A unit of KeyCorp will pay $7.77 million to resolve allegations that the bank violated the False Claims Act. The allegations concern fraudulent loan forgiveness applications submitted under the Paycheck Protection Program (PPP). The U.S. Attorney’s office in New Jersey announced the settlement on Wednesday.
The settlement relates to actions by a former branch manager in Conshohocken, Pennsylvania. The manager allegedly recruited business owners to inflate payroll expenses and employee numbers in approximately four dozen loan applications during 2020 and early 2021. These actions resulted in nearly $6 million in loans from the Small Business Administration (SBA). KeyBank awarded the manager incentive pay for opening accounts before uncovering the scheme, according to the U.S. Attorney’s office.
The branch manager, Tommy Hawkins, pleaded guilty to bank fraud conspiracy and received a 65-month prison sentence in 2024. Six other individuals faced related criminal charges, with four pleading guilty. KeyCorp, which has approximately 1,000 branches across 15 U.S. states and $187.4 billion in assets as of September 30, 2023, did not admit any wrongdoing in agreeing to the settlement.
KeyCorp is a large regional bank. The settlement includes approximately $6.2 million in restitution and reflects KeyBank’s cooperation with the government’s investigation. The Paycheck Protection Program was established in March 2020 to provide financial support to Americans and small businesses affected by the COVID-19 pandemic through forgivable loans.
