Paycheck Protection Program Fraud
JP Morgan, led by their CEO Jamie Dimon, has recently learned a financial truth: being a brilliant broker or banker is not the same thing as being an ethical person.
In a recent letter to JP Morgan’s nearly 257,000 employees, Dimon started off by praising some of his employees for their hard work during the worst of the pandemic. Then the letter took on a negative tone:
“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 letter allegedly acknowledges that some of the bank’s customers were engaged in Paycheck Protection Program loan fraud, and that bankers and brokers may have been complicit in banking, investing or “hiding” that money.
The Abuse of Paycheck Protection Program (PPP)
When the federal government through the Treasury Department initiated the Paycheck Protection Program, it was recognized that there may have been some abuse built into the arrangement. It was, after all an honor system.
Therefore, when JPMorgan, acknowledged to be the most prominent asset lender in the U.S., put out about $29 billion to its customer base towards the Paycheck Protection Program, they knew the responsibility for “being honest” fell to those who applied for the funds. Unfortunately, ethical behavior was not to be universally found.
Said Jamie Dimon and JPMorgan:
″We are doing all we can to identify those instances, and cooperate with law enforcement where appropriate. We want you to know because we need everyone to be vigilant.”
However, interestingly, the corporate spokeswoman, when pressed, would not comment on how the organization’s employees “had fallen short in their duties.”
It is not difficult to infer that of those 257,000 employees, bankers, brokers, advisors and the like, a small percentage illegally and (complicitly) knowingly assisted fraudsters. We don’t know if they stood to gain in the short or long-term or indeed, if money passed under the table that was not thought to be traceable.
Obviously, if it came to Jamie Dimon’s attention up through the many layers of management and operations just how many executives – and for how long, knew this sort of behavior was unfolding.
The Opportunity
The amount of Paycheck Protection Program money, dumped on the financial market was so enormous and came so quickly that the “ethical system” was overwhelmed. There was no time to screen, there were no filters or even expectations. While we would like to think that people are inherently honest (how do we discern the percentage?) in the JPMorgan scenario, there were at least some knowing nods and winks that bypassed ethics altogether.
As to the scenarios, we are not privy to that at this time. Nevertheless, when a small business, for example, applied for a large sum, or when shell companies were created, or when hardships were claimed that weren’t (and by the way, all of those Paycheck Protection Program fraud scenarios have been discovered), both shady lenders and recipients benefitted.
The need was a need for cash. More than that, there was a need to game the system and to see how much they could get away with and for how long.
The rationalization among some at JP Morgan might have been the old, “well, everyone is doing it!” As sophisticated as Jamie Dimon’s world might be, it sometimes comes down to immature, unethical behavior on the part of a handful of employees to bring down the reputation of an entire organization.
Without continuous, reinforced, ethical training, we can expect these types of outcomes. The question that persists is: “How many unethical employees escaped detection?” It may be years before this fact is brought to light.
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