When the USA Handed Out the “Free Money”

EIDL and PPP loans were awarded fast and furious — GAO says they lacked sufficient oversight.

Photo by Celyn Kane

From April 3 until August 8, with funds made available by the CARES Act, the Small Business Administration loaned 690 billion dollars to businesses through the Paycheck Protection Program. The purpose of the loans was to help small businesses keep their employees working.

However, the SBA, no doubt partly because of the need to get the money to employers quickly, approved and wrongly paid out possibly as much as $3 billion.

There were irregularities from the initial applications to the final use of the funds. Many of those who received the loans have since turned the money back in as they learned (or admitted) they were not eligible for the loans in the first place.

The PPP Loans are part of the Care Act, legislation intended to slow the economy’s damage from the coronavirus pandemic. Businesses that received the loans may apply to have their debt forgiven if all proceeds are used for payroll costs, and if all employees are retained and paid as usual.

Economic Injury Disaster Loans (EIDL) sought to help small businesses survive the coronavirus pandemic still operating and providing desperately needed jobs. The EIDL loan recipients were not as restricted as to how they could use the money as were those who obtained PPP loans, which allow payroll costs only.

About 6100 loans went to ineligible businesses.

A report issued earlier this month indicates about 6100 loans have been approved for businesses that are ineligible for the relief.

House Democrats say the outcome of an oversight committee report issued September 1 is that around $3 billion in loan proceeds from the Paycheck Protection Program are suspicious in some way.Republicans brushed off the report, saying $3 billion is just a drop in the bucket compared to over $680 billion distributed through the PPP.

News has been coming out almost since the program’s inception last spring that the loan program was rife with abuse, and additional such reports have continued since.

Because of the complaints — over 1200 at this writing — SBA has prioritized investigating loans. Some businesses are reported not to have any employees, and others appear to be start-ups put together mostly to apply for the “free money,” as PPP loans were called among business professionals and tax advocates.

There have been repeated allegations the SBA failed to control the application process and allowed the widespread fraud to continue unabated. SBA administrators deny the allegation. SBA Administrator Jovita Carranza has said the SBA took actions to reduce the risk of fraud. According to most Republicans and a few Democrats a certain amount of fraud — even involving the loss of billions of taxpayer dollars — should be shrugged off as negligible in such a large project.

$62,700 night at a casino for NFL free agent

Alleged misuses of the money received through included money handed out to family members and friends, expensive jewelry, cars, and even, in the case of Josh Bellamy, an NFL free agent, a $62,700 night at a casino (losing taxpayer money, apparently), and items bought from expensive brands like Gucci.

Federal Prosecutors say a group of people, including Bellamy, submitted 90 applications to receive the PPP loans, and the applications included falsified records such as payroll tax forms and bank records. Allegedly the materials used to obtain the 90 loans were similar and had only minor changes.
Bellamy reportedly received a PPP loan of $1,246,565 for his Drip Entertainment LLC.

Bellamy is only one among thousands who used fraudulent information to obtain the loans or used the proceeds from the loans in ways that were not employee wages and expenses related to that.

Congressman Scalise says Democrats should end…investigation.

Representative Steve Scalise, the top Republican on the oversight subcommittee, said in a written statement that “Democrats should end their partisan investigation of this successful program and instead work with Republicans to extend (the program) so more small businesses can keep their workers employed…”

There has been little in terms of media coverage.

The SBA has released names and addresses of those who obtained from over $150,000 to several million in loan proceeds, but they have not released information about who obtained the smaller loans — $150,000 or less — that account for most of the money loaned.

There have been complaints that many smaller businesses were left out when asking for the loans because of the number of loans made to less deserving, larger, or unqualified businesses.

The Justice Department announced in July that more than 50 people were charged with illegally using or receiving a total of $175 million from the SBA program.

SBA spokespersons say they are aggressively investigating and prosecuting those who abused the PPP or EIDL programs and obtained money or used money under fraudulent means. Investigations are continuing.

Administration refused to release information…

The administration at first refused to release information on the loans, but later released the names of the businesses that received over $350 million. However, the bulk of the funds were awarded to businesses that applied for and received $150,000 or less. Those entities and the amounts they received have not been released to the public. Efforts continue from Tax Advocates and some media outlets to get the Trump Administration to release information on who received the smaller loans.

Some companies say they did not apply for the aid money, but applications have been filed in their names.

How to Report Fraud

The SBA and the Government Accounting Office say to report these cases by accessing the SBA website at www.sba and follow the directions there, email answerdesk@sba.gov or call the SBA Answer Desk at (800) 827–5722. Complaints may be made anonymously.

Former print journalist, former mayor, retired law enforcement officer. Writing about politics and government along with random personal essays.

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