A congressional investigation found more than $1 billion in Paycheck Protection Program (PPP) funds went to small businesses that received multiple loans, a violation of the federal program’s rules.
Bloomberg News reported the staff of the Democratic House Select Subcommittee on the Coronavirus Crisis examined more than 5.2 million loans totaling $525 billion in PPP forgivable loans issued by the U.S. Small Business Administration (SBA) and the Treasury Department.
The report found 10,856 loans where borrowers appeared to receive multiple loans. The panel also found about 600 loans totaling more than $96 million that went to companies suspended from doing business with the government.
Enacted by Congress in March as part of the $2 trillion CARES Act, the PPP was crafted to help small and medium-sized businesses (SMBs) after the pandemic hit.
In March, the initial $349 billion injection into the PPP by Congress was distributed within weeks. Then, lawmakers added another $310 billion in April. The cash assisted millions of firms hit hard by the coronavirus pandemic.
“The subcommittee staff’s analysis suggests a high risk that PPP loans may have been diverted from small businesses truly in need to ineligible businesses or even to criminals,” Democrats on the subcommittee said in a report released Tuesday (Sept. 1) prior to a hearing with Treasury Secretary Steven Mnuchin, the news service reported.
The SBA has said it relied on information provided by borrowers and applications submitted by lenders.
Under the terms of the initiative, SMBs could apply for a loan of up to $10 million, while the SBA reported most of the loans were $150,000 less. The money does not have to be paid back if at least 60 percent of the proceeds are spent on payroll.
“Although legitimate explanations may exist for differing addresses, the inconsistency raises numerous concerns, including potential corporate identity theft, companies trying to obtain multiple loans, or companies attempting to skirt PPP eligibility requirements,” the report said.
Republican staff on the subcommittee issued their own report Tuesday which said despite problems, it was “a resounding success” Bloomberg reported.
“Democrats should end their partisan investigation of this successful program and instead work with Republicans to extend it so more small businesses can keep their workers employed and paid,” U.S. Rep. Steve Scalise (R-Louisiana) told Bloomberg in a statement.
Last month, The U.S. Department of Justice charged 14 people in two separate investigations into their alleged participation in schemes to defraud the PPP of more than $28 million in forgivable loans guaranteed by the SBA.