JPMorgan Chase has uncovered evidence that some of its customers and employees broke federal rules when obtaining and distributing billions of dollars in loans from one of the government’s key coronavirus relief programs, according to an internal memo viewed by CBS MoneyWatch.
The nation’s largest bank said it is conducting an internal investigation looking into a number of issues, including how the financial giant helped distribute money from the Paycheck Protection Program (PPP) –– the $660 billion government relief initiative created under the Coronavirus Aid Relief and Economic Security Act.
JPMorgan is also working with law enforcement authorities who are looking into the potential misdeeds. The bank said it believes some of the conduct by its employees may have broken the law.
“It’s been nearly six months since the pandemic began, and during that time we’ve seen our people at their very best,” the memo stated, which was issued to bank employees on Tuesday and which was signed by JPMorgan CEO Jamie Dimon and other top executives. “Unfortunately, we’ve also seen conduct that does not live up to our business and ethical principles — and may even be illegal.”
JPMorgan did not offer any specifics regarding its investigation. But it did say it is also looking into the misuse of unemployment benefits and other government programs, along with the Paycheck program.
A spokesperson for the bank declined to comment further on the investigation.
JPMorgan Chase funded $28 billion in loans, more than any other bank, through the PPP, which was one of the first aid programs to get up and running after Congress’ passed the $2.2 trillion CARES Act. The program was focused on small businesses and generally open to firms with 500 employees or less. But the Small Business Association made a number of exceptions to those rules, most notably for restaurant and hotel chains.
That allowed other firms that most people wouldn’t consider small businesses to access the program as well.
Separately, JPMorgan Chase has been hit by criticism that it had put larger borrowers seeking larger loans from the PPP ahead of smaller firms. Aid from the government-backed program was supposed to be distributed on a first-come, first-serve basis.
In April, CBS MoneyWatch reported that JPMorgan had been hit by a class-action suit that alleged the bank favored its largest clients in distributing PPP funds. The suit claimed JPMorgan did so to maximize loan-origination fees, and its own profits, in the initial rush to obtain PPP loans. At the time the suit was filed, a JPMorgan spokesperson told CBS MoneyWatch that the bank processed PPP loans on a first-come, first-serve basis, and that it did not prioritize larger clients.
In May, CBS MoneyWatch reported that Wells Fargo disclosed in a financial filing that federal and state authorities were investigating some of the loans it had made through the Paycheck program. No further details of those probes have emerged.
It’s not clear when law enforcement officials began looking into JPMorgan’s PPP loans. JPMorgan’s most recent financial statement, which was filed in early August, made no mention of any probe.