Hundreds Of Probes Into PPP Loan Fraud Have Been Opened

The federal Paycheck Protection Program (PPP) designed to blunt the economic impact of the pandemic is beset by extensive instances of fraud, The Wall Street Journal (WSJ) reported, attributing the conclusion to public records and interviews with government officials.

The program provided about $525 billion to 5.2 million businesses. Banks administered the loans on behalf of the government and were not required to ensure that applicants were telling the truth about their financial situations. The program ran out in August and has yet to be renewed.

WSJ reported that the Small Business Administration’s (SBA’s) inspector general said there were “strong indicators of widespread potential abuse and fraud in the PPP.”

Among problems cited by the SBA, according to WSJ, were forged companies getting money; companies getting money even though their payrolls exceeded the 500-worker cap that applied in most instances; and companies getting money even though they were prohibited to do so because of pre-existing debts to the government.

WSJ reported that in September alone, the Department of the Treasury received more than twice the previous record number of suspicious activity reports related to loans to businesses than it usually received in an entire year.

WSJ quoted Kenneth Blanco, director of the Treasury Department’s Financial Crimes Enforcement Network, as having told anti-money laundering experts that some applicants used online instruction sets to position themselves to receive fraudulent loans.

As of late October, WSJ reported, the Department of Justice had charged 73 defendants with fraud related to the PPP.

WSJ quoted Tarek Helou, a former federal prosecutor, as having implied that Congress set the stage for abuse.

“The scandal is what’s legal, not what’s illegal,” he reportedly said.

The government’s ability to follow up on allegations of PPP misdeeds will affect how much the program costs taxpayers, WSJ reported. The SBA is now accepting loan-forgiveness applications, which are largely expected to be approved if companies can show the money was spent mostly on payroll. The business’ revenue isn’t a factor.

While the government has been a prime victim of pandemic-related fraud, individuals and businesses also have been swindled. The Financial Industry Regulatory Authority (FINRA) has been among watch dogs warning of multiple scams.