The Department of Justice (DOJ) announced on September 12, the first-ever False Claims Act (FCA) settlement with a Paycheck Protection Program (PPP) lender. Prosperity Bank, a Texas-based regional bank, agreed to pay $18,673.50 to resolve allegations it improperly processed a PPP loan on behalf of an ineligible applicant.

In May 2021, Prosperity Bank approved and processed a $213,400 PPP loan for a pain management practice in Houston. The PPP application included a question asking whether the applicant (or any individual owning more than 20% equity) was subject to an indictment, criminal information, arraignment or other criminal charges in any jurisdiction. The physician who wholly owns the pain management practice was facing criminal charges at the time of the application but checked the box marked “No” in response to that question.

The government alleged that Prosperity Bank employees knew the physician was facing criminal charges and was therefore ineligible to apply for the PPP loan. However, the bank processed the application and falsely granted the money. Prosperity Bank received a 5% processing fee of $10,670, which the government claimed it was not entitled to receive.

The physician-owner agreed to pay $523,331 to resolve his liability arising from fraudulent medical billing and submitting the false PPP loan application. DOJ noted that the settlement amount paid by Prosperity Bank reflects the bank’s cooperation with the investigation and implementing additional compliance measures.

As highlighted last month, DOJ has stepped up enforcement actions involving the PPP and other CARES Act stimulus programs. DOJ’s announcement on September 14 of three additional DOJ Strike Force teams focusing on COVID-19 fraud is further evidence that DOJ intends to bring more cases related to PPP and other pandemic relief programs. Prosperity Bank’s FCA settlement signals that other lenders that approved loans for ineligible applicants could find themselves the subjects of such DOJ actions. Other lenders who approved ineligible applicants could be accused of having relied on certifications that they knew or should have known were false.