By Jonathan Stempel
Jan 7 (Reuters) - A unit of KeyCorp will pay $7.77 million to resolve allegations that the large regional bank violated the federal False Claims Act by submitting fraudulent loans from
the pandemic-era Paycheck Protection Program for forgiveness, the U.S. Attorney's office in New Jersey said on Wednesday.
KeyBank's settlement related to a Conshohocken, Pennsylvania, branch manager who, in 2020 and early 2021, allegedly recruited business owners to overstate their payroll expenses and how many people they employed in about four dozen loan applications.
This resulted in nearly $6 million of federal Small Business Administration loans, with KeyBank awarding the branch manager incentive pay for opening accounts for the business owners before it uncovered the scheme, the U.S. Attorney's office said.
Tommy Hawkins, the branch manager, pleaded guilty to a bank fraud conspiracy charge and was sentenced to 65 months in prison in 2024. Six other people faced related criminal charges, and four have pleaded guilty.
KeyBank did not admit wrongdoing in agreeing to settle, and the settlement reflected its cooperation in the government's investigation. It did not immediately respond to requests for comment. About $6.2 million of the settlement is restitution.
Congress created the Paycheck Protection Program in March 2020 to support Americans suffering financially from the pandemic, including by providing forgivable loans to small businesses.
KeyCorp has about 1,000 branches in 15 U.S. states, and had $187.4 billion of assets as of September 30, 2025.
(Reporting by Jonathan Stempel in New YorkEditing by Rod Nickel)
