Wells Fargo & Co. fired around 100 employees for defrauding the Small Business Administration (SBA) and unethically collecting coronavirus aid funds. The firm said that the employees made, “false representations in applying for coronavirus relief funds for themselves,” according to an internal memo reviewed by Bloomberg.
Most of the misrepresentation occurred in the funding for the Economic Injury Disaster Loan program under the Payroll Protection Payment (PPP).
“We have terminated the employment of those individuals and will cooperate fully with law enforcement,” David Galloreese, Wells Fargo’s head of human resources, said in the memo. “These wrongful actions were personal actions, and do not involve our customers.”
Wells Fargo will continue to identify additional wrongdoing by employees
The bank’s memo Wednesday said that it has “zero tolerance for fraudulent behavior.” Between 100 and 125 people were terminated, the person with knowledge of the matter said. Evidence has regularly come out of how the stimulus package floated by the government under the CARES Act has been wildly misused by large corporate houses and even senators for pandemic relief.
Employees running a side business can legitimately apply for US aid, but Wells Fargo’s findings show the program was widely misused. Unlike other employers, banks can check whether staff had coronavirus relief aid deposited into their accounts.
The SBA sounded the alarm as it found some evidence of fraudulent deposits. A Bloomberg Businessweek analysis of SBA data in August identified at least $1.3 billion in suspicious payments.
The focus was on $10,000 advances for Covid-19 related losses, along with the rapid loans of unto $25,000, which did not have to return and did not require any audit.
SBA urged banks to look out for suspicious deposits in their customers as well as employees’ accounts. The agency has since found evidence of more than $250 million in aid given to potentially ineligible recipients as well as $45.6 million in possibly duplicate payments.
Wells Fargo “will continue to look into these matters,” Galloreese wrote. “If we identify additional wrongdoing by employees, we will take appropriate action.”
"The SBA is not able to comment on specific evidence of waste, fraud, and abuse with any of the SBA's loan programs is not tolerated and should be reported," SBA spokesperson Carol Chastang told Business Insider in an email.
In addition to funding $670 billion for the Paycheck Protection program to keep small businesses afloat, the federal government's CARES Act allocated another $10 billion to the existing economic Injury Disaster Loan (EIDL) program.
Many well-heeled businesses such as publicly-traded chains reaped millions, and a public outcry led to more than $38 billion loans being returned to the government. Many firms availed of the opportunity in a rush with no administrative restrictions or overseeing of where the funds were going.
Unlike the government’s Paycheck Protection Program or PPP in which banks served as intermediaries, EIDL funds came directly from the SBA. The agency said that it had been under pressure to move the money quickly as the economic impact of the coronavirus pandemic bit into the U.S. economy.
An earlier review by JPMorgan Chase & Co. found that more than 500 employees tapped the EIDL program and that dozens did so improperly.
Wells Fargo recently brought in a new Chief Executive Officer, Charlie Scharf with a mandate to clean up the firm and bolster controls after years of scandals. He even assured that he has brought in changes that are “very different” than the bank’s past efforts to address lapses.