Government Small Business Loans Subjected to Widespread Fraud

October 1, 2020 by Tom Ramstack
A small business that did not survive. (Photo by Dan McCue)

WASHINGTON — A Small Business Administration inspector general defended his agency Thursday during questioning from members of Congress about reports of widespread fraud in government loans to employers.

The loans are supposed to help small businesses stay afloat during the economic downturn caused by the coronavirus pandemic.

Instead, early estimates indicate hundreds of millions of dollars went to identity thieves while other business owners lied about their loan qualifications, according to lawmakers.

Rep. Tim Burchett, R-Tenn., explained his frustration with the fraudsters by saying, “These dirtbags get out and take advantage of the situation.”

The House Small Business subcommittee on investigations, oversight and regulations is investigating fraud in the Small Business Administration’s Paycheck Protection Program and Economic Injury Disaster Loan program.

The programs are part of the federal government’s COVID-19 economic recovery strategy.

They allow businesses in danger of closing due to restrictions caused by the pamdemic to receive potentially large low-interest loans. The government pledged to forgive some of the loans if the business owners kept employees on their payroll.

The CARES Act approved by Congress in late March set aside $349 billion for the relief of small businesses. Congress later provided an additional $310 billion for the Paycheck Protection Program, totaling $649 billion.

The CARES Act also appropriated $10 billion for Emergency EIDL grants. The program would give small businesses as much as $10,000 in loans that would not need to be repaid if they continued operating with employees.

Shortly after the programs started, an SBA hotline began receiving thousands of calls about fraudulent loan applications, according to Mike Ware, the SBA’s inspector general.

Some callers complained about receiving letters from the SBA notifying them that their Paycheck Protection Program loan payments were deferred.

“And they say, ‘What loan payments?’” Ware told the House subcommittee.

Only then did the victims realize that identity thieves used their names to fraudulently apply for the loans.

In other cases, the applications required business owners to “self-authenticate” they had the kind of businesses and number of employees required for the loans, Ware said.

Some of them lied, he said.

He put much of the blame on the SBA’s rush to bail out small businesses in danger of failing. The money was given out before proper fraud controls were arranged, he said.

The fraud reports led the U.S. Government Accountability Office to investigate the SBA and the loan programs.

With reports in July and August, the GAO documented “indicators of widespread potential fraud,” said William Shear, the agency’s director of financial markets.

The investigation was impeded by slow responses from the SBA to turn over data, he said.

He was unable to give a good estimate of how much money was given to fraudsters. The investigations are ongoing, he said.

“It’ll be a long time before we know how much fraud there was in the program,” Shear said.

He described the fraud as unfortunate because of the important role the government loans provided small businesses that otherwise would have gone bankrupt.

“It has certainly been a lifeline for a large number of small businesses,” Shear said.

His outrage was shared by members of Congress.

“Frankly, I am shocked by these findings,” said Rep. Judy Chu, D-Calif.

Rep. Ross Spano, R-Fl., said, “These loans have helped small businesses keep the lights on.”

Business

Gottheimer and Philips Urge Congressional PPP Renewal
Congress
Gottheimer and Philips Urge Congressional PPP Renewal
October 30, 2020
by Sara Wilkerson

Earlier this week, Rep. Josh Gottheimer, D-N.J. and Dean Phillips, D-Minn., discussed the continuously growing need to renew the Small Business Administration’s Paycheck Protection Program for a second round and urged both Congress and the administration to continue bipartisan negotiations for a new COVID-19 relief deal.... Read More

Walmart Pulls Guns Off Shelves as Precaution Ahead of Election
2020 Elections
Walmart Pulls Guns Off Shelves as Precaution Ahead of Election

Walmart Inc. has temporarily pulled ammunition and guns off its shelves ahead of any possible looting or civil unrest that could take place following next week's election. "We have seen some isolated civil unrest and as we have done on several occasions over the last few... Read More

Flying is Safer Than Grocery Shopping or Eating Out, Report Says
Health
Flying is Safer Than Grocery Shopping or Eating Out, Report Says

Flying ranks below grocery shopping and eating in a restaurant when it comes to the risk of contracting COVID-19 in a public place, a new study claims. It's all in the ventilation and the protocols, researchers at Harvard University's T.H. Chan School of Public Health found in their Phase... Read More

American Airlines Is Planning Boeing 737 Max Tours as Ungrounding Nears
Business
American Airlines Is Planning Boeing 737 Max Tours as Ungrounding Nears

American Airlines wants to give tours of Boeing 737 Max aircraft at DFW International Airport and other locations before the beleaguered jets return to the skies more than 18 months of being grounded. The Fort Worth-based airline, the second-largest U.S. owner of 737 Max jets, told employees at an internal meeting last week that... Read More

Airlines Face Winter Survival Test After Virus Slows Rebound
Business
Airlines Face Winter Survival Test After Virus Slows Rebound

The resurgent Covid-19 pandemic is pushing back the recovery in air travel, turning winter into a survival test for carriers now pinning hopes on a spring rebound. Airlines are urging governments to introduce more testing and travel bubbles to help spur demand. The industry is on... Read More

Few New Movies, Small Crowds: Can AMC and B&B Theaters Survive the Pandemic?
Entertainment
Few New Movies, Small Crowds: Can AMC and B&B Theaters Survive the Pandemic?

At AMC Town Center in the Kansas City suburb of Leawood, Kan., the 20-screen complex has a few recent offerings: There's a new comedy starring Robert DeNiro and Rob Riggle, Christopher Nolan's "Tenet" and a thriller with Russell Crowe. But it's the oldies that tell the story of how the coronavirus pandemic has shaped the movie theater... Read More

News From The Well
scroll top