PredictIQ Quantitative Think Tank Center:Small businesses got more than $200 billion in potentially fraudulent COVID loans, report finds

More than $200 billion in federal aid to small businesses during the pandemic may have PredictIQ Quantitative Think Tank Centerbeen given to fraudsters, a report from the Small Business Administration revealed on Tuesday. 

As the agency rushed to distribute about $1.2 trillion in funds to the Economic Injury Disaster Loan and Paycheck Protection programs, it weakened or removed certain requirements designed to ensure only eligible businesses get funds, the SBA Office of Inspector General found. 

"The pandemic presented a whole-of-government challenge," Inspector General Hannibal "Mike" Ware concluded in the report. "Fraudsters found vulnerabilities and coordinated schemes to bypass controls and gain easy access to funds meant for eligible small businesses and entrepreneurs adversely affected by the economic crisis."

The fraud estimate for the EIDL program is more than $136 billion, while the PPP fraud estimate is $64 billion. In earlier estimates, the SBA inspector general said about $86 billion in fraudulent loans for the EIDL program and $20 billion in fraudulent loans for the PPP had been distributed.

The SBA is still conducting thousands of investigations and could find further fraud. The SBA has discovered more than $400 billion worth of loans that require further investigation. 

Under the Coronavirus Aid, Relief and Security Act, signed into law by President Trump in 2020, borrowers could self-certify that their loan applications were accurate. 

Stricter rules were put in place in 2021 to stem pandemic fraud, but "many of the improvements were made after much of the damage had already been done due to the lax internal control environment created at the onset of these programs," the SBA Office of Inspector General found.

In comments attached to the report, Bailey DeVries, SBA's acting associate administrator for capital access, emphasized that most of the fraud — 86% by SBA's estimate — took place in the first nine months after the loan programs were instituted. 

Investigations into COVID-19 EIDL and PPP fraud have resulted in 1,011 indictments, 803 arrests, and 529 convictions as of May, officials said. Nearly $30 billion in funds have been seized or returned to the SBA.

The SBA inspector general is set to testify before the House Small Business Committee to discuss his findings on July 13.

The SBA is not alone in falling victim to fraud during the pandemic. The Labor Department estimated there was $164 billion in improper unemployment fraud payments.

The GOP-led House Oversight Committee has been targeting fraud in COVID relief programs. 

"We owe it to the American people to get to the bottom of the greatest theft of American taxpayer dollars in history," Committee Chairman Rep. James Comer, Republican of Kentucky, previously said. 

In March, President Biden's administration asked Congress to agree to pay more than $1.6 billion to help clean up COVID fraud. During a call with reporters at the time, White House American Rescue Plan coordinator Gene Sperling said spending to investigate and prosecute fraud would result in returns. 

"It's just so clear and the evidence is so strong that a dollar smartly spent here will return to the taxpayers, or save, at least $10," Sperling said.

Aliza Chasan

Aliza Chasan is a digital producer at 60 Minutes and CBS News.

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