The Corporate Whistleblower Center has issued an urgent call to employees who observed their bank employers engaging in fraudulent practices while originating COVID-19 Paycheck Protection Program (PPP) loans. These loans were intended to help small businesses grappling with the economic impact of the pandemic. According to the Center, there is a potential for whistleblowers to receive rewards that could amount to millions of dollars.
The Paycheck Protection Program was established in 2020 by the White House and the US Congress, administered by the US Small Business Administration (SBA) to provide financial relief to small businesses. Under the program, banks and financial institutions were authorized to originate loans for businesses with fewer than 500 employees. The loans mandated that at least 60% of the proceeds be used for payroll expenses, and the funds were required to be necessary for the business's survival during the pandemic.
However, the Corporate Whistleblower Center has pointed out that PPP loan fraud was rampant, with many banks and financial institutions failing to conduct proper due diligence. Specific examples of such fraudulent activity include loan officers offering PPP loans to nursing homes, long-term care facilities, nurse staffing agencies, and other healthcare companies, even when the total number of employees exceeded the 500-employee threshold. In many cases, the same bank processed multiple loan applications for different branches of the same company, making it impossible for them not to notice the violations.
Additionally, banks often did not verify whether the loan proceeds were used for payroll. In numerous instances, healthcare companies received substantial loans, sometimes around a million dollars per location, and used the funds for purposes other than payroll, such as expanding their facilities or retaining the money for themselves. Such loans were typically forgiven, meaning the fraudulent actions went unchecked.
Another common malpractice was banks encouraging borrowers to set up new accounts with them instead of using their existing accounts. This practice sometimes led to the business's accounting staff being unaware of significant deposits, often amounting to millions of dollars, made into these new accounts via the SBA.
The Corporate Whistleblower Center is specifically reaching out to individuals who worked at banks or financial institutions that originated PPP loans during 2020-2021. They are urging those who witnessed instructions to ignore due diligence or the basic rules of the program to come forward. The potential rewards for whistleblowers are substantial, as they may be aware of multiple companies that committed fraud under the PPP.
Given the scale and severity of the fraud, the Center emphasizes that the wrongdoing is straightforward to prove. Many of the implicated banks are small local or regional institutions, where the impact of such fraud could be more easily exposed. The Corporate Whistleblower Center assures that all calls will be confidential and encourages those with information to reach out.
