First-ever False Claims Act settlement received from Paycheck Protection Program lender — USAO Texas, Southern

Summary

A press release published 2022-09-13 by the U.S. Attorney's Office for the Southern District of Texas announcing that Prosperity Bank agreed to pay $18,673.50 to resolve allegations that it improperly processed a PPP loan for an ineligible customer. The office states that in May 2020 the bank processed a $213,400 PPP loan for Woodlands Pain Institute PLLC, whose sole owner, Dr. Emad Bishai, answered No to the criminal-charges question while facing charges in Montgomery County. According to the release, bank employees knew of the charges, and the bank received a 5% processing fee of $10,670 to which it was not entitled. The release describes the settlement as believed to be the nation's first with a PPP lender under the False Claims Act, and states that the claims are allegations only with no determination of liability.

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HOUSTON – Prosperity Bank has agreed to pay $18,673.50 to resolve allegations it improperly processed a Paycheck Protection Program (PPP) loan on behalf of an ineligible customer, announced U.S. Attorney Jennifer B. Lowery.
Prosperity Bank is a regional bank with branches throughout Texas and Oklahoma. It is a subsidiary of Prosperity Bancshares Inc.
The Coronavirus Aid, Relief and Economic Security (CARES) Act authorized the issuance of PPP loans in order to provide relief to small businesses experiencing economic hardship during the pandemic. Those loans would be forgiven if certain conditions were met.
Lenders like Prosperity Bank who originated PPP loans were entitled to receive a fixed fee from the Small Business Administration (SBA).That fee ranged from 1% to 5% depending on the size of the loan.
In May 2020, Prosperity Bank approved and processed a $213,400 PPP loan for Woodlands Pain Institute PLLC. The PPP application included a question asking whether the applicant (or any individual owning more than 20% equity) is subject to an indictment, criminal information, arraignment or other means by which formal criminal charges are brought in any jurisdiction.
Dr. Emad Bishai was the sole owner of Woodlands Pain Institute PLLC. However, at the time of the application, Bishai was facing criminal charges in Montgomery County arising from his practice of prescribing opioid medicines. When filling out the application, he checked the box marked “No” and initialed his name beneath the question.
At that time, Prosperity Bank employees knew Bishai was facing charges and was therefore ineligible to apply for the PPP loan. However, the bank processed the application anyway and falsely granted the money to Bishai. As a result, Prosperity Bank received a 5% processing fee of $10,670 to which it was not entitled.
Bishai entered into a $523,331
settlement
in November 2021 to resolve his liability arising from fraudulent medical billing and his submission of the PPP loan application. He also repaid the PPP loan in full in 2022.
The settlement announced today is believed to be the nation’s first settlement with a PPP lender pursuant to the False Claims Act. The settlement amount also reflects Prosperity Bank’s efforts to cooperate with the government’s investigation and provide relevant facts along with its implementation of additional compliance measures.
The SBA’s Office of Litigation provided assistance. Assistant U.S. Attorney Brad Gray handled the matter.
The claims resolved by the settlement are allegations only and there has been no determination of liability.

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