Select Subcommittee Releases New Findings on Trump Administration’s Failure to Prevent Billions in Small Business Fraud

Mar 25, 2021
Press Release
SBA Made More Than 1 Million Referrals to IG for Potentially Fraudulent Loans

Washington, D.C. (March 25, 2021) — Today, the Select Subcommittee on the Coronavirus Crisis released a staff memo providing new evidence of the Trump Administration’s mismanagement of the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program, which led to nearly $84 billion in potentially fraudulent loans, and detailing the steps taken by the Biden Administration to address the risk of fraud.

The memo states:

“These programs have played a crucial role in helping small businesses keep their lights on and keep workers on the payroll during the pandemic, preventing the nation’s economic crisis from becoming even worse.  However, the Trump Administration refused to implement basic controls in PPP and EIDL despite warnings from the Select Subcommittee and others, leading to billions of dollars in potential fraud.  The American Rescue Plan provided more resources to federal watchdogs to combat this problem, and the Biden-Harris Administration is enhancing program integrity to prevent fraud, waste, and abuse in these critical programs going forward.”

Today’s staff memo includes the following key findings:

  • $626 million:  Funds seized or forfeited as a result of civil and criminal investigations involving the EIDL and PPP programs by the Department of Justice (DOJ), less than 1% of the nearly $84 billion in potential fraud identified in these programs.
  • 1.34 million:  Referrals for suspected fraud in EIDL loans and advances from SBA to the agency’s Inspector General.
  • 148,525:  Hotline complaints received by the SBA Office of Inspector General (OIG) relating to PPP or EIDL, a 19,500% increase over prior years.
  • 212:  Open SBA OIG investigations regarding EIDL or PPP as of March 18, 2021.
  • 32:  Law enforcement and other federal and state agencies investigating small business fraud in pandemic relief programs.

Today’s report also highlights key steps taken by the Biden-Harris Administration and Democrats in Congress to address the risk of fraud in these important small business relief programs:

  • The American Rescue Plan invests an additional $142 million for federal watchdogs to root out fraud in these programs, including inspectors general, the Pandemic Response Accountability Committee (PRAC), and the Government Accountability Office.
  • President Biden has called for “fastidious oversight” and has made key program changes in PPP—including automatic fraud checks and manual reviews for a subset of loans—to prevent fraud while continuing to ensure funds are quickly distributed to those in need.
  • The President appointed former National Economic Council Director Gene Sperling to oversee implementation of the American Rescue Plan and ensure funds are not diverted to fraud or waste.  Interagency coordination has also improved, with the Department of Justice, the PRAC, and other agencies launching a task force to root out fraud.

The Select Subcommittee is committed to rooting out fraud, waste, and abuse in pandemic small business lending programs:

On June 15, 2020, the Select Subcommittee launched an investigation into the Trump Administration’s implementation of PPP following reports that the program favored large companies over the neediest small businesses.  The Committee released preliminary findings last October showing that underserved small businesses often faced longer waits and more obstacles to receiving PPP funding than larger, wealthier companies. 

On June 23, 2020, the Select Subcommittee sent a letter to the SBA Inspector General requesting immediate review of the Trump Administration’s mismanagement of PPP and flagging an error at SBA that allowed for “more than a thousand duplicate loans, creating significant opportunities for fraud and potentially wasting more than $100 million in taxpayer dollars.”  This resulted in the Inspector General identifying $692 million in duplicate PPP loans.

On July 30, 2020, the Select Subcommittee and Small Business Committee launched an investigation into a contract in SBA’s EIDL program plagued by errors and delays after reports that millions of small businesses seeking emergency loans faced delays, poor service, and processing errors.  The Committees subsequently found that the prime contractor appeared to be performing only a small portion of the work while receiving over $380 million.

On September 1, 2020, the Select Subcommittee released a preliminary analysis of PPP loan-level data detailing more than $4 billion in loans may have been diverted to fraud, waste, and abuse.

On March 3, 2021, the Select Subcommittee sent a letter to SBA and the Department of Treasury as part of its continuing investigation of PPP to understand what went wrong last year and determine whether additional steps are needed to ensure that remaining PPP funds are allocated to small businesses truly in need.

Click here to read today’s staff memo.

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117th Congress