Congress Looks to Private Sector to Recover Pandemic Loans Lost to Fraud

September 27, 2023 by Tom Ramstack
Congress Looks to Private Sector to Recover Pandemic Loans Lost to Fraud
The seal of the Small Business Administration above its office door. (Photo by Mr. Blue MauMau via Flickr)

WASHINGTON — Shocking new figures on how much of the COVID-19 pandemic relief bailout funds went to fraud prompted a U.S. House committee on Wednesday to consider private sector strategies to recover more of the money for the government.

The Small Business Administration recently estimated that about $200 billion, or 20% of its Paycheck Protection Program loans were paid to fraudsters who never should have received the money.

At the current pace, investigating all the 11.4 million loans intended to help businesses survive the economic downturn during the pandemic would take about 100 years, according to government estimates.

“It is clear that we cannot continue with business as usual,” said Rep. Roger Williams, R-Texas, chairman of the House Small Business Committee.

So far, about $30 billion has been recovered through Justice Department enforcement action.

Lawmakers at the hearing Wednesday made it clear they were not going to concede the rest of the money to swindlers who often used the money to fund lavish lifestyles. Some purchased luxury cars, vacations or second homes.

“We cannot allow the American taxpayer to be on the hook for $200 billion,” Williams said.

If law enforcement is too ponderous and ineffective, what’s better, Williams and other members of the House committee asked financial industry experts.

Dean Zerbe, managing director of the business consulting firm Alliantgroup, suggested wider use of whistleblowers.

Whistleblowers refer to persons, such as employees, who reveal information to government investigators about activity within an organization that is illegal, unsafe or fraudulent. Typically they receive rewards, either a fixed amount or a percentage of the money the government recovers from persons who committed the fraud.

So far, the Justice Department has relied mostly on traditional law enforcement tactics, such as FBI investigations.

“The whistleblowers give you the keys to the kingdom in terms of what’s going on,” Zerbe said.

He mentioned an example from the Internal Revenue Service, which did not realize the extent of tax fraud by persons shifting money to overseas accounts until the agency was informed by whistleblowers.

J.T. Taylor, director of fraud investigations for the identity theft protection firm ID.me, said much of the pandemic loan fraud could have been avoided with better verification of loan applicants.

Identity thieves would sometimes steal personal information of business owners who could rightfully qualify for the loans, then use the information to divert the government money to themselves. A better online method for identifying the thieves could have stopped them, Taylor said.

“It’s about ID verification at the front end,” Taylor told the committee.

By waiting to recover the money after it was paid out, the government might have lost its opportunity for compensation, said Linda Miller, chief executive officer of Audient Group, an anti-fraud and cybersecurity firm.

“It is water over the dam,” she said.

Some of it went to foreign countries that would be unwilling to cooperate with U.S. investigators.

When the Trump administration announced the Paycheck Protection Program loans, “Those of us in the fraud world saw this as a field day for bad actors,” Miller said.

She recommended an amnesty program that would allow persons suspected of fraud to return the money without risk of prosecution. If they refused, they could face criminal charges and be forced to pay back the original amount plus fines.

Congress already has taken some steps toward more aggressive prosecution, such as extending the statute of limitations from two years to 10 years from the time of the fraud.

Others are pending, such as a bill to require the Small Business Administration to set up an internet link for reporting suspected pandemic loan fraud. A second bill would ban anyone convicted of defrauding the government from receiving Small Business Administration assistance.

You can reach us at [email protected] and follow us on Facebook and Twitter

A+
a-
  • Congress
  • fraud
  • pandemic Relief
  • Small Business Administration
  • In The News

    Health

    Voting

    Congress

    June 12, 2025
    by Dan McCue
    House Republicans Narrowly Pass Bill to Claw Back PBS, NPR Funding

    WASHINGTON — The House voted 214-212, largely along party lines, to cut federal funding for public media and foreign aid,... Read More

    WASHINGTON — The House voted 214-212, largely along party lines, to cut federal funding for public media and foreign aid, a move intended to enshrine the first major cuts proposed by President Donald Trump's Department of Government Efficiency. Four Republicans voted with House Democrats against the... Read More

    June 12, 2025
    by Dan McCue
    Republicans Rout Dems for Fifth Straight Year in Congressional Baseball Game

    WASHINGTON — The Republicans won the Congressional Baseball Game for the fifth straight year Wednesday night, pummeling the Democrats, 13-2... Read More

    WASHINGTON — The Republicans won the Congressional Baseball Game for the fifth straight year Wednesday night, pummeling the Democrats, 13-2 at Nationals Park. As he seems to do every year, Rep. Greg Steube, R-Fla., pitched five strong innings for the GOP, giving up the Democrats’ two... Read More

    What's Targeted in Trump's Request for $9.4B in Budget Cuts From Congress

    WASHINGTON (AP) — President Donald Trump is looking to cancel $9.4 billion in spending already approved by Congress. That's just a sliver... Read More

    WASHINGTON (AP) — President Donald Trump is looking to cancel $9.4 billion in spending already approved by Congress. That's just a sliver of the $1.7 trillion that lawmakers OK'd for the budget year ending Sept. 30. The package of 21 budget rescissions will have to be approved by both chambers... Read More

    House Members, Veterans Condemn Efforts to Scrub DEI From Military

    WASHINGTON — Rep. Chrissy Houlahan, D-Pa., a former Air Force officer, was joined by other women veterans on Capitol Hill... Read More

    WASHINGTON — Rep. Chrissy Houlahan, D-Pa., a former Air Force officer, was joined by other women veterans on Capitol Hill on Thursday to condemn President Donald Trump’s efforts to stamp out diversity, equity and inclusion programs in the military. Among those appearing with Houlahan as a... Read More

    June 6, 2025
    by Dan McCue
    House Looks to Formally Slash PBS, NPR and Other Funding Next Week

    WASHINGTON — The House Rules Committee on Tuesday will mark up a $9 billion-plus rescissions package from the White House,... Read More

    WASHINGTON — The House Rules Committee on Tuesday will mark up a $9 billion-plus rescissions package from the White House, setting the stage for a floor vote next week that will immediately implement the cuts. The carve-backs requested by President Donald Trump include slashing more than... Read More

    Senate Called on to Nix Domestic Violence Services Cuts in Trump Bill

    WASHINGTON — Members of the Bipartisan Working Group to End Domestic Violence gathered outside the Capitol on Thursday to call... Read More

    WASHINGTON — Members of the Bipartisan Working Group to End Domestic Violence gathered outside the Capitol on Thursday to call for a “day of action” against dramatic cuts to federal funding for domestic violence programs included in the Big Beautiful Bill Act currently working its way... Read More

    News From The Well
    scroll top