First-Ever False Claims Act Settlement Received From Paycheck Protection Program Lender | USAO-SDTX
HOUSTON — Prosperity Bank has agreed to pay $18,673.50 to resolve allegations that it mishandled a Paycheck Protection Program (PPP) loan on behalf of an ineligible client, the U.S. attorney has announced. Jennifer B. Lowery.
Prosperity Bank is a regional bank with branches throughout Texas and Oklahoma. It is a subsidiary of Prosperity Bancshares Inc.
The CARES (Coronavirus Aid, Relief and Economic Security) Act authorized the issuance of PPP loans to help small businesses in economic difficulty during the pandemic. These loans would be canceled if certain conditions were met.
Lenders like Prosperity Bank that issued PPP loans were eligible to receive a fixed fee from the Small Business Administration (SBA). This commission varied from 1% to 5% depending on the size of the loan.
In May 2020, Prosperity Bank approved and processed a $213,400 PPP loan for Woodlands Pain Institute PLLC. The PPP application included a question asking whether the applicant (or anyone with more than 20% equity) is the subject of an indictment, criminal investigation, indictment or other means by which formal criminal charges are brought in a jurisdiction.
Dr. Emad Bishai was the sole owner of Woodlands Pain Institute PLLC. However, at the time of the request, Bishai was facing criminal charges in Montgomery County due to his practice of prescribing opioid drugs. When he completed the application, he checked the box marked “No” and initialed his name below the question.
At that time, Prosperity Bank employees knew that Bishai was facing charges and therefore was ineligible to apply for the PPP loan. However, the bank processed the request anyway and falsely granted the money to Bishai. As a result, Prosperity Bank received a 5% processing fee of $10,670 to which it was not entitled.
Bishai reached a $523,331 settlement in November 2021 to resolve his liability arising from fraudulent medical billing and his submission of the PPP loan application. It also repaid the PPP loan in full in 2022.
The settlement announced today is believed to be the nation’s first settlement with a PPP lender under the False Claims Act. The settlement amount also reflects Prosperity Bank’s efforts to cooperate with the government’s investigation and provide relevant facts as well as its implementation of additional compliance measures.
The SBA’s Office of Litigation provided assistance. Assistant U.S. Attorney Brad Gray handled the case.
The claims resolved by the settlement are allegations only and no liability has been determined.