower cases, and civil settlements can take years to surface. (justice.gov) ### Why settle instead of fight? For companies, settlement can cap the damage, end the litigation, and avoid the cost and uncertainty of dragging a False Claims Act case through court. For the government, it gets money back without waiting years for a judgment. That does not make the allegations trivial — it just means both sides decided a negotiated outcome was better than a full-blown court fight. (justice.gov) ### Bottom line? This is really a story about PPP’s afterlife. The money went out during the emergency, but the eligibility rules still matter now. Innodisk USA’s $950,000 settlement is a reminder that if a company certified it was small enough and hurt enough to qualify, the government can come back years later and check the math. (justice.gov)
