Clyburn Letter to Blue Acorn PPP (Nov. 22, 2021)
- Date
- 2021-11-22
Archived source: Clyburn Letter to Blue Acorn PPP (Nov. 22, 2021). Captured from coronavirus-democrats-oversight.house.gov.
Cited in: Barry Calhoun · Blueacorn
Full text
November 22, 2021
Mr. Barry Calhoun
Chief Executive Officer
Blue Acorn PPP, LLC
7014 E Camelback Road, Suite 1452
Scottsdale, AZ 85251
Dear Mr. Calhoun:
The Select Subcommittee on the Coronavirus Crisis has been investigating potential
waste, fraud, and abuse in the Paycheck Protection Program (PPP).1 I am deeply troubled by
reports alleging that financial technology (FinTech) lenders and their bank partners failed to
adequately screen PPP loan applications for. This failure may have led to millions of dollars
worth of FinTech-facilitated PPP loans being made to fraudulent, non-existent, or otherwise
ineligible businesses. I am writing today to request documents and information necessary for the
Select Subcommittee to understand whether your company appropriately implemented all
necessary fraud and financial crime prevention controls while facilitating PPP loans.
On April 8, 2020, the Small Business Administration (SBA) began allowing non-bank
and non-insured depository institution lenders, including FinTechs, to provide PPP loans to
eligible recipients.2 To participate in the program, each institution in this category was required
to certify that it was following the anti-money laundering (AML) requirements applicable to an
equivalent federally regulated financial institution under the Bank Secrecy Act (BSA).3
1
Committee on Oversight and Reform, Select Subcommittee on the Coronavirus Crisis, Press Release:
Select Subcommittee Launches Investigation Into Role of FinTech Industry in PPP Fraud (May 28, 2021) (online at
coronavirus.house.gov/news/press-releases/select-subcommittee-launches-investigation-role-fintech-industry-ppp-
fraud).
2
Department of the Treasury, Paycheck Protection Program (online at home.treasury.gov/policy-
issues/coronavirus/assistance-for-small-businesses/paycheck-protection-program) (accessed May 20, 2021); Small
Business Administration, SBA Form 3507: CARES Act Section 1102 Lender Agreement – Non-Bank and Non-
Insured Depository Institutions Lenders (Apr. 8, 2020) (online at home.treasury.gov/system/files/136/PPP--
Agreement-for-New-Lenders-Non-Bank-Non-Insured-Depository-Institution-Lenders-w-seal-fillable-4-8-2020.pdf).
For definitional consistency, the Select Subcommittee is relying on SBA’s identification of FinTech lenders. Small
Business Administration, Fintech Companies Participating in Paycheck Protection Program As of May 8, 2020
(May 8, 2020) (online at www.sba.gov/sites/default/files/2020-
05/Fintech_Companies_Participating_in_PPP_05.08.20_0.pdf).
3
Small Business Administration, SBA Form 3507: CARES Act Section 1102 Lender Agreement – Non-
Bank and Non-Insured Depository Institutions Lenders (Apr. 8, 2020) (online at
home.treasury.gov/system/files/136/PPP--Agreement-for-New-Lenders-Non-Bank-Non-Insured-Depository-
Institution-Lenders-w-seal-fillable-4-8-2020.pdf). See also Small Business Administration, Business Loan Program
Temporary Changes; Paycheck Protection Program, 85 Fed. Reg. 20811, 20815 (Apr. 15, 2020) (available at
www.federalregister.gov/d/2020-07672/p-115) (interim final rule) (“Entities that are not presently subject to the
Mr. Barry Calhoun
Page 2
Blue Acorn PPP, LLC (Blueacorn) processed at least $14 billion in PPP loans throughout
the duration of the PPP program.4 For loans processed in 2021 alone, your company is estimated
to have taken in at least $1 billion in fees.5 Unfortunately, many of these fees may have been
earned by processing fraudulent or ineligible loan applications. An academic working paper
issued by the McCombs School of Business at the University of Texas at Austin found that
nearly 50 percent of the PPP loans made by your partner financial institutions had indicators of
fraud, including loans that were made to businesses that claimed they paid workers significantly
more than their industry’s norm and loans made to businesses that lacked a state business
registration.6
To help the Select Subcommittee better understand the PPP fraud and financial crime
detection processes applied by FinTech lenders and their bank and non-bank partners, please
produce the following documents and information, accounting for the activities of your
company, by December 6, 2021.
1. All documents and policies establishing or governing the process that Blueacorn used
to review and approve PPP loan applications.
2. All documents and policies related to:
a. any system of preventive controls that Blueacorn has used to deter and
minimize fraud related to PPP loans; and
b. any system of detective controls Blueacorn has had in place to identify and
respond to PPP loan fraud after it had occurred.
3. All communications concerning potential fraud or other financial crime related to
PPP loans, including, but not limited to, emails, persistent chat room logs and
transcripts, direct electronic messages, and minutes of senior leadership meetings.
requirements of the [Bank Secrecy Act], should, prior to engaging in PPP lending activities, including making PPP
loans to either new or existing customers who are eligible borrowers under the PPP, establish an anti-money
laundering (AML) compliance program equivalent to that of a comparable federally regulated institution.”).
4
Blueacorn, Press Release: Blueacorn Helps Process Over $14 Billion in Loans Throughout the Paycheck
Protection Program (June 9, 2021) (online at www.prnewswire.com/news-releases/blueacorn-helps-process-over-
14-billion-in-loans-throughout-the-paycheck-protection-program-301309325.html).
5
How Two Start-Ups Reaped Billions in Fees on Small Business Relief Loans, New York Times (June 27,
2021) (online at www.nytimes.com/2021/06/27/business/ppp-relief-loans-blueacorn-womply.html).
6
John M. Griffin, Samuel Kruger, and Prateek Mahajan, Did FinTech Lenders Facilitate PPP Fraud?,
McCombs School of Business, University of Texas at Austin (online at ssrn.com/abstract=3906395); 15% of
Paycheck Protection Program Loans Could be Fraudulent, Study Shows, New York Times (Aug. 17, 2021) (online
at www.nytimes.com/2021/08/17/business/ppp-fraud-covid.html).
Mr. Barry Calhoun
Page 3
4. All training materials provided to employees and contractors from January 1, 2020 to
May 27, 2021, related to fraud control and prevention, PPP loans, financial crime
investigations, and suspicious activity reporting.
5. All documents, including audits, monthly statistics, and external reviews, containing
assessments or estimates of the amount and value of improper payments that have
been made to PPP applicants whose loans were processed through or facilitated by
the company.
6. The completed SBA Form 3507.
7. All communications, onboarding materials, and Know Your Customer (KYC)
documents related to customers that have been indicted for, convicted of, or have
pleaded guilty to criminal misconduct in connection with any PPP loan or application
for a PPP loan, including but not limited to the loan application documents, internal
and external communications regarding the customer’s loan or loan application,
documentation of the company’s or partner organization’s review of the loan
application, documents reflecting any recommendations or decisions to reject or
approve the loan application, and documents or communications concerning
disbursement of the loan funds.
Please also provide written responses to the following information requests by December
6, 2021:
1. How much is Blueacorn’s total revenue from facilitating PPP loans to date?
2. How many PPP loan applications and loans have been approved, issued, or otherwise
facilitated by Blueacorn, broken down by week, from April 1, 2020, to May 27,
2021?
3. How many PPP loan applications have been denied or rejected by Blueacorn, broken
down by week, from April 1, 2020, to May 27, 2021, and what was the reason for
each denial or rejection?
4. How many Blueacorn employees have been dedicated full time and exclusively to
AML, BSA, or fraud compliance, including those employed full time to prevent,
detect, or investigate potential fraud, broken down by week, from January 1, 2019, to
May 27, 2021? When providing this information, please specify the title and job
responsibilities for each employee included in the total.
5. Please provide a list of all fraud checks conducted by Blueacorn on PPP loan
applications, including indicators used by automatic systems to detect fraud, a
description of how each check serves to detect and prevent fraud, and the average
time taken to approve or reject a PPP loan application, broken down by week.
Mr. Barry Calhoun
Page 4
6. What is Blueacorn’s assessment or estimate of the number and value of potentially
fraudulent PPP loans that your company has issued, approved, or otherwise facilitated
to date, including those loans made in partnership with other financial institutions or
loan service providers?
7. Please provide a description of what indicators and information Blueacorn’s
automated systems use to detect fraud or money laundering and how many and what
percentage of applications were rejected through this system; please also describe
what indicators trigger these automated systems to escalate an application for human
review and what percentage of those escalations resulted in rejected applications.
8. Please provide a detailed description of Blueacorn’s relationship with any non-bank
or bank partners involved in PPP loans, including the name of each entity and any
revenue sharing or liability sharing agreements.
9. Please provide a detailed description of how Blueacorn recruited PPP loan applicants,
including marketing strategies and advertising plans.
10. Please provide a detailed description of any incentives or rewards that Blueacorn
offered or provided to employees or contractors processing PPP loan applications,
including non-monetary rewards.
11. What were the total budgets for, and amounts allocated to, AML, BSA, and fraud
compliance at Blueacorn, on a per quarter basis, in 2019, 2020, and 2021?
12. What was the total compensation of each member of Blueacorn’s executive team in
2019, 2020, and 2021, broken down by constituent components?
13. Did any directors, executives, employees, consultants, or contractors of Blueacorn
receive a bonus, reward, or increase in compensation that was related in whole or in
part to responsibilities for, or profits arising from, PPP lending? If so, please provide
details, including the title and responsibilities of each recipient; the criteria used to
determine each recipient’s compensation or reward; the amount of each recipient’s
compensation or reward; and all documents and communications related to the
decision to issue such bonuses, rewards, or increases in compensation.
These requests are consistent with the House of Representatives’ authorization of the
Select Subcommittee on the Coronavirus Crisis “to conduct a full and complete investigation” of
“issues related to the coronavirus crisis,” including the “efficiency, effectiveness, equity, and
transparency of the use of taxpayer funds and relief programs to address the coronavirus crisis”
Mr. Barry Calhoun
Page 5
and “reports of waste, fraud, abuse, price gouging, profiteering, or other abusive practices related
to the coronavirus crisis.”7
Please respond to this letter by no later than November 26, 2021, to confirm your
company’s cooperation. An attachment to this letter provides additional instructions for
responding to the Select Subcommittee’s request. If you have any questions regarding this
request, please contact Select Subcommittee staff at (202) 225-4400.
Sincerely,
__________________________
James E. Clyburn
Chairman
Enclosure
cc: The Honorable Steve Scalise, Ranking Member
7
H.Res. 8, sec. 4(f), 117th Cong. (2021); H.Res. 935, 116th Cong. (2020).
Responding to Oversight Committee Document Requests
1. In complying with this request, produce all responsive documents that are in your
possession, custody, or control, whether held by you or your past or present agents,
employees, and representatives acting on your behalf. Produce all documents that you
have a legal right to obtain, that you have a right to copy, or to which you have access, as
well as documents that you have placed in the temporary possession, custody, or control
of any third party.
2. Requested documents, and all documents reasonably related to the requested documents,
should not be destroyed, altered, removed, transferred, or otherwise made inaccessible to
the Committee.
3. In the event that any entity, organization, or individual denoted in this request is or has
been known by any name other than that herein denoted, the request shall be read also to
include that alternative identification.
4. The Committee’s preference is to receive documents in electronic form (i.e., CD,
memory stick, thumb drive, or secure file transfer) in lieu of paper productions.
5. Documents produced in electronic format should be organized, identified, and indexed
electronically.
6. Electronic document productions should be prepared according to the following
standards:
a. The production should consist of single page Tagged Image File (“TIF”), files
accompanied by a Concordance-format load file, an Opticon reference file, and a
file defining the fields and character lengths of the load file.
b. Document numbers in the load file should match document Bates numbers and
TIF file names.
c. If the production is completed through a series of multiple partial productions,
field names and file order in all load files should match.
d. All electronic documents produced to the Committee should include the following
fields of metadata specific to each document, and no modifications should be
made to the original metadata:
BEGDOC, ENDDOC, TEXT, BEGATTACH, ENDATTACH, PAGECOUNT,
CUSTODIAN, RECORDTYPE, DATE, TIME, SENTDATE, SENTTIME,
BEGINDATE, BEGINTIME, ENDDATE, ENDTIME, AUTHOR, FROM, CC,
TO, BCC, SUBJECT, TITLE, FILENAME, FILEEXT, FILESIZE,
DATECREATED, TIMECREATED, DATELASTMOD, TIMELASTMOD,
INTMSGID, INTMSGHEADER, NATIVELINK, INTFILPATH, EXCEPTION,
BEGATTACH.
7. Documents produced to the Committee should include an index describing the contents
of the production. To the extent more than one CD, hard drive, memory stick, thumb
drive, zip file, box, or folder is produced, each should contain an index describing its
contents.
8. Documents produced in response to this request shall be produced together with copies of
file labels, dividers, or identifying markers with which they were associated when the
request was served.
9. When you produce documents, you should identify the paragraph(s) or request(s) in the
Committee’s letter to which the documents respond.
10. The fact that any other person or entity also possesses non-identical or identical copies of
the same documents shall not be a basis to withhold any information.
11. The pendency of or potential for litigation shall not be a basis to withhold any
information.
12. In accordance with 5 U.S.C.§ 552(d), the Freedom of Information Act (FOIA) and any
statutory exemptions to FOIA shall not be a basis for withholding any information.
13. Pursuant to 5 U.S.C. § 552a(b)(9), the Privacy Act shall not be a basis for withholding
information.
14. If compliance with the request cannot be made in full by the specified return date,
compliance shall be made to the extent possible by that date. An explanation of why full
compliance is not possible shall be provided along with any partial production.
15. In the event that a document is withheld on the basis of privilege, provide a privilege log
containing the following information concerning any such document: (a) every privilege
asserted; (b) the type of document; (c) the general subject matter; (d) the date, author,
addressee, and any other recipient(s); (e) the relationship of the author and addressee to
each other; and (f) the basis for the privilege(s) asserted.
16. If any document responsive to this request was, but no longer is, in your possession,
custody, or control, identify the document (by date, author, subject, and recipients), and
explain the circumstances under which the document ceased to be in your possession,
custody, or control.
17. If a date or other descriptive detail set forth in this request referring to a document is
inaccurate, but the actual date or other descriptive detail is known to you or is otherwise
apparent from the context of the request, produce all documents that would be responsive
as if the date or other descriptive detail were correct.
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18. This request is continuing in nature and applies to any newly-discovered information.
Any record, document, compilation of data, or information not produced because it has
not been located or discovered by the return date shall be produced immediately upon
subsequent location or discovery.
19. All documents shall be Bates-stamped sequentially and produced sequentially.
20. Two sets of each production shall be delivered, one set to the Majority Staff and one set
to the Minority Staff. When documents are produced to the Committee, production sets
shall be delivered to the Majority Staff in Room 2157 of the Rayburn House Office
Building and the Minority Staff in Room 2105 of the Rayburn House Office Building.
21. Upon completion of the production, submit a written certification, signed by you or your
counsel, stating that: (1) a diligent search has been completed of all documents in your
possession, custody, or control that reasonably could contain responsive documents; and
(2) all documents located during the search that are responsive have been produced to the
Committee.
Definitions
1. The term “document” means any written, recorded, or graphic matter of any nature
whatsoever, regardless of how recorded, and whether original or copy, including, but not
limited to, the following: memoranda, reports, expense reports, books, manuals,
instructions, financial reports, data, working papers, records, notes, letters, notices,
confirmations, telegrams, receipts, appraisals, pamphlets, magazines, newspapers,
prospectuses, communications, electronic mail (email), contracts, cables, notations of any
type of conversation, telephone call, meeting or other inter-office or intra-office
communication, bulletins, printed matter, computer printouts, teletypes, invoices,
transcripts, diaries, analyses, returns, summaries, minutes, bills, accounts, estimates,
projections, comparisons, messages, correspondence, press releases, circulars, financial
statements, reviews, opinions, offers, studies and investigations, questionnaires and
surveys, and work sheets (and all drafts, preliminary versions, alterations, modifications,
revisions, changes, and amendments of any of the foregoing, as well as any attachments
or appendices thereto), and graphic or oral records or representations of any kind
(including without limitation, photographs, charts, graphs, microfiche, microfilm,
videotape, recordings and motion pictures), and electronic, mechanical, and electric
records or representations of any kind (including, without limitation, tapes, cassettes,
disks, and recordings) and other written, printed, typed, or other graphic or recorded
matter of any kind or nature, however produced or reproduced, and whether preserved in
writing, film, tape, disk, videotape, or otherwise. A document bearing any notation not a
part of the original text is to be considered a separate document. A draft or non-identical
copy is a separate document within the meaning of this term.
2. The term “communication” means each manner or means of disclosure or exchange of
information, regardless of means utilized, whether oral, electronic, by document or
otherwise, and whether in a meeting, by telephone, facsimile, mail, releases, electronic
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message including email (desktop or mobile device), text message, instant message,
MMS or SMS message, message application, or otherwise.
3. The terms “and” and “or” shall be construed broadly and either conjunctively or
disjunctively to bring within the scope of this request any information that might
otherwise be construed to be outside its scope. The singular includes plural number, and
vice versa. The masculine includes the feminine and neutral genders.
4. The term “including” shall be construed broadly to mean “including, but not limited to.”
5. The term “Company” means the named legal entity as well as any units, firms,
partnerships, associations, corporations, limited liability companies, trusts, subsidiaries,
affiliates, divisions, departments, branches, joint ventures, proprietorships, syndicates, or
other legal, business or government entities over which the named legal entity exercises
control or in which the named entity has any ownership whatsoever.
6. The term “identify,” when used in a question about individuals, means to provide the
following information: (a) the individual’s complete name and title; (b) the
individual’s business or personal address and phone number; and (c) any and all
known aliases.
7. The term “related to” or “referring or relating to,” with respect to any given subject,
means anything that constitutes, contains, embodies, reflects, identifies, states, refers to,
deals with, or is pertinent to that subject in any manner whatsoever.
8. The term “employee” means any past or present agent, borrowed employee, casual
employee, consultant, contractor, de facto employee, detailee, fellow, independent
contractor, intern, joint adventurer, loaned employee, officer, part-time employee,
permanent employee, provisional employee, special government employee,
subcontractor, or any other type of service provider.
9. The term “individual” means all natural persons and all persons or entities acting on
their behalf.
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