The alleged wave of strikes is aimed at two of the government’s most generous emergency initiatives: the Paycheck Protection Program, known as PPP, and the Economic Injury Disaster Loan, known as EIDL. Launched by President Donald Trump — and administered by the embattled Small Business Administration — nearly $1 trillion in loans and grants is aimed at helping cash-strapped companies stay afloat financially during the worst economic crisis since the Great Depression.
But the money also served as a source of criminal activity, as nefarious actors used the SBA and its lax oversight to defraud Washington of seemingly huge sums. In the latest example, the PRAC failed to prevent a wave of applications from the SBA to collect federal funds using suspect Social Security numbers.
Studying more than 33 million applicants, the PRAC identified more than 221,000 ineligible Social Security numbers when applying for small business assistance. That includes thousands of cases, such as the number not being “issued” by the government or not matching correct name and birth information.
More than a quarter of applications using nearly 70,000 Social Security numbers were still approved between April 2020 and October 2022 despite the questionable data — and the government gave out about $5.4 billion in loans to these applicants, the watchdog found.
The SBA did not respond to a request for comment.
Gene Sperling, the top White House official tapped by President Biden to control federal pandemic spending, said in a statement that the report “reveals significant fraud and identity theft that occurred in the previous administration.” Since then, Biden and his aides have worked “to restore strong anti-abuse measures in these emergency small business programs,” he said.
The revelation confirmed the government’s massive task of overseeing more than $5 trillion in emergency pandemic programs. The broad package of relief funds provided checks to unemployed Americans, to schools, hospitals and other essential facilities, and to cities and states struggling to cover their own pandemic needs.
But the speed with which Washington spent the money – and known for a long time The Post’s year-long investigation found that funding loopholes in government oversight — and the conditions for theft and misuse — led to the covid money trail. The time-consuming and expensive task of finding and prosecuting epidemic-related crimes is unknown, even for Washington.
For now, the scandal could embolden GOP critics who initially helped pass the PPP, EIL and other key pandemic programs. The House Oversight Committee — now chaired by Chairman James Comer (R-Ky.) — held a hearing Wednesday on PRAC Chairman Michael Horowitz’s testimony on the coronavirus hoax.
Comer, speaking Monday at an event hosted by the National Press Club, seemed to point to his growing alarm over the fate of the country’s buoyant dollar.
“I don’t think history will be kind to the PPP loan program,” he said.
With the findings, two senior Republican senators – Joni Ernst (Iowa) and Rand Paul (Ky.) – immediately wrote to the SBA inspector general to fully review the “very disturbing” information. A recent report that reviewed only a sample of federal stimulus aid raised the possibility that the loss to taxpayers would be “significantly greater,” he said.
Covid money trail
It was the largest emergency spending explosion in American history: two years, six laws and more than $5 trillion intended to contain the deadly coronavirus. The money has saved the American economy from destruction and put vaccines in millions of devices, but it has invited unprecedented opportunities for fraud, abuse and opportunity.
In a year-long investigation, The Washington Post is following the Covid money trail to find out what happened to all that cash.
Read more
The monitoring report showed only recent shortfalls for the SBA, which lawmakers tasked two years ago with overseeing more stable stimulus aid than its usual annual budget. The agency received many applications from businesses that were forced to close and were on the brink of collapse in the early days of the outbreak.
The SBA ultimately helped save millions of these organizations from financial ruin, but its haste led to costly mistakes: it missed warning signs about widespread identity theft and other potential crimes. It funded domestic criminals and foreign criminal syndicates. He gave aid to big businesses that didn’t deserve money. And the agency failed to track down a network of companies that helped review grant applications, allowing them to reap billions in taxpayer-funded payouts in the process.
Adding to the challenge, SBA granted full or partial forgiveness to more than 93 percent of PPP recipients. It was not immediately clear if the PRAC emerged Monday if the SBA waived applications tied to ineligible Social Security numbers.
In the report, federal watchdogs noted that the SBA struggled primarily in the early days of PPP and EIDL two years ago. During the Trump administration, the committee did not check key federal databases, including a “do not pay” list run by the Treasury Department to thwart fraud.
In late 2020 and 2021, the SBA began to address the problem, requiring additional tax documents from borrowers seeking federal funds. But that was too little too late, according to the PRAC, which acknowledged how the government’s bureaucracy had thwarted its brutal controls – and called on officials to tackle the problem head on.
In doing so, he concluded his report Monday with a grim warning that until the government changes its approach, “federal agencies will continue to be hampered in their efforts to detect and combat fraud.”