Home Music bank Millions of Suspicious PPP Loans Reported, But Never Investigated

Millions of Suspicious PPP Loans Reported, But Never Investigated


If the protesters who clashed with police and fought their way through the U.S. Capitol on January 6, 2021, really wanted to “stop the theft,” perhaps their anger should have been directed a few blocks toward South.

As chaos unfolded on Capitol Hill, bureaucrats at the Small Business Administration (SBA) — three blocks away — were also apparently very busy. According to a new report, some 1.8 million ‘flags’ applied to loans issued under the Paycheck Protection Program (PPP) indicating that loans may be fraudulent or otherwise issued incorrectly have been removed en masse files on January 6.

The massive closure of these flags paved the way for the cancellation of billions of dollars in PPP loan debt in the final days of the Trump administration, apparently without due diligence by federal bureaucrats tasked with preventing fraud.

In total, the SBA reported nearly 2.3 million PPP loans worth at least $189 billion, according to the report released Thursday by the Project on Government Oversight (POGO), a watchdog group that has obtained this data from the SBA via an open records request. “A flagged PPP loan does not necessarily mean there has been fraud, but some flags, if true, indicate clear reasons why a recipient would not have been eligible for the taxpayer guaranteed loan,” explains The report.

But the SBA has now authorized 95% of those loans. Over 40% of clearances occurred on January 6, far more than any other day. “This means that a significant number of loans flagged as potentially going to fraudsters or ineligible recipients have now been cancelled,” the POGO report concludes.

This may be why other reviews of the program have found that as much as $100 billion of the $820 billion distributed through PPP loans has been stolen by fraudsters.

According to the report, 57 different flag types were applied to various PPP loans. The most common said that the company requesting the loan did not exist before February 15, 2020, the deadline for applicants which was supposed to prevent fraudsters from setting up new companies to collect the pandemic aid. This flag was applied to 785,089 loans.

Any loan over $2 million was automatically flagged for review under a Treasury Department policy adopted in 2020 to apply stricter review to larger PPP loans. But the POGO report shows that 99% of the roughly 28,000 loans reported for this reason were cleared in the last days of the Trump administration in January 2021.

“The bulk closure of most of these flags,” the POGO report says, “suggests that all of these large loans did not receive the ‘full scrutiny’ that then-Treasury Secretary Steven Mnuchin had. promised to get”.

The details of the POGO report are worth reading in full. It’s an illustrative peek inside a government bureaucracy that seems to have been overwhelmed with the need to squeeze out unprecedented piles of cash. In the first 33 days after the PPP program opened in April 2020, the SBA lent more than 20 times more than it had managed in any full year before this time. High levels of fraud and waste were inevitable.

Even when the money did going to a qualifying, actual business, much of it ended up in the pockets of business owners — rather than on employee paychecks — at a huge cost to taxpayers.

“Only 23-34% of program funds went directly to workers who would otherwise have lost their jobs,” a National Bureau of Economic Research study found. Another study by the Federal Reserve Bank of St. Louis found that taxpayers paid about $4 for every dollar in worker wages and benefits.

“Initially, the PPP promised repayment of loans to businesses that kept workers on their payroll for eight weeks, essentially converting those loans into grants,” Raison‘s Peter Suderman detailed in February. “But, as the pandemic dragged on and the program was supplemented with additional funds, the requirements slipped and the PPP eventually morphed into something more like a federally-funded multi-purpose slush fund for small business owners.”

In a report released in May, the SBA inspector general pointed out that the agency did not have “a centralized entity to design, direct and manage fraud risk” until February 2022, or nearly two years after the start of PPP loan distribution and long after. most of them had been forgiven. It’s obviously far too late to do much.

“The millions of reported PPP loans worth billions of dollars,” the POGO report concludes, “and the lack of oversight leading to their forgiveness, show that the great pandemic scam was aided and abetted by the SBA’s lax oversight.”