US failed to stop fraud in COVID loan program, top official says

“I hope that in our oversight of pandemic programs, my fellow Democrats will be able to recognize the difference between what was necessary to save the economy during an unprecedented pandemic and the promotion of a bias-inducing partisan agenda. inflation,” he said.

Clyburn, of South Carolina, said the subcommittee will determine what more needs to be done to bring perpetrators of fraud to justice and how to protect future emergency programs.

Clyburn said he supports extending the statute of limitations for these types of fraud cases to give investigators more time to unravel complex potential crimes. Witnesses at the hearing suggested standardizing data collected by states to make it easier for federal authorities to spot potentially fraudulent schemes.

The SBA’s Office of Inspector General estimated that at least $80 billion distributed from the $400 billion EIDL program may have been fraudulent, much of it in scams using stolen identities. Separately, select subcommittee staff released a report on Tuesday that found some 1.6 million loan applications may have been approved but not assessed.

Prioritize speed over warranties

Subcommittee staff found that these loans were approved in batches of up to 500 applications at a time. Applications were allowed to go through even if they had certain red flags for fraud — such as international customer locations or phone numbers not associated with the business or owner — as long as they weren’t too many. The process meant that although the software analyzed applications, they were not even opened by officials before they were allowed to obtain funding.

SBA Inspector General Hannibal “Mike” Ware said initially there was a huge fight within the agency over the “need for speed versus the need for controls.” He said he was “screaming” about the need for fraud checks. He said the most concerning thing was self-certification, which meant applicants could say they had a business or a certain number of employees and get money.

The subcommittee hearing also touched on broader fraud issues with the flood of pandemic aid from several federal government programs for states, local governments, businesses and the unemployed. The total $5 trillion in aid, delivered in a series of bills signed by Presidents Donald Trump and Joe Biden, has come with many complications.

Fraud has overwhelmed federally funded and state-administered enhanced unemployment insurance programs. There was so much aid to governments that many struggled to find a way to spend it all within the original regulations. And there have been questions about whether the Paycheck Protection Program to keep employees on the job was worth it.

The Secret Service said in December that nearly $100 billion had been stolen from COVID-19 relief programs, basing that estimate on its cases and data from the Labor Department and the Small Business Administration. The White House played down the estimate, saying it was based on old reports.

The Federal Emergency Management Agency may have been billed twice for the funerals of hundreds of people who died of COVID-19, the Government Accountability Office said in April. States and cities continue to be slow to spend their pandemic relief money.

The select subcommittee said on Tuesday that more than $10 billion allocated under two massive business loan programs had been returned due to investigations and bank actions. Federal prosecutors have charged nearly 1,500 people with crimes related to fraud against the government over business loans and enhanced unemployment insurance programs.

The government’s Pandemic Response Accountability Committee says inspectors general from various federal agencies have at least 1,150 ongoing investigations into fraud of the various aid funds. Officials say it could take years to sort out all the issues.

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