On September 13, 2022, the United States Department of Justice (DOJ) announced a settlement with Prosperity Bank, a regional bank with branches in Texas and Oklahoma, for processing a Paycheck Protection Program (PPP) loan on behalf of an ineligible borrower.
Although the settlement was for less than $20,000, it is nonetheless noteworthy because it is the first time DOJ has publicly settled with a PPP lender for alleged violations of the False Claims Act (FCA) (though DOJ has been actively pursuing fraud cases against PPP borrowers for some time).1 Importantly, this settlement announcement comes on the heels of recent legislation that created a 10-year statute of limitations period for PPP-related fraud (equivalent to the longest statute of limitations available under the FCA). The takeaway is that PPP lenders, as well as other institutions that made loans under other pandemic-related programs such as the Main Street Lending Program, should be prepared for many years of government investigation and enforcement actions targeting PPP fraud.
The original PPP program, a creation of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, was designed to help small businesses meet their payroll (and certain other qualifying expenses) during the unprecedented shutdowns of the early COVID-19 pandemic. The PPP program depended on private lenders making loans to small businesses on behalf of the US government. And, despite significant hurdles, lenders rose to the challenge...
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