The U.S. Attorney's Office in Grand Rapids is joining a federal lawsuit that accuses the Schostak family's group of restaurant and real estate businesses of overdrawing nearly $2.5 million from the pandemic-era Paycheck Protection Program.
The lawsuit was filed in April 2025 against five Schostak-owned businesses, including Livonia-based Schostak Brothers & Co., but was unsealed only in late August of this year, when the U.S. Attorney Timothy VerHey's office said it planned to take up the case.
The suit was brought by a San Francisco-based firm, Blockquote Inc., under the "qui tam" provisions of the False Claims Act, under which a private party can file an action on behalf of the federal government and get a portion of any recovery.
Blockquote
has filed numerous such lawsuits across the country related to PPP fraud allegations, often netting six-figure awards for itself from the cases' eventual settlements.
The lawsuit accuses Schostak Brothers & Co. of violating rules in the PPP program that set a $4 million limit on the amount of forgivable loans available to businesses within a single corporate group for "second draw" PPP loans in 2021.
The five Schostak-owned companies received second draw loans and eventual forgiveness totaling nearly $6.5 million, the lawsuit says, or about $2.5 million over the limit for such affiliated businesses.
In addition, Schostak Brothers & Co. should have been ineligible for a second PPP loan, the suit says, because it employed more than the maximum allowed 300 workers for a second draw and it wasn't a restaurant or a franchisee, which were given exceptions in the program to the 300-employee rule.
The other four Schostak-owned business were Team Schostak Family Restaurants, SOK Venture LLC, Applebee's operator TSFR Apple Venture LLC and MOD Pizza operator TSFR Pizza LLC.
A representative for the Schostak businesses issued a statement for this story:
"During the global pandemic, like thousands of other companies across Michigan, the entities received COVID assistance loans after consulting with various trade organizations, attorneys, bankers, and other experts to determine the proper course of action," the statement says.
"The companies were solely focused on keeping their team members employed and protecting employees’ livelihoods — while continuing to serve communities across Michigan as the family has done for more than 100 years. The companies are working cooperatively with the federal government to look back on a challenging period where complex regulations were rapidly evolving in real time.
"We are all thankful to the U.S. Attorney’s Office for continued collaboration and we all look forward to next steps and a reaching a timely resolution."
An attorney for Blockquote didn't return a message seeking comment for this story.
The Paycheck Protection Program, commonly called PPP, was a federal pandemic relief initiative that began in 2020 as COVID-19 forced numerous businesses to temporarily shut their doors.
PPP loans could be forgiven if recipients spent at least 60% of the money on payroll costs and maintained employee headcount and compensation for a loan's covered period of time. Loans that didn't qualify for forgiveness had to be repaid with 1% interest.
Contact JC Reindl: 313-378-5460 or jcreindl@freepress.com. Follow him on X @jcreindl
This article originally appeared on Detroit Free Press: Feds join lawsuit alleging Schostak businesses overdrew PPP by $2.5M
