JPMorgan probes misuse of Covid-19 funds by staff

Bloomberg

JPMorgan Chase & Co. says it’s probing the role of some employees who may have enabled misuse of Covid-relief funds in what it calls potentially illegal activities.
The New York-based bank 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. 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,” according to the memo. The bank asked workers to report any conduct that violates its policies.
JPMorgan’s investigation could be another sign that misconduct around the slew of coronavirus relief programs went beyond scattered individual borrowers who have been charged with fraud. A congressional report last week raised red flags on more than $1 billion of loans in the Small Business Administration’s PPP program.
JPMorgan was the biggest lender in that effort, which offered a lifeline to businesses reeling from shutdowns tied to the pandemic but has caused headaches for banks. The $669 billion program was the centerpiece of the federal coronavirus relief package enacted in March and allowed small businesses to apply for a loans of as much as $10 million each.
The program’s rollout was riddled with criticism of banks as technology outages and changing lending rules slowed the process of getting funds to businesses. Lenders later faced accusations that they favored large companies over smaller ones and were assailed on Capitol Hill and sued by angry borrowers.
JPMorgan issued about 280,000 loans totaling more than $29 billion, according to SBA data.

Read more: Banks face House scrutiny on PPP loans

The program’s scale and efforts to rush funds out quickly may have also made it vulnerable to fraud, according to a watchdog report in June. The U.S. Department of Justice is already pursuing scores of cases of alleged fraud. And a congressional subcommittee found earlier this month that more than $1 billion in federal coronavirus relief went to U.S. small businesses that received multiple loans, according to a report that also raised red flags for potential fraud with thousands of other companies.

In the memo, JPMorgan also applauded workers for staying vigilant while the majority of them worked from home to help stem the spread of the coronavirus. “While we know that we are working through a period of unprecedented turmoil,” it’s “important to continue to hold ourselves to the highest standards of conduct,” the bank said.

Wall Street firms have been summoning more of their workers back to offices in recent weeks and concerns about faltering controls have been among catalysts driving the push.