The U.S. Department of Justice has seized $626 million as a result of criminal and civil investigations tied to fraud in the Economic Injury Disaster Loan and Paycheck Protection Programs — less than 1 percent of the nearly $84 billion in potential fraud identified, according to a memo from House Democrats.
The memo, from Democratic staff on the Select Subcommittee on the Coronavirus Crisis, said that President Donald Trump’s administration failed to establish safeguards to prevent criminals from claiming the small business funding meant to help companies that were struggling during pandemic shutdowns.
“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,” the staff members said in the memo. “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 PPP and EIDL programs, which were charged with getting money to small business quickly at the start of the pandemic last year, quickly became targets for fraudsters because of the lax application requirements and security checks. The Small Business Administration implemented more stringent requirements as the programs continued but after billions of dollars had already gone out the door.
The lack of protections during the loan and grant application process has meant that law enforcement agencies have been responsible for tracking down funds from dishonest claims. The Small Business Administration Inspector General has received 1.34 million referrals for suspected fraud. Nearly 149,000 complaints have come into the watchdog’s hotline, a 19,500 percent increase compared with previous years, the memo said.
There are 212 open SBA Inspector General investigations regarding PPP and EIDL fraud as of March 18, and there are 32 law enforcement agencies involved in probing small business fraud in pandemic relief programs, the staff added in the memo.
Story by Laura Davison.