Tax-exempt labor organizations agree to $3.85 million settlement over allegedly improper PPP loans

Four labor organizations and an affiliated welfare fund have agreed to pay $3.85 million to resolve allegations that they falsely certified their eligibility for Paycheck Protection Program loans, the U.S. Attorney’s Office for the Southern District of New York announced July 27, 2026.

The settlement resolves a federal False Claims Act case involving organizations identified by the government as tax-exempt nonprofits under Section 501(c)(5) of the Internal Revenue Code. The government joined a private whistleblower lawsuit that had been filed under seal.

The agreement is a final monetary resolution of the case, but it does not by itself establish an adjudicated finding of liability. The allegations were resolved through settlement rather than a trial judgment.

Who is covered by the settlement

The defendants named in the announcement are the International Union of Journeymen and Allied Trades, United Service Workers Union, IUJAT National Union, Home Healthcare Workers of America, Service Professionals Union Local 726 IUJAT and the United Welfare Fund — Welfare Division.

The government described the organizations and affiliated fund as tax-exempt entities operating under Section 501(c)(5). The settlement concerns their purported certifications that they were eligible to receive loans through the Paycheck Protection Program, commonly known as PPP.

The case was announced by U.S. Attorney Jay Clayton on behalf of the Southern District of New York. The Justice Department’s settlement agreement provides the operative document for the resolution.

What the government alleged

According to the federal announcement, the organizations allegedly made false certifications about their eligibility when seeking PPP loans. The False Claims Act case was initiated privately by a whistleblower, and the government later joined the lawsuit.

The settlement amount is $3,850,000. The approved materials do not specify how much each organization received through the program, how the $3.85 million payment will be divided among the defendants or the exact amount of any individual loan.

The allegations also should not be read as a finding that every PPP loan obtained by the organizations was fraudulent. The resolution addresses the government’s allegations through an agreement, without a trial determination establishing liability.

Why the case matters

The settlement illustrates how federal authorities are pursuing pandemic-relief certifications made by tax-exempt organizations. It also puts labor nonprofits and an affiliated welfare fund at the center of a public-funds accountability case involving government-backed loans.

For organizations that received pandemic relief, the case underscores the legal significance of eligibility certifications submitted in connection with those applications. In this matter, the government’s legal theory focused on allegedly false statements about eligibility, rather than a finding that the named organizations were criminally convicted.

The settlement does not state that the organizations’ tax-exempt status has changed. It resolves the claims described in the federal case and establishes the agreed payment, while leaving the underlying allegations without an adjudicated finding of liability.

What happens next

The announced resolution sets the settlement at $3.85 million. The available official materials do not identify an additional public deadline or a separate next procedural step beyond the settlement agreement.

The case was announced July 27, 2026, by the U.S. Attorney’s Office for the Southern District of New York. The Justice Department’s agreement serves as the primary record for the terms of the resolution.

Sources

• $3.85 Million Settlement Of Case Against Labor Unions For Improper Receipt Of Paycheck Protection Program (PPP) Loans, U.S. Department of Justice, U.S. Attorney’s Office for the Southern District of New York
• Settlement Agreement, U.S. Department of Justice

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