Photo: Greg Nash/The Hill/Bloomberg

As stimulus talks again broke down in early September, Sen. Marco Rubio, R-Fla., chairman of the Senate Committee on Small Business and Entrepreneurship, pressed JPMorgan Chase CEO Jamie Dimon to answer several questions by Sept. 23 about reports that bank employees have been involved in potentially illegal conduct involving Paycheck Protection Program and Economic Injury Disaster Loans (EIDL) funds.

Published reports stated that JPMorgan Chase is investigating alleged misuse by employees of PPP and EIDL funds.

JPMorgan said it has seen “instances of customers misusing Paycheck Protection Program Loans, unemployment benefits and other government programs” and that some “employees have fallen short, too,” according to a memo to staff from the bank’s senior leaders, as reported by Bloomberg News.

The firm said the conduct doesn’t meet its principles “and may even be illegal.” “We are doing all we can to identify those instances and cooperating with law enforcement where appropriate,” Bloomberg reported the memo as stating.

Rubio told Dimon that he’s “alarmed” by the reports.

“Both the PPP and expanded EIDL programs were intended to provide critical economic assistance to small businesses during this time of enormous need,” Rubio wrote. “Financial institutions, like yours, are on the frontlines of providing PPP assistance. Allegations that employees of financial institutions have exploited either the PPP or EIDL programs for their own gain must be investigated fully.”

The PPP has provided “over $525 billion in critical relief to more than 5.2 million businesses, and saved an estimated 50 million jobs,” the senator wrote.

While Rubio told Dimon that he appreciated his previous response in May that JPMorgan “did not prioritize certain [PPP] loan applicants over others,” the senator wanted answers on:

• The specific allegations JPMorgan is investigating;

• Any actions JPMorgan has taken to mitigate potential fraud or misuse of PPP and/or EIDL funding;

• Any actions JPMorgan has taken to notify SBA and/or federal law enforcement of potential fraud or misuse of PPP and/or EIDL funding; and

• Any internal controls distributed to the bank’s employees regarding the PPP and/or EIDL program.

More than 50 people who allegedly committed fraud to obtain money from the PPP have been criminally charged by the Department of Justice Criminal Division’s Fraud Section, Acting Assistant Attorney General Brian Rabbitt said in a Sept. 10 speech at the PPP Criminal Fraud Enforcement Action press conference in Washington.

Stimulus Talks Falter

The Senate GOP’s new “targeted” COVID-19 relief bill, which Senate Democrats blocked on Sept. 10, included a “second round” of PPP funds.

Senate Majority Leader Mitch McConnell, R-Ky., said in introducing the bill on Sept. 8 that it focused on “some of the very most urgent health care, education and economic issues.”

After the Sept. 10 vote, McConnell tweeted: “Every Senate Democrat just voted against hundreds of billions of dollars of COVID-19 relief. They blocked money for schools, testing, vaccines, unemployment insurance, and the Paycheck Protection Program. Their goal is clear: No help for American families before the election.”

In comments before the vote, Senate Minority Leader Chuck Schumer, D-N.Y., said that the Senate “will take a rather pointless vote on the latest, highly partisan Republican, emaciated COVID-relief bill.”

McConnell “claims that his bill is an attempt at a bipartisan solution,” Schumer continued. “But, of course, the bill was drafted solely by Republicans — no input from Democrats — and rushed to the floor.”

Schumer said “Democrats urge our Republican colleagues to come to the table, meet us halfway, and negotiate in good faith on a bipartisan comprehensive bill that will benefit the entire country.”

But chances of a stimulus bill getting done before the Presidential election look dim.

Andy Friedman, founder and principal of The Washington Update, told IA on Sept. 10 that “reaching agreement on a bill will be tough,” as “the closer we get to the election, the (even) more partisan the negotiations become.”

The “wild card,” Friedman added, “is that the president believes that a strong economy will improve his chances of winning the election, and he might push the Senate Republicans to agree to legislation that provides additional economic stimulus.”

PPP Loan Fraud

Treasury Secretary Steven Mnuchin told the House Select Subcommittee on the Coronavirus Crisis on Sept. 1 that while the deadline to apply for a PPP loan ended on Aug. 8, there was PPP funding left over and that the money should be targeted at the hardest-hit industries.

Meanwhile, at the hearing, the subcommittee released a preliminary analysis that found more than $1 billion in PPP loans were given to companies that received multiple loans, which violated PPP rules.

On June 15, the Select Subcommittee launched an investigation into the Trump administration’s implementation of the PPP, following reports that the program favored large, well-funded companies.

In response, Treasury and SBA produced detailed data on all 5.2 million loans approved by SBA as of Aug. 8, the subcommittee states.

The analysis shows “PPP helped millions of small businesses and non-profit organizations stay afloat during the coronavirus crisis, but a lack of oversight and accountability from the Treasury Department and Small Business Administration may have led to billions of dollars being diverted to fraud, waste, and abuse, rather than reaching small businesses truly in need,” according to the lawmakers.

The subcommittee report cites the following areas as also pointing to a high risk for fraud, waste and abuse in the PPP program:

• More than 600 loans totaling over $96 million went to companies excluded from doing business with the government.

• More than 350 loans worth $195 million went to government contractors with significant performance and integrity issues.

• Federal databases raised red flags for $2.98 billion in loans to more than 11,000 PPP borrowers.

• SBA and Treasury approved hundreds of loan applications missing key identifying information about the borrower.

The administration, according to the analysis, “appears to lack the appropriate oversight mechanisms to identify and root out these problems.”

Rep. James Clyburn, D-S.C., chairman of the subcommittee, sent a letter to Treasury and the SBA on Sept. 1 requesting that they conduct a review of the management of the PPP in light of the subcommittee’s report.

Clyburn asked PPP and SBA to “examine the categories of loans” identified in the analysis and any other loans that contain “indicia of fraud, as well as the program’s oversight and accountability mechanisms.”

Washington Bureau Chief Melanie Waddell can be reached at [email protected].