SBA’s watchdog received more than 1 million fraud referrals for disaster loans, House select committee says
The Small Business Administration’s watchdog received more than 1 million referrals for suspected fraud in loans from small business relief programs, including referrals for identity theft, according to an analysis released Thursday by the House select committee reviewing the federal response to the coronavirus crisis.
The SBA sent its Office of Inspector General 1.34 million referrals for potential fraud in loans and advances borrowed from the Economic Injury Disaster Loan program, the House Select Subcommittee on the Coronavirus Crisis’s majority staff wrote in a memo.
The latest analysis shows the wide scope of potential fraud in small business loans under the Trump administration. The House select committee claims that the Trump administration’s “mismanagement” of small business relief programs led to nearly $84 billion in potentially fraudulent loans.
According to the committee, the SBA OIG’s most recent analysis found that $79 billion was doled out in potentially fraudulent Economic Injury Disaster Loan program loans and advances. The vast majority — $67.5 billion — went to applicants with duplicate addresses, emails, IP addresses, and bank accounts.
A committee analysis from last year identified more than $4 billion in possible fraudulent Paycheck Protection Program loans.
So far, the Department of Justice has recovered $626 million — less than 1% — of the near $84 billion in potentially fraudulent loans in the two small business loan programs, according to the committee.
As of Tuesday, the Justice Department has “charged 173 criminal cases involving 242 defendants for violations related to the PPP or EIDL programs,” the committee said in its analysis.
The committee argued that the Justice Department may need additional personnel to “continue effectively investigating and prosecuting” cases of fraud in small business relief programs.
The SBA’s OIG also received 148,525 hotline complaints — a 19,500% increase over prior years — related to the two loan programs. The OIG receives approximately 700 to 800 hotline complaints in a typical year.
More than 400 of the total complaints have led to investigations, while 73,758 are still unprocessed as of March 18. The OIG, as of March 18, is also handling more than 200 open investigations related to PPP or EIDL.
The memo release comes ahead of the House subpanel’s hearing Thursday with the SBA inspector general Mike Ware, the Pandemic Response Accountability Committee chair Michael Horowitz, and Government Accountability Office director of financial markets and community investments William Shear.
The House Select Subcommittee on the Coronavirus Crisis was formed last year to have broad oversight and investigative authority to probe the federal response to the Covid-19 pandemic.
