Vice President JD Vance announced Monday that nearly 870,000 borrowers tied to an estimated $39 billion in suspected pandemic loan fraud are being cut off from future Small Business Administration programs.
Eight hundred seventy thousand.
Washington has apparently identified enough warning signs to bar all those borrowers from coming back for another SBA loan. The obvious question is why taxpayers had to wait years for somebody to lock the door.
From CBS News:
The vice president contended that borrowers who stole taxpayer money should no longer be eligible to receive loans from government-backed programs.
“If you screwed the American taxpayer, the federal government is now going to say you’re cut off, no more,” Vance told reporters. “You shouldn’t be applying anymore, and if you do apply, you’re no longer able to get those benefits.”
His remarks came as the Justice Department announced a slew of cases in a nationwide crackdown on fraud involving the COVID-19-era Paycheck Protection Program.
The department’s enforcement push, which ran from June 12 through Sept. 1 and was dubbed “Heartland fraud surge,” resulted in actions involving more than 160 defendants and approximately $245 million in intended losses to taxpayers. The operation was put into action more than five years after the government pushed emergency loans to businesses nationwide that were struggling as a result of the coronavirus pandemic.
The Paycheck Protection Program and COVID Economic Injury Disaster Loan program were created during an emergency. Businesses were dying, workers were being sent home, and Washington wanted money moving quickly.
It moved quickly, all right.
The SBA’s own inspector general later estimated that more than $200 billion of the roughly $1.2 trillion distributed through PPP and EIDL may have gone to potentially fraudulent actors.
From the SBA:
“From Day One, the Trump SBA has worked tirelessly to crack down on billions in pandemic-era fraud that the Biden Administration forgave or ignored. After extensive review, and with the strong support of the White House Task Force to Eliminate Fraud, we are taking our most decisive action yet to end a Biden-era scheme that protected over 560,000 borrowers tied to more than $22 billion in suspected pandemic-era fraud,” said SBA Administrator Kelly Loeffler. “For years, the Biden Administration shielded these borrowers from debt collectors as part of a de facto amnesty scheme – but today, they will finally face accountability. The SBA is deeply grateful to the U.S. Department of the Treasury for its partnership in this historic action, and we look forward to continued collaboration as we work to claw back stolen taxpayer dollars and hold fraudsters accountable.”
By law, SBA must refer delinquent debts to Treasury’s Bureau of the Fiscal Service once they become sufficiently past due. Likewise, when SBA’s internal fraud controls flag loans for potential fraud, the agency is expected to refer those cases to the appropriate investigative and law enforcement authorities.
The watchdog said the government weakened or removed controls while rushing money out the door and created a “pay and chase” system that attracted an overwhelming number of fraudsters.
Read that number again: $200 billion.
This wasn’t somebody sneaking an extra zero onto an expense report. The inspector general estimated potential fraud consumed at least 17% of the money distributed through those two programs.
Now comes the chase.
The Trump administration’s latest action covers borrowers across 45 states, six territories, and the District of Columbia. Suspended borrowers lose access to future SBA loans and programs. Operation No Doze will also begin sending 30-day repayment demands to suspected fraudulent borrowers, warning them to return the money or face further action.
From Spectrum News:
“To anyone looking to defraud the state of Missouri, we’re putting you on notice,” Republican Missouri Gov. Mike Kehoe said at an event in Kansas City, Missouri, where he was joined by top Trump administration officials, including Vice President JD Vance, Attorney General Todd Blanche, FBI Director Kash Patel and Small Business Administration head Kelly Loeffler. “We will find you, we will prosecute you, and you will pay.”
Called Operation No Doze, the new anti-fraud program led by the SBA inspector general’s office will send 30-day demand letters to borrowers who are suspected of fraudulent pandemic-era Paycheck Protection Program and Economic Injury Disaster loans. The letters, which will soon roll out across the country, instruct borrowers to return the funds or be subject to legal action.
The suspensions bar borrowers from accessing small business loans and federal contracting programs, she said.
“Small businesses are the nation’s largest job creators and among our nation’s biggest taxpayers. Like every taxpayer, they deserve to know that programs that they fund are not siphoned away by criminals who would rather steal from hardworking Americans than become hardworking Americans,” said Loeffler, who noted that the SBA has referred $22 billion in fraudulent loans to the U.S. Treasury for collections.
“The message is simple: If you stole from the Paycheck Protection Program, if you created fake companies and lied about your employees, we know who you are,” she said. “We will claw back the money and, where warranted, we will refer you to law enforcement so that you can face the jail time you deserve.”
The SBA already sent more than 562,000 suspected fraudulent pandemic loans totaling $22 billion to the Treasury Department for collection in April.
Wisconsin hasn’t escaped this mess. In July, the SBA suspended 7,800 Wisconsin borrowers connected to $375 million in suspected PPP and EIDL fraud.
Nobody should confuse suspicion with conviction. Borrowers can challenge their suspensions, and criminal guilt still has to be proven in court.
But Washington isn’t dealing with a handful of questionable applications anymore.
Federal investigators are dealing with numbers large enough to fill cities.
A Justice Department enforcement push running from June through Sept. 1 took action involving more than 160 defendants and roughly $245 million in intended losses. Criminal cases are finally moving alongside collections and administrative suspensions.
Vance put the new policy plainly on Monday: if you cheated the taxpayer, you’re cut off.
Good.
Now keep going.
Bar suspected fraudsters from new federal money. Recover every dollar the government can prove was improperly obtained. Prosecute cases where the evidence supports charges. Seize assets when courts authorize it.
Then Congress should ask the question taxpayers deserved answered years ago.
How did a federal government capable of identifying 870,000 suspect borrowers become so incapable of stopping them before the checks cleared?
Pandemic panic explains why Washington moved fast.
It doesn’t explain why accountability moved this slowly.
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