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(LR) Kevin Chambers, Director of COVID-19 Fraud Control, Department of Justice; Hannibal “Mike” Weir, Inspector General, Small Business Administration; Michael Horowitz, chair of the Committee on Accountability for Epidemic Response; Roy Dotson Jr., Acting Special Agent in Charge, National Pandemic Fraud Recovery Coordinator, United States Secret Service; Testified during a mixed hearing convened by the House Subcommittee on the Coronavirus Crisis in the Rayburn House office building on June 14, 2022 in Washington, DC.
Joe Riddle | Getty Images
Scammers have likely stolen more than $200 billion in federal loans meant to help small businesses struggling during the covid pandemic, government censor He said on Tuesday.
The Office of the Inspector General estimated in a new report that at least 17% of the $1.2 trillion spent by the Small Business Administration may have been stolen by fraudulent actors.
The inspector general found that more than $136 billion in Economic Injury Disaster Loan Program and $64 billion in Paycheck Protection Program loans were stolen. In all, the Small Business Administration disbursed $400 billion in EIDL money and $800 billion in Paycheck Protection Program loans over the course of the programs.
The inspector general said a myriad of scammers attracted by the easy money were able to take advantage of the programs because the Small Business Administration loosened its internal controls in a rush to distribute aid to small businesses struggling during the pandemic shutdown.
The Small Business Administration, in a letter included in the report, challenged the inspector general’s findings. Billy DeVries, a senior SBA official, said the report grossly overstates the extent of software fraud.
The Trump administration rushed the loans during the first few months of the program, DeVries said, but additional fraud controls were introduced in 2021.
It also said the 34% potential fraud rate that the EIDL program’s inspector general found did not match SBA’s current payment data.
SBA numbers show that 12% of loans went to past due borrowers, most of whom are likely real businesses that are closed or simply unable to repay, DeVries said. She said that about 74% of the companies have either paid off their loans in full or have begun to repay them while 14% are still in the deferral period.
The OIG investigation has resulted in more than 1,000 indictments, 803 arrests and 529 convictions related to loan program fraud, according to the report. These investigations have led to nearly $30 billion in stolen loans being forfeited or returned by federal law enforcement agencies.
The Office of the Inspector General is still working on tens of thousands of investigative leads about waste, fraud and abuse in loan programs, according to the report. The inspector general said thousands of such investigations are expected to drag on for years.
The Paycheck Protection Program provided secured loans to small businesses, individuals, and non-profit organizations that could be forgiven if the borrower met certain conditions. The Economic Injury Disaster Loan Program provides low-interest and fixed-interest loans to help small businesses and other organizations cover their operating expenses.
According to the report, about 1.6 million EIDL loans worth $114 billion were either past due, past due, or in liquidation as of May. More than 69,000 of these loans, worth $3.2 billion, have been written off. More than 500,000 PPP loans have defaulted
The inspector general’s report said that non-payment is often an indicator of loan fraud, though not all delinquent, delinquent, or charged loans will be fraudulent.
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