DOJ Settles FCA Claims Against PPP Fintech Lender and Processor

A now-bankrupt fintech lender and processor of Paycheck Protection Program (PPP) loans recently entered into two settlement agreements with the DOJ to resolve allegations that the fintech knowingly submitted false claims for loan forgiveness, loan guarantees, and processing fees to the Small Business Administration (SBA) in violation of the False Claims Act. 

In one settlement agreement, the fintech admits to 1) including employee annual compensation over $100,000 in calculating borrowers’ eligible loan amounts on some loan applications; 2) including payments for non-eligible costs or duplicative costs; and 3) double counting tax withholdings in determining monthly payroll amounts, all of which led to increased processing fees for the fintech.  To resolve these claims, the fintech granted the United States an unsecured claim of up to $63 million in the bankruptcy case, minus a $12.5 million credit for a previous payment made to the SBA.

The second settlement agreement resolves allegations that the fintech failed to implement adequate fraud controls sufficient to comply with PPP requirements, including Bank Secrecy Act/Anti-Money Laundering (BSA/AML) requirements.  Among the DOJ’s allegations are that the fintech 1) knowingly and systematically failed to conduct a timely good faith review to identify fraudulent borrowers and prevent disbursement of fraudulent loans; 2) knowingly and systematically submitted fraudulent PPP loan applications; and 3) knowingly set substandard fraud check thresholds, reduced its fraud review staff, instructed staff to submit PPP loans despite having identified those loans as fraudulent or suspicious of fraud, and encouraged employees to approve more PPP loan applications to increase revenue.  To resolve these claims, the fintech granted the United States an unsecured claim of up to $57 million in the bankruptcy case.  The fintech neither admits nor denies any allegations of wrongdoing in this settlement agreement.