More than $200 billion was potentially stolen from federal COVID-19 relief programs, including the Paycheck Protection Program, the U.S. Small Business Administration Office of Inspector General said Tuesday.
At least 17% of $1.2 trillion disbursed through the pandemic-era PPP and Economic Injury Disaster Loan programs were handed over to potential fraudsters, the OIG said.
“In the rush to swiftly disburse COVID-19 EIDL and PPP funds, SBA calibrated its internal controls. The agency weakened or removed the controls necessary to prevent fraudsters from easily gaining access to these programs and provide assurance that only eligible entities received funds,” the watchdog said in its report.
“However, the allure of ‘easy money’ in this pay and chase environment attracted an overwhelming number of fraudsters to the programs,” the OIG said.
The SBA disputed the figure, according to Reuters, saying that it had been significantly overestimated. Citing its own experts, the SBA estimates potential fraud at $36 billion, and said 86% happened before President Joe Biden took office in January 2021. Former President Donald Trump was in power at the time.
Since May 2020, the U.S. has indicted 1,011 individuals for COVID-19 relief fraud, leading to 803 arrests and 529 convictions, according to Tuesday’s report. There are 570 ongoing investigations related to COVID-19 relief fraud, and Congress has held 11 related hearings, including one in December that blasted fintechs including Blueacorn and Womply for “obvious and preventable” PPP fraud.
Additionally, U.S. Attorney General Merrick Garland created a COVID-19 Fraud Enforcement Task Force in May 2021, expressly tasked with unearthing such frauds.
In January, the Pandemic Response Accountability Committee said that roughly $5.4 billion in relief money was given to 69,323 applicants with Social Security numbers that either didn’t exist or didn’t match name or birth date information.
Several lenders have been subject to related enforcement actions. The Federal Reserve fined New York-based Popular Bank $2.3 million in January for failing to detect “significant indications of potential fraud” in six PPP loans processed in 2020; and Houston-based Prosperity Bank was ordered to pay $18,673.50 in September to resolve Department of Justice allegations it knowingly processed a PPP loan for an ineligible business.
The Federal Reserve Board banned five former bankers in October from working in the banking industry after it said they submitted fraudulent applications for COVID-19 aid and used the funds for unauthorized personal expenses. Two of the bankers worked for Jacksonville, Fla.-based Ally Bank, and one each was employed at Birmingham, Alabama-based Regions Bank, Memphis, Tennessee-based First Horizon Bank and Bank of America’s Merrill Lynch.
As for what the OIG plans to do moving forward, it said in Tuesday’s report that it will continue to pursue more data through partnerships with government agencies and through subpoenas of certain banks and their third-party processors.
“As we receive and analyze additional datasets, the fraud groups may be refined to identify additional fraudulent loans,” the OIG’s one-pager said. “The potential fraud estimates directly correlate to our investigative casework, adjudicated and ongoing criminal cases, and to schemes SBA OIG and other oversight agencies are continuing to unravel and then prosecute.”
