House Committee Finds $4 Billion in Suspect PPP Fraud

Where were the simple fraud checks on PPP Loans? Even members of Congress using simple queries on publically available data sets have been able to find billions in loans that were granted when they probably should not have been.

Democrats of the Select Subcommittee on The Coronavirus Crisis released a report today that flags over $4 Billion in loans that they suspect are suspicious of having fraud.

The report released 5 key findings about the Paycheck Protection Loan Program which they believe was subject to high rates of fraud and abuse.

Shockingly, or not if you are like me, with some simple checks the subcommittee was able to locate over 22,000 loans with significant fraud indicators for over $4 Billion in risk.

Finding #1 Over $1 Billion in Loans Went to Companies That Received Multiple Loans.

Staff from the committee found that over $1 Billion in loans went to companies that received more than 1 loan. They identified 10,856 loans in which the borrower received multiple PPP loans, for a total of over $1 billion in outstanding loans.

Of the 10,856 loans, identified, only 65 would be subject to additional scrutiny based on the Administration’s stated plans to audit loans over $2 million. PPP rules prohibit companies from receiving multiple loans.

To conduct this analysis, Select Subcommittee staff searched for duplicate entries matches in the “Loan Applicant Name/ Borrower Name” and address fields of SBA’s loan-level data. Staff excluded borrowers that applied as franchises to eliminate potential false matches.

Finding #2 – $96 Million in Loans Went To Companies Excluded From Doing Business With The Government

The subcommittee Staff identified 613 PPP loans, amounting to $96.3 million, provided to borrowers that are ineligible to receive PPP funds because they have been debarred or suspended from doing
business with the federal government.

Of the 613 suspended or debarred companies that received a PPP loan, at least 12 had been excluded by more than one federal agency.

Finding #3 – $195 Million in Loans Went to Government Contractors With Integrity Issues

More Than 350 Loans Worth $195 Million Went to Government Contractors
With Significant Performance and Integrity Issues. Staff found that SBA
approved 353 PPP loans, amounting to approximately $195 million, to
government contractors previously flagged by the federal government for
performance or integrity issues.

Of the 353 PPP loans extended to entities listed in the FAPIIS database, the SBA has approved 181 loans amounting to over $90 million to contractors who were terminated for cause. 15 Loans amounting to more than $38 million were made to contractors who have been terminated for default due to the contractor’s actual or anticipated failure to perform its
contractual obligations. SBA approved loans totaling approximately $6.7 million to contractors who were found “non-responsible” because they lacked a satisfactory performance record or a satisfactory record of integrity and business ethics.

Finding # 4 – $2.98 Billion in Loans Had Significant Anomalies In Address

Federal Database Raises Red Flags for $2.98 Billion in Loans to More Than
11,000 PPP Borrowers. Select Subcommittee staff compared the federal
government’s System for Award Management (SAM) database against the
information companies used to obtain PPP loans to identify red flags, such as mismatched addresses. These flags implicated more than 11,000 borrowers and $2.98 billion in PPP loans.

In one concerning example, seven businesses in widely varied industries all provided the same seemingly nonexistent address in Ohio on their PPP loan applications. A Google Maps search approximates this address as the back of a fast-casual restaurant. According to SAM, each of these varied businesses has an address registered in a different distant location—most of
them out of state. This could indicate corporate identity theft. These loans totaled more than $10 million.

Finding #5 – Hundreds of Applications Were Funded Missing Key Information About Borrowers

SBA and Treasury Approved Hundreds of Loan Applications Missing Key
Identifying Information About the Borrower. These PPP loan applications
were approved despite incomplete or missing identifying information on the loan applications, including missing names and addresses.

  • 287 loans with “Self Employed” or “Independent Contractor” in the Borrower Name field, which amounts to over $4 million dollars in PPP loans;
  • 192 loans with “New Application” in the Borrower Name field, which amounts to over $36 million dollars in PPP loans;
  • 144 loans with the Borrower Name field left blank, which amounts to over $10 million dollars in PPP loans; and
  • 203 loans where either the street address, city, state, or zip code is missing, which amounts to over $10 million dollars in PPP loans.

The Committee Recommends Limiting Forgiveness Of Loans

The Committee’s primary recommendation is to implement stronger fraud controls, particularly when it comes to forgiving the loans in the coming months.

The Administration stopped issuing PPP loans on August 8, but in the coming months will face millions of applications to forgive these loans.

The committee recommended that the SBA and Treasury should work to develop stronger internal controls when reviewing loan forgiveness applications.

Frank McKenna is the Chief Fraud Strategist for PointPredictive and a Fraud Consultant based in San Diego California