Banking Dive, "Texas bank settles with DOJ over PPP lending allegations"

Summary

Banking Dive article by Gabrielle Saulsbery, published September 15, 2022, reporting the Justice Department's first-ever False Claims Act settlement from a Paycheck Protection Program lender. The article says Prosperity Bank will pay $18,673.50 to resolve allegations that it knowingly processed a $213,400 PPP loan for an ineligible business, Woodlands Pain Institute, which netted the bank a $10,670 processing fee. It reports the Justice Department's allegation that Prosperity employees knew the institute's sole owner, Dr. Emad Bishai, was facing criminal charges when the application answered "no" to the question on charges. According to the article, Bishai agreed in November to pay $523,331 to settle allegations and repaid the PPP loan in full this year.

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Dive Brief

Texas bank settles with DOJ over PPP lending allegations

Published Sept. 15, 2022

Gabrielle Saulsbery Senior Reporter

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Dive Brief:

- The Justice Department has received its first-ever False Claims Act (FCA) settlement from a Paycheck Protection Program (PPP) lender, it announced Tuesday.
- Prosperity Bank, a Houston-based regional bank, will pay $18,673.50 to resolve allegations it knowingly processed a PPP loan for an ineligible business.
- The $213,400 PPP loan netted the bank a $10,670 processing fee. PPP loans entitled banks to a Small Business Administration (SBA) processing fee between 1% and 5%, and Prosperity received the latter with the loan.

Dive Insight:

Financial institutions doled out around $800 billion in PPP loans to businesses during the pandemic.

Prosperity’s FCA settlement could signal that other lenders that allegedly approved loans for ineligible applicants might find themselves in the Justice Department’s cross-hairs as it doubles down on pandemic-related fraud activity , which t he Office of the Inspector General reported in May included more than 70,000 potentially fraudulent loans totaling $4.6 billion .

The bank, in May 2021, approved and processed a $213,400 PPP loan for Woodlands Pain Institute, solely owned by anesthesiologist and pain management physician Dr. Emad Bishai.

The application asked whether anyone with more than 20% equity in the company was “subject to an indictment, criminal information, arraignment or other means by which formal criminal charges are brought in any jurisdiction.” Bishai was facing criminal charges in Montgomery County related to the prescription of opioids at the time, but he checked the box marked “no” next to the question and initialed his answer.

The Justice Department alleged Prosperity employees knew Bishai was facing charges, which made him ineligible for the loan. The bank processed the application, gave the money to Bishai, and received the associated processing fee.

Bishai agreed in November to pay $523,331 to settle allegations that he submitted false claims for medical equipment and for making false statements on his PPP loan application. He repaid the PPP loan in full this year.

It’s unclear whether or not Prosperity’s settlement will affect its SBA preferred lender status, which allows the bank to get funds to borrowers faster than regular SBA lenders. Also, unlike nonpreferred lenders, which must submit loans to the SBA for approval, preferred lenders have the authority to make final credit decisions on SBA-guaranteed loans.

A representative for Prosperity did not return a request for comment by press time.

Prosperity Bank, which has branches in Texas and Oklahoma, approved more than 10,000 PPP loans totaling $1 billion , it said.

The bank was among the top 10 PPP lenders in North Texas in both number of loans and loaned dollars in 2020, according to the Dallas Business Journal , in the company of more national banks than local banks.

The settlement amount “reflects Prosperity Bank’s efforts to cooperate with the government’s investigation and provide relevant facts along with its implementation of additional compliance measures,” according to the DOJ announcement.

Abigail Gonzalez, an SBA Houston-area public information officer, told Banking Dive that “all U.S. Small Business Administration lenders are subject to thorough reviews by the U.S. Small Business Administration’s Office of Credit Risk Management and any violations would be taken into account at that time.”

Filed Under: Commercial , Regulations & Policy

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