By: Richard L. Smith
KeyBank National Association has agreed to pay more than $7.7 million to settle federal allegations that it improperly sought forgiveness for fraudulent Paycheck Protection Program (PPP) loans, according to a statement released by the U.S. Department of Justice.
Federal officials said the Cleveland-based bank violated the False Claims Act by submitting loan forgiveness requests to the Small Business Administrationdespite having evidence that the loans were tied to fraud orchestrated by one of its branch managers.
The misconduct stemmed from actions taken during the height of the COVID-19 pandemic, when Congress created the PPP under the CARES Act to help struggling small businesses remain afloat.
According to prosecutors, former KeyBank branch manager Tommy Hawkins recruited individuals with companies that had little or no real operations and helped them submit PPP applications containing false claims about payroll and employees.
Nearly $6 million in PPP funds were paid out in connection with about four dozen applications processed through the branch Hawkins managed.
Although the bank later identified suspicious activity and disclosed concerns about several loans to federal authorities, officials said KeyBank still submitted forgiveness applications for all 48 loans, which were approved because they fell under expedited thresholds.
The Justice Department noted that KeyBank cooperated with the investigation, a factor reflected in the civil settlement amount.
The agreement resolves claims under both the False Claims Act and the CARES Act.
The investigation also led to criminal cases against several individuals involved in the scheme.
Hawkins has already pleaded guilty and was sentenced to more than five years in federal prison, while other defendants have either pleaded guilty or are awaiting trial or sentencing.
Authorities emphasized that remaining defendants are presumed innocent unless proven guilty.
Federal investigators, including the FDIC Office of Inspector General, said the settlement underscores ongoing efforts to hold both individuals and financial institutions accountable for pandemic-related fraud and to protect taxpayer funds.