Scammers have stolen $200 billion in Covid loans: watchdog

(LR) Kevin Chambers, Director of COVID-19 Fraud Response, Department of Justice; Hannibal “Mike” Ware, Inspector General, Small Business Administration; Michael Horowitz, Chairman of the Pandemic Response Accountability Committee; and Roy D. Dotson Jr., Acting Special Agent in Charge, National Coordinator for Pandemic Fraud Recovery, United States Intelligence Agency; Issue during a hybrid hearing of the House Subcommittee on the Coronavirus Crisis June 14, 2022 at the Rayburn House Office Building in Washington, DC.

Joe Raedle | Getty Images

Scammers may have stolen more than $200 billion in federal loans meant to help small businesses struggling during the Covid pandemic, a state watchdog said Tuesday.

A new report suggests at least 17% of the $1.2 trillion paid out by the Small Business Administration may have been scammed by fraudulent actors, according to the SBA’s Office of Inspector General.

More than $136 billion from the Economic Injury Disaster Loan program and $64 billion from the Paycheck Protection Program loans may have been stolen, the inspector general found. In total, the SBA has disbursed $400 billion in EIDL funds and $800 billion in Paycheck Protection Program loans over the life of the programs.

The inspector general said an overwhelming number of easy-money scammers have been able to take advantage of the programs because the SBA has relaxed its internal controls to provide help to struggling small businesses during the pandemic shutdowns.

The SBA disputed the inspector general’s conclusions in a letter accompanying the report. Bailey DeVries, a senior SBA official, said the report grossly overestimated the amount of fraud in the programs.

DeVries said the Trump administration rushed to lend in the early months of the program, but additional fraud controls were introduced in 2021.

She also said that the 34% potential fraud rate found by the Inspector General in the EIDL program does not tally with the SBA’s current payback data.

Figures from the SBA show that 12% of loans went to delinquent borrowers, most of whom are likely real businesses that are closed or simply unable to repay, DeVries said. About 74% of companies have either fully repaid their loans or started repaying them, while 14% are still in the deferral phase, she said.

According to the report, the inspector general’s investigations resulted in more than 1,000 indictments, 803 arrests and 529 convictions related to fraud at the loan programs. These investigations have resulted in nearly $30 billion worth of stolen loans being seized or returned by federal law enforcement.

According to the report, the office of the inspector general is still processing tens of thousands of investigative leads into waste, fraud and abuse in the loan programs. Thousands of these investigations are expected to continue for years to come, the inspector general said.

The Paycheck Protection Program provided small businesses, individuals, and nonprofits with guaranteed loans that could be forgiven if the borrower met certain conditions. The Economic Injury Disaster Loan program provided low-interest, fixed-rate loans to help small businesses and other organizations meet their operating expenses.

According to the report, as of May, approximately 1.6 million EIDL loans, valued at $114 billion, were either past due, in default or in liquidation. More than 69,000 of those loans, worth $3.2 billion, were written off. And more than 500,000 PPP loans have defaulted

The inspector general’s report states that nonpayment is often an indicator of loan fraud, although not all delinquent, delinquent, or debited loans are fraudulent.

CNBC Health and Science

Read the latest health coverage from CNBC:

Comments are closed.