Fraud Friday: Wichita Falls Banker Sentenced to 4 Years for $500K PPP & EIDL Loan Fraud

January 16, 2026

Bob Coleman
Founder & Publisher

Fraud Friday: Wichita Falls Banker Sentenced to 4 Years for $500K PPP & EIDL Loan Fraud

Kaylee Lunn, a former vice president of commercial lending, was sentenced to four years in federal prison after pleading guilty to PPP loan fraud and EIDL fraud. Lunn exploited her role inside the banking system, using access, process knowledge, and lender credibility, to submit fraudulent relief loan applications, including at least one submitted through a customer account and additional applications tied to herself and her husband.

Lunn worked for a bank identified as Prosperity Bank for a period during the COVID-era lending surge; the institution was later taken over by First Capital Plus. According to the case details discussed, she “figured out she had the keys to the kingdom” and used that leverage to treat emergency programs as an easy funding source.

One of the most brazen features of the scheme involved manipulating borrower financials. PPP loan eligibility was driven by payroll calculations, requiring not only representations in the application but supporting documentation during the forgiveness process. Lunn allegedly inflated revenues and payroll expenses to increase loan proceeds, then diverted the money after funding.

The scheme included multiple loans. One notable red flag was a PPP loan in the amount of $20,800 (often seen as $20,833 in PPP data), a figure commonly associated with a claimed $100,000 Schedule C net income level. During the crisis, SBA policy permitted applicants to submit draft tax documentation due to IRS operational disruptions, but forgiveness depended on filing consistency. In this case, Lunn allegedly represented $100,000 of sole proprietor income while employed at the bank, yet did not report that income on her tax returns—an inconsistency that frequently appears in PPP fraud matters.

Additional loans referenced included a $16,250 sole-proprietor PPP loan under different naming and a PPP loan in her husband’s name. Collectively, the activity totaled roughly $500,000 which is significant enough to trigger aggressive federal enforcement, particularly given the abuse-of-trust profile.

Beyond incarceration, the collateral consequences are extensive. Lunn is barred from banking employment, faces intrusive supervision requirements, and must comply with strict financial controls while on probation—including limits on incurring new credit card charges or opening credit lines without probation-officer approval. She must also provide broad access to personal and business records. Restitution was described as approximately $500,000, with payments structured at $1,000 per month or 10% of income, continuing after probation until the debt is paid.