Justice Dept. asks United Community for PPP documents
United Community Banks in Blairsville, Ga., has received a request from the Department of Justice for documents tied to its participation in the Paycheck Protection Program.
The $13.1 billion-asset company disclosed in a regulatory filing Tuesday that it had received a civil investigative demand from the Justice Department tied to the False Claims Act.
The agency is looking into the “nonpayment of fees to agents of borrowers,” along with United Community’s policies tied to paying agents, the filing said. United Community said it complied with all laws, regulation and guidance tied to the PPP.
United Community, which has funded more than $1.1 billion in PPP loans, said it plans to cooperate with the Justice Department. The company said $33 million in program loans have been returned by borrowers.
While United Community pays fees to agents and brokers that assist with SBA volume, Brad Milsaps, an analyst at Piper Sandler wrote in a note to clients that the company "opted to not offer agent or broker fees with PPP given the robust volume and stress on its own internal system."
Milsaps said he was told by United Community that its decision to not pay fees was made clear in all communication around the administration of its PPP lending process.
"Our sense is that [United Community] will not be the only bank to receive an inquiry ... given the likelihood of additional scrutiny around the program," Milsaps added.
It is unclear whether other banks have received similar inquiries from the Justice Department.
A lawsuit was recently filed in U.S. District Court for the Central District of California alleging that 200 lenders, including Citigroup and Wells Fargo, have systemically failed to pay the agents of borrowers, typically accountants, their share of the processing fees established under PPP.