BUSINESS NEWS MAY 15, 2020 / 7:10 PM / UPDATED 3 HOURS AGO

Exclusive: U.S. Justice Dept. subpoenas Wall Street banks for small business loans info - sources

Koh Gui Qing, Pete Schroeder
4 MIN READ

WASHINGTON (Reuters) - The U.S. Justice Department has sent grand jury subpoenas to big banks seeking records as part of a broader investigation into potential abuse of a $660 billion emergency loan program to help small businesses hurt by the novel coronavirus, two people with knowledge of the matter told Reuters.

The previously unreported subpoenas issued by the department’s Washington fraud division do not necessarily indicate wrongdoing on the part of the banks, but will compound growing worries among lenders that they risk being swept up in a federal crackdown on Paycheck Protection Program fraud.

The program allows small businesses hurt by the pandemic to apply with lenders for a government-backed loan which can be forgiven provided at least 75% is spent on payroll costs.

Policymakers worry that the huge pot of cash has been a magnet for fraudsters, and U.S. Treasury Secretary Steven Mnuchin has warned that companies found to have lied to secure loans could face prosecution. The Justice Department opened a probe into the program last month and has already brought criminal charges against borrowers it alleges lied about the state of their businesses and numbers of employees.

Due to their critical role in processing the loans, banks have reams of information that could point to other fraud.

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