It was April 3, 2020, over two and a half years ago, that the first round of Paycheck Protection Plan (PPP) loans began rolling out. By September 30th of that year, U.S. banks had issued more than 4.5 million PPP loans worth roughly $490 billion to small (mostly) businesses across the country.
As long as the funds were used according to the terms dictated (such as payroll expenses) and forgiveness was requested in a timely manner along with all necessary documentation (to verify the number of employees and pay rates, etc.) most PPP loans were eligible for forgiveness.
Recipients whose loans were not forgiven had two years to repay the loan. The interest rate was a favorable 1% fixed. That said, all first-round PPP loans should be off the banks’ books by now. But then came Round 2 of PPP, and then Round 3.
In total, PPP submission metrics as of October 23, 2022 from the Small Business Administration (SBA) indicate that over 11 million PPP loans were granted (not just by banks) and forgiveness has been requested for 96% of the total value.
The numbers are staggering. Out of $785.8 billion loaned, $755.7 billion has been forgiven. As a government program, especially one thrown together in haste, PPP was a rousing success. It was a much needed lifeline, particularly for smaller businesses. Over 8 million of all PPP loans requested (and granted) were for less than $50,000 (about 73%).
With such haste, there are bound to be scammers in the mix. The United States Justice Department is on top of that. As of October 18th the Fraud Section had reportedly prosecuted over 192 defendants, and seized over $78 million in cash proceeds. And it shows no signs of stopping. Some recent cases include:
11/10: Annette Bryant, Waxahachie, TX, the sole proprietor of several LLCs, allegedly defrauded PPP programs out of $1.2 million and attempted to obtain another $411k.
11/21: A North Texas couple not only applied for $1.85 million in loans they were not entitled to, they also “allegedly” laundered the $684 million they did receive while simultaneously (and fraudulently) obtaining unemployment benefits from the State of Nevada.
11/22: Butherde Darius of North Plainfield, NJ pleaded guilty on his charges of bank fraud. He illegally obtained $850,000 in PPP funds for which he faces up to 30 years in prison and a $1 million fine.
12/1: The youngest (that we are aware of), 20 year-old Jacob Deandre Byrd, of Lake City, FL, applied for a PPP loan for a made-up business, “Jacob’s Beauty.” His $20,833 loan could cost him 20 years in federal prison.
12/6: Perhaps the most egregious, a former Assistant City Attorney in Atlanta, GA, Shelitha Robertson, along with other, unnamed co-conspirators, allegedly obtained over $7 million in PPP funds. (She reportedly bought a Rolls Royce with her PPP loan.)
12/7 A father and son in Waxhaw, NC were sentenced for fraudulently seeking $1.7 million in multiple PPP loans. After reportedly giving about $30,000 away as gifts to family members, the Fraud Section recovered $1.3 million and returned it to the lender. The Freitekhs were sentenced to just: 4 years (Izzat-father) and 87 months (Tareq-son).
We also recently saw the first action taken against a bank itself. 5-Star Prosperity Bank, in Texas, has been accused of approving a $213,400 PPP loan for a doctor bank staff knew was ineligible because he was facing criminal charges. Prosperity Bank agreed to pay $18,670 for its “alleged” wrongdoing.
At September 30, 2022, Prosperity Bank reported 59 PPP loans still outstanding for a total of about $9 million. In fact, over 1,900 banks still have some amount of PPP on their books, although most report very small amounts at this point.
The exceptions to that are the 53 banks listed on page 7. Each reported at least $30 million still outstanding in PPP loans as of September 30th. 3½-Star Cross River Bank, Fort Lee, NJ has by far the most, with more than twice the amount outstanding as the next runner-up.
That’s not new. Cross River Bank has been a leading PPP lender since the beginning. At its peak, June 30, 2021, Cross River Bank had 554,708 PPP loans totaling $11,234.4 million. It was surpassed only by two Big Banks: 5-Star JPMorgan Chase & 4-Star Bank of America.
4-Star Customers Bank, Malvern, PA is the #1 community bank on page 7. Only seven community banks have more than $30 million outstanding (highlighted in yellow). They should all be commended for a job well done.