U.S. Sen. Marco Rubio, R-Fla., joined the U.S. Small Business Administration (SBA) in sounding the alarm on potential fraud in the COVID-19 Economic Injury Disaster Loan (EIDL) program.
Rubio, who chairs the U.S. Senate Small Business Committee, weighed in after the SBA Inspector General (IG) released “Management Alert: Report 20-16, Serious Concerns of Potential Fraud in EIDL Program Pertaining to the Response to COVID-19.” The alert went to the SBA and Congress “warning of suspected fraudulent activity in the COVID-19 Economic Injury Disaster Loan (EIDL) program.”
The senator’s office offered some of the details.
“During the drafting and negotiation process of the CARES Act, Chairman Rubio crafted and secured language in support of SBA’s request to ensure that in advance of disbursing the COVID-19 Emergency EIDL Grants, the SBA must verify that the entity is an eligible applicant for an EIDL loan. This approval takes the form of a certification under penalty of perjury by the applicant that they are eligible. This Management Advisory is the first step in mitigating and preventing fraud,” Rubio’s office noted.
“The details of the suspected COVID-19 EIDL fraud recently uncovered by the SBA OIG are alarming,” Rubio said. “The purpose of COVID-19 EIDL loans and advances are to aid eligible, legitimate American small entities with both a quick injection of capital and long-term financing for working capital needs brought on by the pandemic. I’m proud to have worked to secure language in the CARES Act to ensure the federal government has the tools to identify and go after fraudulent activity while protecting taxpayer dollars. As Congress considers an additional federal relief package, I will continue working to provide relief to industries and businesses, especially minority-owned small businesses and those in low-income communities, that have been hit hard by the COVID-19 pandemic.”
The IG’s finding noted “serious concerns with the EIDL program that require immediate attention and action during its ongoing evaluation” as the office “has seen complaints from more than 1,000 individuals as well as 440 financial institutions citing more than 5,000 in suspected fraudulent transactions.”
These suspected fraudulent transactions include:
$187.3 million in suspected fraudulent transactions reported by nine financial institutions;
$250 million EIDL loans and advances were given to potentially ineligible recipients;
$208.1 million EIDL loans and $47.8 million EIDL grants to ineligible businesses; and,
$35 million of the $45.6 million in approved duplicate loans have been disbursed.
Examples of suspicious activities and suspected fraud include:
Accounts of stolen identification;
Inability to identify the names of the businesses or their existence;
Deposits to accounts that were newly created and/or had no business account activity;
Transfer of funds into investment and personal accounts with no evidence of business ownership;
Transfer of funds to foreign accounts; and,
Sophisticated phishing, social media, and romance schemes that often were associated with foreign actors and linked to other CARES programs fraud such as unemployment assistance.