KeyCorp’s regional banking unit has agreed to pay $7.77 million to resolve allegations that it violated the federal False Claims Act by submitting fraudulent Paycheck Protection Program (PPP) loans for forgiveness. The settlement includes $6.2 million in restitution to the U.S. Treasury and does not require KeyCorp to admit wrongdoing, but it obligates the bank to pay the restitution and to strengthen its compliance controls.
The fraud involved a branch manager who encouraged small‑business owners to inflate payroll figures on PPP applications. At least 38 loans were approved and roughly $5 million was disbursed during the height of the COVID‑19 pandemic. The manager, Tommy Hawkins, pleaded guilty and was sentenced in 2024, underscoring the seriousness of the misconduct and the regulatory focus on PPP abuse.
Financially, the $7.77 million settlement is modest relative to KeyCorp’s balance sheet. As of September 30, 2025, the bank’s total assets were $187.409 billion, and its Q3 2025 net income was $454 million. The restitution represents a fraction of the bank’s earnings and assets, but it signals a regulatory risk that could prompt tighter oversight and higher compliance costs.
The settlement is part of a broader DOJ effort to address PPP fraud, which has seen several banks and lenders face similar penalties. The case highlights the importance of robust internal controls and fraud detection systems, especially during periods of rapid program expansion. KeyCorp’s experience may prompt the bank to review its loan‑origination processes and strengthen its monitoring of payroll data.
Management has emphasized its commitment to risk management and compliance. In its Q3 2025 earnings call, CEO Chris Gorman noted that the bank remains focused on delivering strong financial performance while managing risk. Although he did not comment directly on the settlement, his remarks reinforce the bank’s intent to maintain rigorous oversight of its lending practices.
The settlement announcement coincided with a modest decline in KeyCorp’s stock price, but analysts raised their price targets, reflecting confidence in the bank’s earnings momentum and strategic outlook. The market reaction suggests that investors view the settlement as a resolved legal matter that does not materially alter the bank’s long‑term prospects.
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