Outraged by Preventable Fraud & Waste Uncovered by WPRI, Reed Demands Investigation & Calls on Trump Admin to Fix SBA Lending & Protect Taxpayers
WASHINGTON, DC – After warning the Trump Administration that its refusal to publicly disclose basic information regarding small business lending could contribute to fraud and abuse, U.S. Senator Jack Reed (D-RI) blasted the Trump Administration for withholding details about fraudulent pandemic relief loans and failing to take appropriate steps to safeguard emergency relief funds. Citing a new report by WPRI that uncovered $3.8 million in fraudulent loans that the SBA approved to at least 80 “farm” businesses that don’t exist, Reed sent a letter to the head of the SBA urging an investigation and corrective steps, including following recommendations from the SBA Inspector General, to prevent additional Economic Injury Disaster Loans (EIDL) fraud – particularly given that Congress has just approved an additional $20 billion for this program.
“The Trump Administration blocked scrutiny of these programs and now taxpayers are paying the price. I’m concerned this is only the tip of the iceberg. This was preventable fraud that robbed taxpayers, victimized innocent people, and also prevented legitimate small businesses from getting the help they need. We’ve got to get to the bottom of this, hold the perpetrators accountable, and implement reforms to prevent it from happening in the future,” said Reed.
In March, Congress passed the CARES Act, which included billions in EIDL and Paycheck Protection Program (PPP) funding administered by the U.S. Small Business Administration (SBA). While the scope and speed of the program caused lenders and SBA officials to move quickly to make and process the loans, the Trump Administration took the needless and unprecedented step of withholding the names and information of individuals who were approved for hundreds of billions of dollars in taxpayer-backed COVID-19 small business relief loans.
Under previous Administrations, it was SBA policy to publicly release detailed loan information for similar federal emergency loan programs. Soon after the CARES Act passed, SBA officials initially indicated the agency would publish similar loan data for COVID-19 related loans. However, the Trump Administration reversed course, refusing to release the data and withheld it until a judge forced the SBA to provide public access to records on loan recipients, amounts of loans, and other basic information.
After WPRI reported this week that the SBA granted loans in Rhode Island to fake farms that were all listed at single-family homes, apartment complexes, or other non-farm properties, Reed sent a letter to SBA Administrator Jovita Carranza, calling for an investigation: “I write to urge you to take immediate action to investigate claims of fraud associated with the Small Business Administration disaster loan program, hold Rhode Islanders who are victims of fraud harmless from any liability, and protect victims from future acts of fraud,” wrote Reed.
Senator Reed notes that had the Trump Administration not blocked initial disclosure of basic information to begin with, these non-existent farms could have quickly been uncovered.
“It seems the Trump Administration was so worried about protecting the President from political embarrassment that they failed to protect taxpayers. I commend the Target 12 investigators for uncovering this rampant fraud and I will continue pressing for accountability,” concluded Reed.
Full text of the letter follows:
The Honorable Jovita Carranza
U.S. Small Business Administration
409 3rd St. SW
Washington, D.C. 20416
Dear Administrator Carranza:
I write to urge you to take immediate action to investigate claims of fraud associated with the Small Business Administration (SBA) disaster loan program, hold Rhode Islanders who are the victims of fraud harmless from any liability, and protect victims from future acts of fraud.
I make this request because it has come to my attention that the SBA has approved Economic Injury Disaster Loans (EIDL) for fraudulent businesses in Rhode Island. An investigation by a local Rhode Island news outlet revealed that $3.8 million in such loans was approved for at least 80 “farm” businesses that do not exist. In addition, many of these fraudulent businesses in falsifying their applications used the addresses and names of single-family homes, apartment complexes, and other non-business properties. The individuals, whose names and names were used, are now receiving bills from the SBA asking them to pay back these loans they never applied for. Several of the constituents interviewed in the local news story reported the fraud to the federal government, including to the SBA Inspector General, and were told the loans were under review. It is unclear whether these constituents have been alerted that they are not expected to pay back the loans taken out in their names.
It is my understanding that similar fraud has been perpetrated in states other than Rhode Island as well. In both October and July, the SBA Inspector General published reports raising serious concerns of potential fraud in the EIDL program. For example, the October report showed that the SBA approved $14.3 billion in EIDLs to accounts that differed from the original bank accounts listed on the loan applications, as well as $62.7 billion in EIDLs to applicants using the IP addresses, email addresses, bank accounts, or businesses listed at the same addresses. The SBA Inspector General attributed the fraud to the fact that SBA relaxed internal accountability controls as it tried to get out aid to businesses during the COVID-19 pandemic, which significantly increased the risk of program abuse.
Due to this lax SBA oversight, victims of fraud have already had to suffer the consequence of having their personally identifiable information used or stolen. They should not be further punished by being financially or legally on the hook for loans taken out with this information. Therefore, I urge the SBA to expeditiously start an investigation and review reports that a person has been a victim of fraud in the EIDL program, and to ensure that victims of fraud are held harmless from any financial or other liability. I also urge you to take corrective steps, including following recommendations from the SBA Inspector General, to prevent additional EIDL fraud – particularly given that Congress has just approved an additional $20 billion for this program.
Thank you for your immediate attention to this matter, and I look forward to your prompt response.