Billions in COVID-19 relief loans may have been distributed to scammers, report says
Wednesday, October 28, 2020
The Small Business Administration may have granted billions of dollars in loans to companies that falsely claimed to have been damaged by coronavirus lockdowns, an agency report said on Wednesday.
Agency officials were so inundated with requests for disaster assistance from last March that they were unable to properly vet applicants, according to reporting from the Office of SBA Inspector General Michael Ware.
In one case, the agency approved 10 loans for 10 different bathroom remodeling companies in the same city under the SBA’s Economic Disaster Lending (EIDL) program.
“However, we were unable to locate any bathroom remodeling company on behalf of this company in this town. Additionally, the email address indicates that this is a burrito restaurant, that we located in this city. SBA has shelled out $ 1.4 million for these potentially fraudulent businesses, ”the report states.
In another case, applicants using the same email address at a fish market requested 85 loans “from various names of jewelry, psychiatric, construction, gas station and other unrelated companies. with seafood “. All but one of the loans have been approved.
Overall, the report says the SBA approved $ 78 billion in program applications for potentially fraudulent or ineligible applicants, although all of this ultimately went undisbursed.
The inspector general’s report said the level of fraud was in part due to the speed with which the agency had to operate after the economy stalled in March due to the pandemic.
Within days, an unprecedented number of loan applications arrived. As of March 31, more than 680,000 requests were received, the highest number ever received in a single day. As of April 10, more than 4.5 million loan applications had been received.
“[The] The SBA has now approved and disbursed more loans for COVID-19 assistance than for all other disasters combined in the agency’s history, ”the report said.
As a result, loan officers were only given 15 minutes to process each request, which “resulted in superficial reviews rather than the more in-depth reviews needed to ensure loans were made to eligible businesses,” the report notes.
The fact that some fraud has taken place is no surprise.
The Justice Department has charged dozens of people with fraudulently applying for loans under major coronavirus aid programs, and law enforcement officials say investigations are continuing.
The alleged fraud took place as crooks and others took advantage of programs put in place by Congress to provide assistance to small businesses and others amid the pandemic.
SBA officials were quick to dispute the report, saying it had misinterpreted many of the requests.
SBA administrator Jovita Carranza said many of the “potentially fraudulent” loans were legitimate transactions that had been misinterpreted.
Many examples of shared IP and email addresses involved loan requests by people who relied on accountants, law firms, loan providers, or religious and cultural centers to submit their requests. loan, she said.
The report “does not fully and accurately describe the SBA’s highly successful delivery of an unprecedented volume of disaster assistance. [report] Grossly exaggerates the risk of fraud, waste and abuse in the program, ”she said.
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