U.S. Joins FCA Suit Against Former Kabbage Executives

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# United States Joins Lawsuit Against Former Executives of Kabbage Inc. Alleging False Claims Act Violations in Connection with PPP Lending

**Source:** U.S. Department of Justice, Office of Public Affairs
**Date:** Friday, December 20, 2024
**Press Release Number:** 24-1625
**URL:** https://www.justice.gov/archives/opa/pr/united-states-joins-lawsuit-against-former-executives-kabbage-inc-alleging-false-claims-act
**Retrieved:** 2026-06-12
**Component:** Civil Division; USAO - Eastern District of Texas
**Government complaint (DOJ-hosted PDF):** https://www.justice.gov/media/1381951/dl

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The United States has intervened and filed a complaint against Robert Frohwein, Kathryn Petralia and Spencer Robinson, three former executives of Kabbage Inc., a now-bankrupt financial technology company. The United States alleges that they violated the False Claims Act by submitting and causing the submission of false claims for loan forgiveness, loan guarantees and processing fees to the Small Business Administration (SBA) in connection with Kabbage's participation in the Paycheck Protection Program (PPP).

"The department is committed to ensuring that PPP lenders — including their executives — are held accountable for contributing to the misuse of PPP funds by knowingly failing to comply with applicable program requirements, including approving PPP loans in inflated amounts and to ineligible borrowers," said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department's Civil Division.

According to the government's complaint, Frohwein and Petralia co-founded Kabbage in 2008 and served as the company's chief executive officer and president, respectively, while Robinson formerly served as the company's head of strategy. **Kabbage was approved as a PPP lender in 2020 and approved more than $7 billion in PPP loans that year for which the company was paid more than $217 million in processing fees** after certifying that it had complied with all applicable lending requirements.

The complaint alleges that, between April and October 2020, the defendants knowingly submitted or caused the submission of false claims for loan guarantees, loan forgiveness and processing fees relating to tens of thousands of PPP loans that were systemically inflated due to calculation errors by Kabbage. These errors allegedly included Kabbage's double-counting of state and local taxes paid by employees and the failure to exclude annual compensation in excess of $100,000 per employee. Additionally, the lawsuit alleges that the defendants knowingly submitted or caused the submission of false claims for processing fees related to tens of thousands of PPP loans where Kabbage failed to implement appropriate fraud controls. The government's complaint alleges that the defendants ignored these violations to maximize PPP processing fees before selling off the majority of Kabbage's assets in October 2020.

Kabbage Inc., now winding down as KServicing Wind Down Corp., previously agreed to resolve allegations relating to its role in the submission of false claims to the SBA; the United States received a general unsecured claim in the bankruptcy proceeding of up to $120 million, and the company received a credit for $12.5 million that Kabbage returned to SBA during the department's investigation.

The lawsuit was originally filed under the *qui tam* provisions of the False Claims Act by Paul Pietschner, a former analyst in Kabbage's collections department.

*The claims asserted by the United States are allegations only. There has been no determination of liability.*

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