The Washington Post reports that the U.S. Small Business Administration (“SBA”) Office of Inspector General (“OIG”) estimated that more than $200 billion was disbursed in potentially fraudulent loans and grants from COVID-19 relief initiatives. These funds were meant to help small businesses survive during the worst health crisis of the century, but the OIG’s report stated that, “at least 17% of all COVID-EIDL and PPP funds were disbursed to potentially fraudulent actors.”
Specifically, the amount of estimated fraud from the COVID-19 Economic Injury Disaster Loans (“EIDL”) is over $136 billion and Paycheck Protection Program (“PPP”) fraud is estimated at $64 billion from March 2020 to January 2022. These numbers are even greater than the previous projections that the SBA OIG had released. The SBA OIG had previously estimated fraud in the COVID-19 EIDL program at $86 billion and the PPP at $20 billion.
A report by The Associated Press stated that scammers had potentially swiped around $280 billion in COVID-19 relief funds and that another $123 billion was wasted or spent improperly. The bulk of losses are from the two SBA programs (EIDL and PPP) and another for unemployment benefits for workers who were affected by the pandemic. The SBA inspector general (“IG”), Hannibal “Mike” Ware, said in a statement that the report by the SBA OIG, “utilizes investigative casework, prior (inspector general) reporting, and cutting-edge data analysis to identify multiple fraud schemes used to potentially steal over $200 billion from American taxpayers and exploit programs meant to help those in need.” Mr. Ware also stated that his office will continue to further assess fraud until investigations are complete. So far, according to the report, the OIG Hotline received more than 250,000 fraud tips since the start of the pandemic, in which 90,000 turned into “actionable leads.”
At the 2022 Fraud and Corruption Awareness Seminar, co-sponsored by Schneider Downs, SBA Inspector General Mike Ware and the team of investigators who joined him stated that the volume of tips their office received related to COVID-19 fraud was the equivalent volume of decades of work normally performed by their office.
The OIG stated that there were some obvious potential fraud red flags, including various loan applications being submitted from foreign countries or multiple loan applications coming from the same IP address. The report specifically highlighted a fraudster who scammed SBA loan programs over 150 times to receive over $3 million in COVID-19 aid. Up to this point, there has been at least $30 billion in COVID-19 EIDL and PPP funds recovered, returned, or seized by the U.S. Treasury. The OIG’s oversight and investigative work has produced 529 fraud convictions; and 570 investigations are ongoing.
If you have any questions regarding potential fraud schemes, contact Tom Pratt at [email protected] or Brian Webster at [email protected]. The Schneider Downs Consulting group has worked with an array of clients, addressing their forensic accounting needs including the investigation of potential and actual cases of fraud, waste and mismanagement.
