- JPMorgan Chase is looking into instances of customers abusing loans they received earlier this year through the federal government’s Paycheck Protection Program, Bloomberg first reported on Tuesday.
- In a memo to staff seen by Business Insider, JPMorgan’s Operating Committee wrote that some customers had misused their PPP loans in activities that “may even be illegal.” The memo added that “some employees have fallen short, too.”
- The memo called on employees to “say something” if they “see conduct that doesn’t live up to our high standards and strong values.”
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JPMorgan Chase is looking into instances of its customers misusing loans received earlier this year through the federal government’s Paycheck Protection Program — as well as the role the bank’s own employees may have played.
It’s behavior that “may even be illegal,”JPMorgan’s Operating Committee said in a company-wide memo it sent out on Tuesday, which has since been reviewed by Business Insider.
“We are doing all we can to identify those instances, and cooperate with law enforcement where appropriate,” the note read.
JPMorgan Chase declined a request for further comment.
Bloomberg first reported the memo on Tuesday.
The note touted some of the good that the firm’s customers have done with their PPP loans, but said that “unfortunately, we’ve also seen conduct that does not live up to our business and ethical principles — and may even be illegal.”
“This includes instances of customers misusing Paycheck Protection Program loans, unemployment benefits and other government programs. Some employees have fallen short, too,” the memo added.
The memo did not specify in greater detail what employees may have done that has drawn the firm’s scrutiny, or add further context to the kinds of activities that JPMorgan is said to be investigating.
In May, Reuters reported the US Justice Department subpoenaed the big banks regarding potential misuse of PPP loans.
PPP loans have been accused of enabling bad actors to engage in fraud and impropriety
Earlier this year, as small businesses hemorrhaged funds and the economy faced the shock of the coronavirus outbreak, the federal government sought to stop the bleeding by making roughly $670 billion in emergency funds available.
Early on, the disbursement of those small business loans drew sharp criticism, as large corporate entities came under fire for taking funds that could have benefited smaller players in much more precarious positions. As much as $30 billion in approved PPP funds had been returned to the federal government or canceled as of July, CNBC reported.
Democrats in the House of Representatives recently warned that PPP loans are at high risk of misuse. Members of the House Select Subcommittee on the Coronavirus Crisis wrote a memo sounding the alarm bells, explaining that tens of thousands of PPP loans “could be subject to fraud, waste, or abuse.”
Read more: Tens of thousands of PPP loans at high risk for ‘fraud, waste, and abuse’ House Democrats say
Among the memo’s chief points of concern: Some companies received multiple loans, when the original program was intended to grant recipients just one loan. As much as $1 billion in PPP funding was carved up by firms that received more than a single loan.
What’s more, as much as $96 million in PPP loans was pocketed by companies which are excluded from doing business with the federal government. And, government contractors with “significant performance and integrity issues” received another $195 million in funds, the memo said.
For its part, the Small Business Administration has tried to put into place parameters to prevent the abuse of funds, and guide how they’re used when companies receive them.
For instance, to encourage companies to avoid layoffs, lenders are to forgive loans to firms which can demonstrate that they didn’t lay off staff or cut wages. What’s more, the SBA has said, public companies “with substantial market value and access to capital markets” would be a tougher sell for lenders to appropriate funds to.
JPMorgan encouraged employees to speak up if they detect customers abusing PPP funds
In Tuesday’s memo, JPMorgan called upon employees to serve as the vanguard in weeding out customers’ abusive or unethical behavior surrounding PPP loans.
Read more: Experts explain the complexities around getting PPP loans forgiven, and why so many small businesses are turning to fintechs like PayPal and Plaid
“If you see conduct that doesn’t live up to our high standards and strong values, say something,” the note said. “We take each report seriously and will take action, including disciplinary, when warranted” — though it’s unclear how the firm would respond to such claims of abuse.
“While we know that we are working through a period of unprecedented turmoil,” the memo concluded, “it is precisely during difficult times like these that it is most important to continue to hold ourselves to the highest standards of conduct.”
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