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Rep. Clyburn Says US failed to stop fraud in COVID-19 loan program

Posted at 4:40 PM, Jun 15, 2022
and last updated 2022-06-15 20:28:25-04

The U.S. failed to take basic steps at the start of the coronavirus pandemic to prevent fraud in a federal aid program intended to help small businesses, depleting the funds and making people more vulnerable to identity theft, the chairman of a House panel examining the payouts said on Tuesday.

Democratic Representative James Clyburn blamed the Trump administration for the problems in the COVID-19 Economic Injury Disaster Loan program, overseen by the U.S. Small Business Administration, amid revelations that as much as 20% of the money — tens of billions of dollars — may have been awarded to fraudsters.

Clyburn said the Biden administration has implemented measures to identify potential fraud and directed loan officers to address indications of fraud before approving loans, while Congress has invested in fraud prevention and accountability.

Republican Representative Steve Scalise, the No. 2 House Republican, said the Trump administration and Congress worked together at the beginning of the pandemic, when uncertainty was rampant and much of the economy was locked down, to deliver "much-needed relief as fast as we could to help save as many jobs as we could" and prevent the economy from crashing.

Scalise, said Democrats are undermining the successes, and he asked why the House coronavirus panel Clyburn chairs wasn't looking into the enhanced unemployment insurance program that was plagued by “egregious and unprecedented fraud” and is a “leading contributor” to the high inflation rates.

“I hope that in our oversight of pandemic programs, my Democratic colleagues will be able to recognize the difference between what was needed to save the economy during an unprecedented pandemic versus pushing a partisan, inflation-inducing agenda,” he said.

The SBA’s Office of the Inspector General has estimated that at least $80 billion distributed from the $400 billion EIDL program could have been fraudulent, much of it in scams using stolen identities. Separately, staff for the select subcommittee on Tuesday issued a report that found that some 1.6 million applications for the loans may have been approved without being evaluated.

The subcommittee’s staff found that those loans were approved in batches of up to 500 applications at a time. Applications were allowed to move through even if they had certain red flags for fraud — such as international client locations or phone numbers not associated with the business or the owner — so long as they weren’t too many of them. The process meant that while software analyzed the applications, they were not even opened by officials before being greenlighted for funding.

The subcommittee hearing also tackled broader fraud concerns with the flood of pandemic aid from multiple federal government programs for states, local governments, businesses and the unemployed. The $5 trillion in total aid, delivered in a series of bills signed by Presidents Donald Trump and Joe Biden, have come with numerous complications.

Fraud overwhelmed enhanced unemployment insurance programs funded by the federal government and administered by the states. There was so much aid to governments that many struggled to find a way to spend it all under the original regulations. And there have been questions about whether the Paycheck Protection Program to keep employees working was worth it.

The Secret Service said in December that nearly $100 billion has been stolen from COVID-19 relief programs, basing that estimate on its cases and data from the Labor Department and the Small Business Administration. The White House downplayed the estimate, saying it was based on old reports.

The government's Pandemic Response Accountability Committee says inspectors general for various federal agencies have at least 1,150 ongoing investigations into fraud from the different aid funds. Officials say it could take years to untangle all the problems.

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