Wells Fargo fires employees over Covid-19 relief fund fraud

Wells Fargo wrote in a memo Wednesday that more than 100 employees were fired for engaging in Covid-19 relief fund fraud.

The Covid-19 relief funds were set aside for small businesses that were affected by the impacts of the pandemic. The improper action of the employees involved has led to defrauding the US Small Business Administration.

In the Wednesday memo to staff, Wells Fargo human resources head David Galloreese said the bank had identified some employees who may have “defrauded the U.S. Small Business Administration (SBA) by making false representations in applying for coronavirus relief funds for themselves through the Economic Injury Disaster Loan program, which is administered directly through the SBA.”

The federal government allocated additional funding of $670 million in the Paycheck Protection Program (PPP) to help small businesses stay afloat. The PPP funds were under the federal government CARES Act, which also allocated another $10 billion to the Economic Injury Disaster Loan (EIDL) program which was already in existence.

An SBA representative Carol Chastang, over the matter, said, the administration is “not able to comment on specific fraud cases. Evidence of waste fraud, and abuse with any of the SBA’s loan programs is not tolerated and should be reported.”

In July, the SBA's inspector general alerted U.S. banks about “serious concerns of potential fraud” in relation to the EIDL program. In a preliminary review, the watchdog office said it found “strong indicators of widespread fraud.” It also said in its investigation, the office found $250 million in loans and grants to “potentially ineligible recipients” and an additional $46.6 million in potential double payments.

At the end of Wednesday’s trading, Wells Fargo stock closed at $23.25 per share, down nearly 6%.

In the meantime, the bank has fired more than a hundred employees involved in the fraud. An internal investigation is also ongoing to settle the matter properly, according to a person familiar with the matter.

“We have terminated the employment of those individuals and will cooperate fully with law enforcement,” said Galloreese, in the memo. “We have zero tolerance for fraudulent behavior and will continue to look into these matters. If we identify additional wrongdoing by employees, we will take appropriate action.”

Galloreese further stated that the incident is a misrepresentation of the bank and the majority of its employees.

Wells Fargo wouldn’t be the first bank to have fraud cases, as JPMorgan had a similar case, last month. The bank said it was investigating the actions some of its employees may have taken in abusing the Paycheck Protection Program loans and other Covid-19 relief programs. As a result, several individuals have been charged with alleged bank fraud misuse of relief funds.

In mid-April, a group of small business owners sued some of the biggest banks in the U.S., including JPMorgan and Wells Fargo. The group accused the banks of reshuffling applications to frontload businesses that sought higher loans, in turn, boosting their profits.