Earlier this month, the DOJ announced its first False Claims Act (FCA) settlement with a Paycheck Protection Program (PPP) lender, resolving allegations that the bank submitted statements fraudulent on behalf of an ineligible borrower applying for a loan.
In May 2020, shortly after Congress enacted the CARES (Coronavirus Aid, Relief and Economic Security) Act, the bank lender submitted an initial PPP loan application on behalf of its borrower, a pain management clinic based in Texas and its owner (Borrower). The lenders behind the PPP loans, such as the bank, are eligible to receive a commission of 1% to 5% from the Small Business Administration (SBA), with the commission varying depending on the size of the loan .
During the process of filling out the PPP application questionnaire, the Borrower replied in the negative to “if the applicant (or any person holding more than 20% of the capital) is the subject of an indictment, d criminal investigation, indictment or other means by which charges are brought in any jurisdiction”. However, following an investigation by the Office of the Inspector General of the Department of Health and Human Services and the Defense Criminal Investigative Services, it was determined that at the time of submission of the request, the Borrower faced criminal charges stemming from illegal practices of prescribing opioid drugs. Additionally, it was determined that the bank lender was aware of these pending charges, but nonetheless processed the request, containing the falsified response regarding the criminal charges. This application was submitted to the SBA not only in support of the borrower’s PPP application, but also in support of the Bank’s receipt of its origination fee from the SBA based on of its administration of the loan.
The borrower settled with the DOJ regarding its fraudulent submission in November 2021 and repaid the loan in full earlier this year. The bank lender’s settlement for $18,637.50 resolves the bank’s potential liability for knowingly submitting fraudulent information in support of the PPP application, and the fees collected by the bank. The DOJ noted that “[t]The settlement amount also reflects [the bank’s] efforts to cooperate with the government’s investigation and provide relevant facts as well as its implementation of additional compliance measures. Finally, the claims resolved by the settlement are allegations only and no determination of liability has been made in this matter.