C-Suite Wednesday – $30 Billion in Fraudulent Relief Funds Have Been Recovered

July 5, 2023

Delaney Sexton
Contributing Editor

C-Suite Wednesday – $30 Billion in Fraudulent Relief Funds Have Been Recovered

“It is noteworthy that SBA executed over 14 years’ worth of lending within 14 days, and this was just the beginning.” SBA’s emergency loan programs were performed on a scale like never before for the agency and at an unparalleled speed. As such, “the allure of ‘easy money’ in this pay and chase environment attracted an overwhelming number of fraudsters to the programs.” SBA’s Office of Inspector General organized a new review of the potential fraud in SBA’s pandemic assistance loan programs. As pandemic fraud has been at the forefront of discussion in recent months, the report provides an updated perspective of the fraud landscape.

The OIG’s new estimation for pandemic fraud reaches $200 billion in potentially fraudulent EIDLs and PPP loans, or 17% of disbursed funds. When broken down, it is suspected that EIDL fraud was more than twice that of PPP fraud. They reported that $136 billion of EIDL funds, or a third of disbursed EIDL funds, are potentially fraudulent. For PPP, estimated fraud represents 8% of total disbursements which is $64 billion. Together, the potential fraud translates to 4.5 million potentially fraudulent loans or grants, or 21% of disbursed loans.

“Moreover, a good indicator of loan fraud is nonpayment when payment is due.” This does not mean all loans with a lack of payment will be fraudulent, but fraudsters have no intentions of making payments on their loans. In May of this year, more than half of EIDLs totaling (1.6 million loans worth $114.2 billion) are either past due, delinquent, or in liquidation. For PPP, over 500,000 loans have defaulted as of June 2023 and submitted for guaranty purchase, and SBA made payments on 425,000 loans worth $12.9 billion.

“The complexity of fraud schemes has made it more challenging to identify the perpetrators behind fraudulent loan applications and has necessitated not only extensive coordination and deconfliction among multiple agencies but increased evidence gathering, interviews, analytical work, and national and international law enforcement collaboration,” reads the report.

Thus far, the Inspector General has investigated more than 1,000 pandemic-related fraud cases since March 2022 leading to over 800 arrests. Oversight and investigative work in relation to EIDL and PPP have also led to 529 convictions, over 90,000 actionable leads, and over 250,000 hotline complaints. In addition to their 570 open investigations, the OIG has more than 100 years of investigative case work still cut out for them in regard to PPP and EIDL fraud.

It is clarified in the report that the full scope of seized and returned funds is unknown, but the OIG reported there has been $399 million in seized or forfeited assets and $509 million in restitution orders. In combination with other federal agencies and financial institutions, almost $30 billion in EIDL funds has been seized or returned to the SBA. There is an additional $168 million in PPP funds that may have been returned to the SBA.

Source:
OIG Report