Justice Department targets PPP fraud; Wells (again) under the microscope

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PPP fraud

“Federal prosecutors are mounting a broad search for fraud in emergency lending programs designed to assist businesses battered by the coronavirus crisis,” the Wall Street Journal reported. “The $660 billion Paycheck Protection Program is getting the most attention now because it is rushing loans out quickly to reach small businesses in dire need of liquidity.”

The Justice Department “has a lot of leads and there are multiple ongoing investigations of individuals and small businesses,” Assistant Attorney General Brian A. Benczkowski said, adding that “prosecutors also will apply scrutiny to the activities of banks, which are charged with disbursing the funds in some of the programs.”

“Whenever there is lending like this, there is always a high likelihood or high possibility of bank fraud and other types of fraud,” he said.

On Tuesday “federal prosecutors in Rhode Island charged two east coast businessmen with inventing dozens of employees to apply for four separate loans under the PPP” totaling $550,000, the Financial Times reported. The fraud was exposed by “an undercover FBI agent posing as a bank compliance officer.”

At the same time, Wells Fargo said it has received “formal and informal inquiries from federal and state governmental agencies regarding its offering of PPP loans,” Reuters reported. “As of April 27 the bank had submitted more than 100,000 PPP applications to the Small Business Administration for review,” a Wells spokesman said Tuesday.

Meanwhile, “some public companies are declining to return” money they received through the PPP, “saying the program’s initial rules never barred them from applying. And some outside experts agree,” the Washington Post reported. That “ambiguity … is complicating the Trump administration’s effort to claw back money doled out under the program to publicly traded companies.”

“The lack of clarity reflects the rushed rollout of the loan program, which Congress and the Trump administration created in a hurry last month to try to save businesses and jobs amid the coronavirus crisis. The loans were particularly attractive because the government will forgive them if companies use the money to retain workers.”

Wall Street Journal

Permanent changes?

Investment bankers are rethinking their pre-coronavirus lifestyle of exhausting global travel, interrupted family time and all-nighters in the office as they plan an eventual return to the workplace,” the Journal reports. “Many bankers are finding they can do their jobs without the cost of frequent flying or time wasted in airports thanks to videoconferencing and other technology that has become ubiquitous during the lockdowns resulting from coronavirus pandemic.

“Bankers will eventually fly again. Face-to-face meetings are key to building client trust, they say. But videoconferencing is expected to remain popular as banks look to save on costly flights and time wasted in airports.”

Financial Times

Leveling the field

In the U.K., nonbank lenders are asking the Bank of England to help them compete in the market for government-guaranteed “bounce back” loans to small businesses, which carry six-year maturities at 2.5% interest, with the first year’s interest and fees paid by the government.

“Executives in the alternative lending sector, fearful that they will be unable to offer loans at such a low rate of interest fixed for up to six years, have asked the Bank of England to let them access its term funding scheme, which offers lower-cost financing to the banking sector.”


Raising funds

N26, the German digital bank, said it has raised an additional $100 million, raising its total funding so far to $770 million to date. The company remains valued at $3.5 billion, which CEO Valentin Stalf said “makes us still one of the most highly-valued companies around Europe.” He “insisted the company wasn’t running low on cash and said the round instead highlighted a trend of more people opting to ‘bank from home’ instead of at a physical branch.”

“It’s not only about where we are today at $3.5 billion, but where are we going to be in five to 10 years,” he said. The bank has over five million users.


“We don’t intend to return the loan because it’s going to serve its intended purpose, which is to prevent people from being laid off. If we’re eligible for the program and we meet the requirements, why wouldn’t we participate?” — Bruce Davis, CEO of Digimarc, a 210-employee tech company in Beaverton, Ore., which received a $5 million PPP loan.

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Paycheck Protection Program Small business lending Wells Fargo DoJ Investment banking Nonbank Digital banking