JPMorgan Chase is investigating whether its staff helped clients illegally obtain funds from the US government’s Small Business Rescue Program.
The largest US bank, which arranged $ 29 billion in forgivable loans under the Paycheck Protection Program (PPP) at the end of June, said it discovered “wrong conduct to our business and ethical principles – and may even be illegal ”. .
“This includes cases of clients misusing Paycheck Protection Program loans, unemployment benefits and other government programs. Some employees have also failed, ”the bank’s operating committee wrote in a note to all employees.
“We are doing everything we can to identify these cases and cooperate with law enforcement where appropriate.”
The bank confirmed the contents of the memo, which was first reported by Bloomberg, but declined to comment further.
It’s the latest controversy to hit the $ 670 billion program, which was designed to blunt the toll of the coronavirus pandemic on Main Street. President Donald Trump and his administration have defended the fund on the grounds that it has saved 51 million jobs.
However, some experts dispute this digit. The PPP has been plagued by problems since its inception in April, including early technical glitches that left companies struggling fearing funds would run out before their demands were processed and outrage against listed companies in scholarship such as Shake Shack, which was successful in raising funds.
The program eventually received more money, technical issues were resolved, and several prominent companies repaid their funds when it emerged that their names would be released and larger loans would be reviewed. particular.
Yet even before it closed on August 8, several states opened criminal investigations into allegedly fraudulent PPP requests, including requests from companies that did not exist or were not functioning when the requests were filed.
Bankers have said privately that the sheer volume of PPP loans processed – which totaled 4.9 million at the end of June – meant that there would inevitably be problems with fraud in a system that promised free money, provided that it is spent on expenses such as payroll. and rent.
More problems could emerge in the coming months as borrowers request cancellation of their loans on the grounds that they were used for qualifying expenses.
While the PPP program originally cost tens of billions of dollars in fees for zero risk, it has proven to be a deadly affair for banks, with several executives privately admitting that reputation and relationships with clients had suffered amid wider frustrations with the program.
Several banks, including JPMorgan and Citigroup, have pledged to donate the proceeds of the PPP program to charities and nonprofits. Wells Fargo, which was allowed to violate a regulatory limit on the size of its balance sheet to participate in the program, went further by pledging to donate the $ 400 million in gross fees it received for arranging the loans.