Birmingham bank pays $4.9 million to settle PPP loan forgiveness fraud allegations

Regions Bank has agreed to pay nearly $4.9 million to the federal government to settle allegations that it approved forgiveness of a Paycheck Protection Program loan that the government said did not qualify under program rules, the Justice Department announced.

The Birmingham, Alabama-based bank will pay $4,919,631 to resolve claims that it received payments from the U.S. Small Business Administration that it should not have received after approving forgiveness of a customer’s PPP loan on or about Aug. 3, 2021, according to the Justice Department. The government alleged the loan in question was not eligible for forgiveness under PPP guidelines.

The SBA administered the PPP, which Congress created in March 2020 under the Coronavirus Aid, Relief and Economic Security Act to provide federally guaranteed loans to small businesses facing economic hardship during the COVID-19 pandemic. Under the program, private lenders could approve loans for eligible borrowers, who could later seek forgiveness if they used the funds on payroll and other qualifying expenses. Upon forgiveness, the SBA paid lenders the forgiven principal balance plus accrued interest and an origination fee calculated as a percentage of the loan amount.

The government further alleged that Regions Bank was unjustly enriched by the SBA payment it received following forgiveness of the ineligible loan.

“The PPP was intended to provide critical assistance to eligible businesses during the economic uncertainty caused by the Covid-19 pandemic,” Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division said in a statement. “The department is committed to ensuring that PPP lenders are held accountable for failing to comply with applicable program requirements, including approving forgiveness of PPP loans that were not eligible under program rules.”

The settlement was the product of a coordinated effort between the Justice Department’s Civil Division Commercial Litigation Branch Fraud Section and the U.S. Attorney’s Office for the Western District of Missouri, with assistance from the SBA’s Offices of the General Counsel and Inspector General and the Federal Deposit Insurance Corporation’s Office of Inspector General.

Trial Attorney Gavin Thole of the Civil Division’s Commercial Litigation Branch Fraud Section and Assistant U.S. Attorney Matthew Sparks of the Western District of Missouri are handling the case.

The Justice Department noted that the settlement resolves allegations only and that no determination of liability has been made.