Watchdog sees massive debt fraud in SBA, sparking battle with agency

But SBA Administrator Jovita Karanja dismissed the report, claiming that the findings and figures “rest on a hasty, incomplete conclusion.” The inspector general stood by the investigation, pointing to $ 450 million in 15,000 fraudulent loans already seized, as well as the agency for setting fire to employees and contractors who affected themselves or improperly approved loan approvals Also influenced the decision of.

The inspector general said in the report, “The management of the SBA continues to emphasize that its controls are strong despite evidence to the contrary.” “Our analysis of SBA’s Kovid-19 EIDL loan and application data exposes strong indicators of ongoing fraudulent activity in the Kovid-19 EIDL program.”

The dispute was the latest example of the SBA’s confrontation with federal oversight officials. The agency has in recent months clashed with investigators at the Government Accountability Office and with journalists to disclose federal loan recipients.

During the epidemic, the SBA approved $ 192 billion of so-called EIDL loans and $ 20 billion of related disaster grants. In addition, it issued excusable loans worth $ 525 billion under the paycheck protection program that Congress established in March. This is an unprecedented activity for the agency.

Although some fraud was expected, Ware has indicated that it may occur to a greater degree during the epidemic. Speaking on Wednesday at a conference organized by the National Association of Government Guaranteed Lenders, Ware said he believes SBA loan fraud is “more than normal” and that it is “a bone of contention when I talk with the agency about this I’m discussing. “

“I say this is the tiniest tip of the iceberg,” he said.

In Wednesday’s report, the inspector general blamed the SBA and contractors used it to implement the EIDL program. The inspector general said a team from the SBA approved the batches of the loans after review by the subcontinent “that the loan information is no less.” The SBA initially set targets for loan officers to make final loan decisions on at least four applications per hour and, according to the report, its subcontractor’s system did not always characterize fake loans.

Investigators found that the fraudsters understood that sending a “shower” of applications increased the likelihood that one or more would make it through the agency’s security measures. One applicant filled 38 applications that were marked as potentially problematic but at least two were distributed for $ 384,600. An IP address used by the applicants was used for 245 approved loans. 158 loans were approved at one email address.

The Inspector General said that while the SBA agreed to make some changes to its operations, Kairana rejected the findings in a letter to Ware.

He said the Inspector General “largely failed to investigate whether the ‘potentially fraudulent loans’ raised more than the minimum amount of suspicion.” He said examples of reports of shared IP addresses and email addresses include loan applicants who rely on certified public accountants, law firms, loan packers or religious and cultural centers.

“Much has been written about the findings of the draft report in the analysis of the SBA and shows that the draft report has largely eradicated the” potential “Kovid-19 EIDL fraud.”

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