Federal watchdog says over $200 billion in pandemic business loans look fraudulent – Gist It

Federal watchdog says over $200 billion in pandemic business loans look fraudulent

Over $200 billion of the $1.2 trillion in emergency federal aid disbursed to small businesses during the pandemic may have been obtained fraudulently, according to the Office of Inspector General of the Small Business Administration (SBA).

Fraudulent Claims: The SBA Office of Inspector General reported that the rush to distribute pandemic aid opened opportunities for fraudsters.
* Emergency loans were issued to assist small businesses during the pandemic, but the report suggests many were granted to non-existent businesses. These loans were then forgiven and covered by tax dollars.

Details from the report: The Office of Inspector General used advanced data analytics to arrive at the $200 billion estimate.
* The report, titled “COVID-19 Pandemic EIDL and PPP Loan Fraud Landscape,” emphasizes that the relaxation of controls during the crisis made the programs more accessible to fraudsters.

Federal Response: The leaders of the SBA state that they took action against fraudulent practices.
* They estimate that 86% of the potential fraud occurred during the first nine months of the program. Leaders also cited anti-fraud measures implemented in early 2021.

Fraud Crackdown: The report reveals the actions taken by the SBA and federal investigators in response to the fraud.
* As of May 2023, there have been “1,011 indictments, 803 arrests, and 529 convictions related to COVID-19 EIDL and PPP fraud,” with nearly $30 billion in aid seized or returned to the government.

Expert View: Sam Kruger, Assistant Professor of Finance at the University of Texas, offers a perspective on the situation.
* While acknowledging the necessity of speed in emergency aid distribution, Kruger suggests that the data analysis used in the report indicates the government could have done more to mitigate fraud in real-time.

View original article on NPR

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June 27, 2023

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