A former Wichita Falls bank vice president has been sentenced to federal prison for orchestrating a fraud scheme involving COVID-19 relief loans, according to the U.S. Attorney’s Office for the Northern District of Texas.
Kaylee Ree Lunn, 37, of Holliday, was sentenced to 48 months in federal prison on December 5 by Chief U.S. District Judge Reed C. O’Connor after pleading guilty in July 2025 to one count of wire fraud.
Lunn previously served as a vice president of commercial lending at the Wichita Falls branch of First Capital Bank, now Prosperity Bank. Federal prosecutors said she used her position to unlawfully access customer financial information and submit fraudulent applications under the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs between late 2020 and mid-2021.
Fraud Scheme
According to court records, Lunn submitted four fraudulent PPP loans and one commercial loan using false or inflated income and payroll figures tied to bank customers, without their knowledge or consent. Prosecutors said she diverted more than $276,000 in loan proceeds into bank accounts she controlled.
Authorities said Lunn also applied for and received more than $140,000 in fraudulent PPP loans by falsely listing her husband’s business entities. In addition, she attempted to obtain more than $890,000 in EIDL loans, though those applications were denied due to false information.
Federal authorities said Lunn admitted to spending thousands of dollars of the fraudulently obtained funds on personal and lifestyle expenses.
Restitution Ordered
In addition to her prison sentence, Judge O’Connor ordered Lunn to pay $573,444 in restitution to the Small Business Administration and more than $19,000 to Prosperity Bank, her former employer.
The case was investigated by federal authorities and prosecuted by the U.S. Attorney’s Office for the Northern District of Texas.
