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

Face Masks Are Piling Up In Warehouses, Indy Makers Say
Health
Face Masks Are Piling Up In Warehouses, Indy Makers Say
March 4, 2021
by Dan McCue

AUSTIN, Texas – It was a dire situation that Lloyd Armbrust can almost laugh about now.  A global pandemic had swept across the United States, a baby was on the way, and Armbrust, hard as he tried, could not find a supply of a critical element... Read More

Airlines Say They Will Fail Without More Federal Aid
Travel
Airlines Say They Will Fail Without More Federal Aid
March 3, 2021
by Tom Ramstack

WASHINGTON -- Airline industry officials made a plea Tuesday for additional federal assistance to help their deeply wounded businesses recover from the COVID-19 pandemic. They asked a congressional committee for another round of Payroll Support Program funds, not only to keep their workers employed, but in... Read More

Apprenticeships Benefit Individuals and Employers
Employment
Apprenticeships Benefit Individuals and Employers
March 2, 2021
by Victoria Turner

WASHINGTON - The Department of Labor’s apprenticeship programs benefit individuals seeking to master skills while gainfully employed, and provides employers with the talent needed to fill the current workforce shortage, according to two Congressmen yesterday. Apprenticeships differ from paid internships in that they are not temporary,... Read More

FDA Clears Single-Shot Vaccine for Use
Health
FDA Clears Single-Shot Vaccine for Use
March 1, 2021
by Daniel Mollenkamp

WASHINGTON - On Saturday, the Food and Drug Administration gave emergency authorization to a third coronavirus vaccine. This vaccine, unlike the Pfizer and Moderna vaccines which received emergency authorizations in December, is a single shot vaccine.  Placebo-controlled, randomized studies of 43,783 participants across eight countries, including... Read More

Trump Rule on China Tech Transactions to Remain in Place
Geopolitics
Trump Rule on China Tech Transactions to Remain in Place
March 1, 2021
by Reece Nations

WASHINGTON — A Trump-era regulation allowing the Department of Commerce to block technology-related business transactions determined to be national security threats will remain in place, against the wishes of some of the country's business stakeholders. The rule, scheduled to take effect this month, derives from a... Read More

US Jobless Claims Fall to 730,000 But Layoffs Remain High
Economy
US Jobless Claims Fall to 730,000 But Layoffs Remain High

WASHINGTON (AP) — The number of Americans seeking unemployment benefits fell sharply last week but remained high by historical standards.  Applications for benefits declined 111,000 from the previous week to a seasonally adjusted 730,000, the Labor Department said Thursday. It is the lowest figure since late... Read More

News From The Well
scroll top