U.S. Attorney’s Office Settles False Claims Act Allegations with Paycheck Protection Program Lender

On September 13, 2022, the U.S. Attorney’s Office (USAO) for the Southern District of Texas announced ​that it had reached a settlement with a bank that served as a lender under the Paycheck Protection Program (PPP) to resolve allegations that the lender violated the False Claims Act (FCA) in issuing processing a PPP loan.  According to the USAO, this settlement represents the first FCA settlement with a PPP lender. ​

The PPP, authorized by the Coronavirus Aid, Relief and Economic Security (CARES) Act, provided loans to small businesses during the COVID-19 pandemic. Loans under this program are forgiven under certain conditions.

The USAO alleged that the defendant bank violated the FCA when it processed a PPP loan on behalf of an ineligible customer because bank employees knew that the applicant was facing criminal charges related to his business, and was therefore ineligible for a PPP loan.  The USAO alleges that the bank processed the ineligible applicant’s $213,400 PPP loan anyway and, as a result, received a 5% processing fee totaling $10,670.

The bank agreed to pay $18,673.50 to resolve the allegations.  The USAO stated that the settlement amount is intended to reflect the bank’s efforts to cooperate with the USAO’s investigation, as well as its implementation of additional compliance measures.  The applicant separately entered into a $523,331 settlement in November 2021, and repaid the PPP loan in full in 2022.