(L-R) Kevin Chambers, Director for COVID-19 Fraud Enforcement, Department of Justice; Hannibal “Mike” Ware, Inspector General, Small Business Administration; Michael Horowitz, Chair, Pandemic Response Accountability Committee; and Roy D. Dotson Jr., Acting Special Agent in Charge, National Pandemic Fraud Recovery Coordinator, United States Secret Service; testify during a hybrid hearing held by the House Select Subcommittee on the Coronavirus Crisis within the Rayburn House Office Constructing on June 14, 2022 in Washington, DC.
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Fraudsters potentially stole greater than $200 billion in federal loans intended to assist small businesses struggling through the Covid pandemic, a government watchdog said on Tuesday.
The Office of the Inspector General estimated in a latest report that not less than 17% of the $1.2 trillion disbursed by the Small Business Administration can have been ripped off by fraudulent actors.
Greater than $136 billion from Economic Injury Disaster Loan program and $64 billion from the Paycheck Protection Program loans was potentially stolen, the inspector general found. In total, SBA disbursed $400 billion in EIDL funds and $800 billion in Paycheck Protection Program loans through the lifetime of the programs.
The inspector general said an amazing variety of fraudsters interested in easy money were capable of benefit from the programs since the SBA eased its internal controls in the push to distribute assistance to struggling small businesses through the pandemic shutdowns.
The SBA, in a letter included within the report, disputed the inspector general’s conclusions. Bailey DeVries, a senior official at SBA, said the report significantly overestimates the quantity fraud within the programs.
DeVries said the Trump administration rushed out loans through the first few months of this system but additional fraud controls were introduced in 2021.
She also said the 34% potential fraud rate the inspector general present in the EIDL program is inconsistent with SBA’s current repayment data.
SBA figures show that 12% of the loans went to borrowers who’re overdue, most of whom are likely real businesses which are closed or just unable to repay, DeVries said. Some 74% of companies have either fully repaid or begun to repay their loans while 14% are still within the deferment period, she said.
The inspector general office’s investigations have led to greater than 1,000 indictments, 803 arrests and 529 convictions related to fraud within the loan programs, based on the report. These investigations have led to almost $30 billion in stolen loans being seized or returned by federal law enforcement agencies.
The inspector general’s office remains to be working on tens of 1000’s of investigative leads on waste, fraud and abuse within the loan programs, based on the report. Hundreds of those investigations are expected to proceed for years, the inspector general said.
The Paycheck Protection Program provided guaranteed loans to small businesses, individuals and nonprofits that may very well be forgiven if the borrower fulfilled certain conditions. The Economic Injury Disaster Loan program provided low-interest, fixed-rate loans to assist small businesses nd other organizations to assist cover their operating expenses.
About 1.6 million EIDL loans value $114 billion are either overdue, delinquent or in liquidation as of May, based on the report. Greater than 69,000 of those loans value $3.2 billion have been written off. And greater than 500,000 PPP loans have defaulted
The inspector general report said nonpayment is commonly an indictor of loan fraud, though not all loans which are overdue, delinquent, or charged off might be fraudulent.
