PPP lender fraud can occur in many ways. In some cases, PPP lenders recruit individuals who are not eligible to apply for PPP loans—often because they don’t even own a business—and offer to process a fraudulent PPP loan in exchange for a portion of the loan. This payment from the borrower to the lender is an illegal kickback.
As part of the PPP, the government directly pays the lender for processing PPP loan applications. Therefore, any fees charged by the lender to the borrower are fraudulent. If a legitimate PPP borrower has a portion of their loan held by the bank for “fees,” then the bank is likely committing fraud.
In a series of class action lawsuits, Bank of America, JPMorgan Chase, U.S. Bank, and Wells Fargo have been accused of prioritizing larger loan amounts over others in order to get higher processing fees paid by the government. This behavior was allegedly unlawful because the Small Business Administration (SBA) dictates that loans are to be dispersed on a first-come, first-served basis. Since the government pays processing fees to PPP lenders, this type of misconduct could also lead to liability under the False Claims Act (FCA).
The SBA requires lenders to do their due diligence and obtain certain pieces of information from PPP borrowers, such as monthly payroll costs. Banks should follow the guidelines of the SBA to determine the eligibility of a small business for PPP loans.
One study found that about “1.8 million of the program’s 11.8 million loans – more than 15% – totaling $76 billion had at least one indication of potential fraud.”
With very little oversight over the PPP, some unscrupulous borrowers and lenders have taken advantage of this program and scammed the American taxpayers out of millions of dollars. These scams have defrauded small business owners who were unable to obtain PPP funds when they legitimately needed them to keep their businesses afloat.
If you were contacted by a bank or anyone representing a bank about applying for a PPP loan even though you do not own a small business, you should speak to a whistleblower attorney. Or, if the bank kept a portion of your legitimate PPP loan as a fee, you should contact an experienced attorney to determine if this was an illegal kickback.
Whistleblowers are critical in the fight against PPP fraud. Individuals with information about these schemes can file a lawsuit on behalf of the federal government and may be entitled to portion of the recovery as a reward.
With more than 30 years of experience in Qui Tam cases, the attorneys on Baron & Budd’s whistleblower representation team have represented some 70 clients in government fraud cases returning over $5.4 billion to federal and state agencies, with whistleblower recovery shares as high as 49%. They are ready to help if you have evidence of fraud involving the Paycheck Protection Program.
Please call (866) 401-5971 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower. Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.