Some people obtained PPP loans for approximately $4 million by making false claims about their small businesses
The Wall Street Journal reports that the federal government has become swamped with reports of potential fraud in the Paycheck Protection Program, a response to the impact of the coronavirus pandemic.
According to government officials and public data, there’s evidence that others have taken advantage of the program’s “open door design” that was created to give small businesses easy access to taxpayer funds.
Between April 3 and Aug. 8, $525 billion in loans was distributed to approximately 5.2 million small businesses.
WSJ also reports that the inspector general of the Small Business Administration, which serves as an arm of the agency that administers the PPP, found “strong indictors of widespread potential abuse and fraud in PPP.”
From July to September, there was a noticeable surge resulting in banks filing suspicious activity notices in the midst of the pandemic.
Government official watchdogs counted tens of thousands of companies that reportedly receiving PPP loans that appeared to be ineligible. These included corporations and small businesses that were created after the start of the pandemic, that exceeded 500 employees or were listed in a “Do Not Pay” system database due to owing money to taxpayers.
At the peak of PPP early in the pandemic, the SBA approved 514,000 loans in one day in May.
The Government Accountability Office in June warned of “significant fraud risk” due to lack of safeguards in place and complex rules.
In a report, GAO said, “Because of the number of loans approved, the speed with which they were processed and the limited safeguards, there is a significant risk that some fraudulent or inflated applications were approved. In addition, the lack of clear guidance has increased the likelihood that borrowers may misuse loan proceeds or be surprised they do not qualify for full loan forgiveness.”
In September, WSJ reported that charges were filed against 57 people for their roles in crimes connected to PPP. The schemes consisted of submitting fraudulent documents to obtain funds for payroll and instead using it to purchase lavish items.
Five people in Georgia, Ohio, and California obtained PPP loans for approximately $4 million by making false claims about their small businesses’ overall expenses and payroll. The individuals failed to make payroll payments as indicated on their loan application which raised red flags.
Authorities later seized $120,000 in cash, a $125,000 Range Rover truck, jewelry, and $3 million from 10 bank accounts at the time of arrest, according to The United States Department of Justice website.
Brian Rabbitt, assistant attorney general at the Justice Department said that the government allowing companies to self-certify rather than be vetted are a magnet for opportunities of fraud.
“Experience has taught us that any time the federal government makes a large amount of money available to the public on an expedited basis, the opportunities for fraud are unfortunately clear,” said Rabbitt in September during an online press conference.
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