Bank Settles FCA Allegations Related to Branch Manager’s Fraudulent PPP Submissions

An Ohio-headquartered bank recently settled with the U.S. Department of Justice for over $7.7 million, to resolve allegations of vicarious liability for its former branch manager’s criminal actions in facilitating many fraudulent Paycheck Protection Program (PPP) loan submissions through the bank, and allegations that the bank failed to properly respond to the branch manager’s fraudulent scheme, including by submitting the subject loans for forgiveness or guaranty from the Small Business Administration (SBA). 

The branch manager allegedly conspired with others (outside of the bank) to knowingly submit PPP loan applications with false information that significantly inflated payroll expenses and employee headcounts of businesses with little or no operation.  The DOJ alleged that approximately 48 fraudulent PPP loan applications were facilitated by this branch manager at the bank without the bank’s knowledge.  Almost $6 million in total was disbursed to these business applicants, from whom the branch manager also received or was to receive certain payments under this scheme.  In 2024, the branch manager pleaded guilty to bank fraud conspiracy.

The bank had cooperated with the government on this investigation, including, originally, by disclosing its concerns about this potential fraud in June 2021, shortly after terminating the branch manager for violating bank policies.  The bank detected suspicious activity and submitted potential fraud complaints to the SBA’s Office of Inspector General on 31 loans, but did not investigate or detect fraud with respect to the other 17 PPP loans facilitated by the branch manager.  The bank neither admitted nor denied liability.