The Justice Department has announced the first-ever False Claims Act settlement with a lender to resolve allegations related to processing a Paycheck Protection Program loan on behalf of an ineligible customer. This settlement occurred shortly after the Justice Department announced the creation of three new Strike Force teams to enhance its existing efforts to combat and prevent COVID-19 related fraud. This groundbreaking settlement and DOJ’s decision to create additional task forces signals that the government intends to intensify investigations into alleged COVID-19 related fraud.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, provided emergency financial assistance through the Paycheck Protection Program (PPP) in the form of forgivable loans to businesses to cover payroll and other specified expenses. Lenders who originated PPP loans were entitled to receive a fixed fee from the Small Business Administration (SBA). That fee ranged from 1% to 5%, depending on the size of the loan.
From the outset, the government vowed to prevent recipients from fraudulently taking advantage of CARES Act programs. While initial investigations and prosecutions focused on individuals and companies that allegedly received fraudulent loans, the Justice Department has now broadened its scope to include lenders who distributed the funds.
Prosperity Bank, with branches throughout Texas and...
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