Bloomberg reported earlier on Wednesday that America’s largest bank had discovered that some employees improperly applied for and received money under the Economic Injury Disaster Loan (EIDL) programme, which offered grants of up to $10,000 and low interest loans to businesses hurt by the pandemic.
The scheme is separate from the Paycheck Protection Program, the federal government’s flagship bailout for small businesses which offered forgivable loans of up to $10m and has been plagued by problems since its April inception.
Unlike PPP loans, which were doled out by banks, EIDL funds were dispersed directly by the Small Business Administration (SBA), a federal agency.
The person familiar with the situation said the individuals who fraudulently obtained EIDL loans had not been acting in their capacity as JPMorgan employees, but that breaking the law was a violation of the bank’s code of conduct and some people were fired as a result of their improper EIDL applications. The bank declined to comment.
The applications were discovered after the SBA instructed banks to investigate any potentially suspicious activity related to the EIDL loan programme amid fears of potential fraud.
JPMorgan, which employs more than 160,000 people in the US, found that some of its own staff had deposited suspicious EIDL funds in their Chase checking accounts. Those cases accounted for a “very small” percentage of the total suspicious activity uncovered by JPMorgan, the person said.
On Tuesday, JPMorgan’s executive committee sent a company-wide memo warning that it had discovered “conduct that does not live up to our business and ethical principles — and may even be illegal” as the bank dealt with the fallout from a pandemic that sent America’s economy into steep recession.
“This includes instances of customers misusing Paycheck Protection Program loans, unemployment benefits and other government programmes,” the bank’s bosses said. “Some employees have fallen short, too. We are doing all we can to identify those instances, and co-operate with law enforcement where appropriate.”
JPMorgan was the single biggest lender in the Paycheck Protection Program, making almost $29bn of government-backed forgivable loans to small and medium sized businesses hit by the coronavirus crisis. The bank is also looking at potential fraud there, as are other big lenders that participated in the $670bn programme, which closed on August 8.
Several states have launched criminal proceedings over allegedly fraudulent PPP applications, casting aspersions on a programme that Donald Trump, president, says saved 51m jobs by giving businesses money to pay their staff and rent while lockdowns emptied cities and towns.