By Ben Glickman
Bankrupt small-business loan platform Kabbage agreed to resolve allegations that it improperly approved pandemic-era Paycheck Protection Program loans, officials said Monday.
The Justice Department said the government would receive a claim of up to $120 million in bankruptcy proceedings.
Officials alleged that Kabbage knowingly submitted thousands of false claims for loan forgiveness, loan guarantees and processing fees to the Small Business Administration, which administered the program during the Covid-19 pandemic.
Kabbage, which operated under the name KServicing, is winding down operations after filing for Chapter 11 protections in 2022.
As part of the resolution, the wind-down company admitted that Kabbage inflated loans, causing the company to receive repayment in amounts that exceeded what borrowers were eligible for. The Justice Department said the resolution also addresses allegations that Kabbage knowingly had substandard fraud controls.
The actual amount the government receives through the claim will depend on the assets available in the bankruptcy estate, and Kabbage will receive a $12.5 million credit for payments previously returned to the government.
American Express bought substantially all of the assets of the online lender in 2020 and has since retired the brand.
Write to Ben Glickman at ben.glickman@wsj.com
(END) Dow Jones Newswires
05-13-24 1548ET
