A former Texas bank vice president who exploited pandemic relief programs intended to help struggling businesses will spend the next four years in federal prison, authorities announced this week.
Kaylee Ree Lunn, 37, of Holliday, Texas, was sentenced to 48 months behind bars after pleading guilty to wire fraud in a scheme that diverted hundreds of thousands of dollars from COVID-19 emergency loan programs. Chief U.S. District Judge Reed C. O’Connor handed down the sentence on December 5, 2025.
Betrayal of Trust
What makes this case particularly troubling? As vice president of commercial lending at First Capital Bank (now Prosperity Bank) in Wichita Falls, Lunn had privileged access to customer information — which she then exploited to submit fraudulent loan applications under government relief programs.
Between late 2020 and mid-2021, Lunn submitted multiple bogus applications for Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL), using her position at the bank to create the appearance of legitimacy. Court records show she managed to divert over $276,000 to accounts under her control and secured more than $140,000 in loans for her husband’s businesses.
The scheme wasn’t limited to a single transaction. Prosecutors documented that Lunn submitted four fraudulent PPP loans and one commercial loan using fabricated income and payroll figures — all without the knowledge of the customers whose information she misappropriated.
Had all her attempts succeeded, the damage would have been substantially worse. Investigators found evidence that Lunn tried to secure over $890,000 in EIDL loans but failed in those attempts.
Pandemic Relief Fraud
Lunn’s case represents just one instance in a broader pattern of fraud that has plagued pandemic relief programs. These programs were rapidly deployed to provide economic lifelines during unprecedented business disruptions — but that same urgency created vulnerabilities that opportunists exploited.
The PPP and EIDL programs were designed as crucial safety nets for legitimate businesses struggling with pandemic shutdowns and restrictions. Instead, in this case, they became targets for a banking professional who knew exactly how to manipulate the system.
The four-year sentence reflects the seriousness with which federal authorities are treating such violations as they continue to uncover and prosecute pandemic relief fraud across the country.
For businesses in the Wichita Falls area that trusted First Capital Bank with their financial information, the case serves as a stark reminder of how vulnerable even regulated systems can be to insider threats.
Lunn’s sentencing comes as federal investigators nationwide continue their years-long effort to reclaim billions in fraudulently obtained pandemic relief funds — a process likely to continue well into the future.
