Former KY banker agrees to prohibition after COVID loan funds used for ‘unauthorized purposes’

A former Kentucky banker has consented to his prohibition from future employment or service at a bank for obtaining a loan from a coronavirus crisis federal fund and using the $500,000 in proceeds for “unauthorized purposes,” the Federal Reserve said Thursday.

The Fed said that Andrew Ellison, while employed as Graves County Market President at the Community Financial Services Bank of Benton, Ky., obtained an economic injury disaster loan (EIDL) issued under the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Under the EIDL loan or grant requirements, the Fed said, borrowers were required to apply to the Small Business Administration (SBA) and sign a loan authorization agreement under penalty of perjury certifying compliance with all EIDL requirements. That includes providing information, such as average monthly payroll expenses and number of employees, and agreeing that loan proceeds would be used for specifically authorized purposes, the Fed said.

Ellison obtained an EIDL of $500,000 from the SBA for a business in which he was sole proprietor and, the Fed alleged, used these funds for unauthorized expenses.

The agency said his conduct was “contrary to the terms of the EIDL and constituted violations of law or regulation, unsafe or unsound banking practices, or breaches of fiduciary duty.”

Ellison, the Fed noted, has repaid the SBA in full, including interest.

Federal Reserve Board issues enforcement action with former employee of Community Financial Services Bank