Fremont Company Settles Nearly $1M PPP Fraud

A Fremont tech company just agreed to pay $950,000 over a pandemic relief loan it allegedly should never have received in the first place. The company is Innodisk USA, a subsidiary of Taiwan-based Innodisk Corporation. The basic allegation is simple — it took a second-draw Paycheck Protection Program loan even though it wasn’t eligible, then got that loan forgiven anyway. The settlement was announced by the U.S. Attorney’s Office for the Northern District of California on May 4. (justice.gov) ### What was the company accused of doing? Federal prosecutors say Innodisk USA knowingly violated the False Claims Act by applying for and retaining a second-draw PPP loan that did not meet the program’s rules. This was not a criminal conviction, and the settlement resolve(justice.gov)actually have. (justice.gov) ### Why wasn’t it eligible? Second-draw PPP loans had two big gatekeepers. A business had to have no more than 300 employees when affiliates were counted, and it had to show a gross-receipts decline of more than 25% against an earlier comparison period. Prosecutors say Inno(justice.gov)suffered the required revenue drop. (justice.gov) ### Why do affiliates matter so much? Because PPP was aimed at smaller businesses that were actually squeezed by the pandemic. A company can look small if you isolate the U.S. subsidiary, but the rules often required the government to look at the whole corporate family. Tha(justice.gov)r group made it ineligible and applied anyway. (justice.gov) ### When did this happen? The government says Innodisk USA applied for the second-draw loan on March 17, 2021. PPP itself was a CARES Act program created in March 2020, and the loan program later closed on May 31, 2021. So this case is about conduct from the tail end of the pandemic aid rush, but enforcement is still unfolding years later. (justice.gov) ### Who brought the case forward? A whistleblower did. The settlement says the claims were brought under the False Claims Act’s qui tam provisions by Blockquote, Inc., which filed on behalf of the United States. Under that setup, private parties can share in recoveries, and(justice.gov)justice.gov) ### Why is this still happening in 2026? Because the government is still unwinding a huge pandemic lending program with lots of questionable loans buried inside it. PPP sent out enormous sums fast, which helped businesses but also created room for abuse. In late April, SBA (justice.gov)d those borrowers to DOJ. That gives you the backdrop — smaller settlements like this one are part of a much larger cleanup. (sba.gov) ### Is $950,000 just repayment? Not exactly. Settlements like this usually bundle damages and penalties into one number. Here, the government’s announcement says Innodisk USA agreed to pay a total of $950,000 to resolve the allegations. The point is less about one loan balance in isolation and more about punishing false certifications in a program that depended heavily on borrower honesty. (justice.gov) ### Bottom line This case is a reminder that PPP enforcement did not end when the loans stopped. The money went out in 2020 and 2021, but the rule-checking is still catching up — and companies that stretched the eligibility rules are still paying for it. (justice.gov)