SBA approved loans with signs of fraud early in pandemic, House report says
The Economic Injury Disaster Loan (EIDL) program is administered by the SBA and provides low-interest loans to businesses in disaster-stricken areas. With the onset of the coronavirus pandemic in the United States in March 2020, millions of businesses suddenly became eligible for assistance, and Congress also earmarked funds under the program to provide grants that did not have not to be reimbursed.
“Today’s report once again underscores the Trump administration’s failure to act as an effective steward of American taxpayers’ money to respond to the economic crisis unleashed by the coronavirus pandemic.” said Rep. James E. Clyburn (DS.C.), chair of the select subcommittee on the coronavirus crisis. “They failed to take reasonable steps to prevent EIDL funds from being lost to fraud, and they wasted additional public funds by overpaying a contractor who did not do much. thing to implement the program.”
Government watchdogs have repeatedly raised concerns about fraud in the EIDL program, and federal investigators have found instances of identity theft, shell companies, false or exaggerated employee counts and misrepresentations. misuse of program funds.
Between March 2020 and May 2021, the EIDL program provided approximately $230 billion in loans and grants to businesses and nonprofits, according at the Office of Government Accountability. This represented an astronomical increase in workload for the SBA. From March 2020 to February 2021, the agency approved nearly 4 million loan and grant applications. That’s more than the agency had approved in the previous six decades: Between 1953 and March 2020, the SBA approved 2.2 million loan applications.
The agency turned to an existing contractor, RER Solutions, for help. RER had previously received a $10 million annual contract from the SBA for its work on economic catastrophe claims, but that increased to $738 million for work on pandemic-era loans, the largest. contract awarded by the federal government to address the economic effects of the virus, the committee found. The contract was awarded without a competitive bidding process, but rather through amendments to the existing RER Solutions contract.
In the report released Tuesday, the subcommittee found that the SBA had asked one of the RER’s contractors to create a “batch” approval function that would allow government employees to approve requests for mass ready without any examination.
“As a result, up to 1.6 million, or 41%, of the 3.9 million loan applications that were ultimately approved may have been approved without actual review by an SBA employee,” the committee found. “The SBA guidelines further indicate that some applications were included in these batches for approval without review despite the presence of indicators of fraud.”
The SBA reduced its use of batch approval in August 2020 after a critical report from an agency watchdog, the report said.
RER did not immediately respond to requests for comment.
“The Trump administration has prioritized speed over certainty, a choice that has left the door wide open to fraudsters, exposing taxpayers’ money to fraud, waste and abuse,” said an SBA spokesperson in a statement to the Washington Post. Biden-Harris SBA is focused on providing timely and effective assistance to small businesses without compromising the integrity of our programs. Today’s select committee report recognizes the success of the Biden administration’s reforms that reduced fraud, protected taxpayers and ensured vital relief funds benefited the small businesses Congress intended to help. ”
When applications were reviewed by SBA officials, reviewers were instructed to approve submissions even if there was evidence of fraud, such as information that could not be validated, evidence that the applicant was deceased or had failed identity verification.
RER subcontracted part of the project to Rocket Loans, an online personal loan company. Another subcontractor was Rapid Financial Services, a Rocket affiliate, which “provided the bulk of the labor and technology required to perform the contract,” the committee said.
Rocket and Rapid did not immediately respond to requests for comment.
Of the $738 million the SBA has paid on the contract through February 2021, RER received $357 million, Rocket received $233 million, and Rapid received $148 million. Six RER employees, 20 Rocket employees and 163 Rapid employees worked on the project, the committee said. The committee found that after paying the costs associated with the project, RER brought in $340 million. Rocket Loans is part of Rocket Companies, whose chairman is billionaire Dan Gilbert, who cultivated a relationship with President Donald Trump’s family during his administration.
The committee’s report is based on 17,000 pages of SBA and contractor documents, staff briefings with the agency and companies, and testimony from the SBA’s inspector general.