IG Report: US Lost $200 Billion in COVID Fraud

More than $200 billion in federal COVID-19 pandemic relief funds were distributed to potentially fraudulent recipients, a report from the inspector general of the Small Business Administration showed.

The report, released Tuesday by the Office of Inspector General Hannibal “Mike” Ware, said the estimate represents 17% of the $1.2 trillion of COVID-19 Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) funds doled out by the agency.

“Since SBA did not have an established strong internal control environment for approving and disbursing program funds, there was an insufficient barrier against fraudsters accessing funds that should have been available for eligible business owners adversely affected by the pandemic,” the report found.

Ware’s office said its investigation, as of May, resulted in 1,011 indictments, 803 arrests and 529 convictions related to COVID-19 EIDL and PPP fraud. Its collaboration with the SBA, the Secret Service, other federal agencies, and financial institutions resulted in nearly $30 billion in COVID-19 EIDL and PPP funds being seized or returned to the SBA.

“OIG is working on tens of thousands of investigative leads on alleged fraud, waste, and abuse of taxpayer resources,” the report said. “Thousands of investigations will ensue for years to come because of swift congressional action to increase the statute of limitations to 10 years for COVID-19 EIDL and PPP fraud.”

Rep. Roger Williams, R-Texas, chair of the House Small Business Committee, said the report contains more cases of fraud than were previously known.

“These findings show the SBA failed to implement basic guardrails to protect the integrity of these programs, resulting in roughly 1 in 5 loans dispersed being labeled as potentially fraudulent,” Williams said in a statement to Fox News. “When COVID-19 hit the United States, the SBA was tasked with taking on an oversized role to help save small businesses and our nation’s job creators. Unfortunately, these after-action reports show the agency was not up to the task.”

Ware is expected to testify in front of Williams’ committee about the report on July 13.

Bailey DeVries, acting associate administrator of the SBA, disputed the report’s findings. Writing in an appendix to the report, DeVries said it “contains serious flaws that significantly overestimate fraud and unintentionally mislead the public to believe that the work we did together had no significant impact in protecting against fraud.”

“SBA believes a full accounting of our work together would provide critical context for fraud in the programs and when that fraud occurred,” DeVries wrote. “The vast majority of the fraud, 86% by SBA’s estimate, occurred in the first nine months of COVID-EIDL and PPP. It is critical to clarify when SBA added controls and to emphasize which of those controls effectively protected against fraud. Such changes can provide valuable information to policymakers, as they consider effective controls for inclusion in legislation and at program launch for any future emergency program.”