A program specifically designed to help small businesses weather the vagaries of the pandemic economy is coming under fire for what some officials are saying are examples of fraudulent practices.
Created earlier this year under the massive Coronavirus Aid, Relief, and Economic Security Act, the Payroll Protection Program was designed to help sole proprietors, some nonprofit organizations, and small businesses in general to continue to pay their workers.
Between April and August around $525 billion in loans were handed out to more than 5.2 million small businesses across the country. Roughly 25% of those loans were for $150,000 or less.
For the most part, the vast majority of those businesses said the PPP support was the lifeline they needed to keep their doors opened.
But, according to reports, there is increasing evidence that some applicants took advantage of the liberal structure of the program, with some companies receiving loans for which they may not have been eligible.
The Small Business Administration, tasked with overseeing the PPP effort, has released an inspector general’s overview saying that there are “strong indicators of widespread potential abuse and fraud in the PPP.”
The report additionally notes that larger companies received support, as did corporations that were only formed after the Covid-19 outbreak.
In September, the Treasury Department said it received nearly 2,500 suspicious-activity reports involving businesses that were the beneficiary of support from a variety of relief programs, suggesting that their financial situation was not as dire as claimed.
The Justice Department has meanwhile said that it has charged nearly 60 individuals with trying to fraudulently obtain funding equal to $175 million from the PPP.
Despite the negative publicity generated by the acts of fraud, notes Forbes magazine, “most of the loans that were taken out weren’t attempts to scam taxpayers: they were good faith efforts to keep the lights on in businesses across the country.”
Even so, more problems with the manner in which the program was exploited are expected to be learned as the result on a Federal Bureau of Investigation currently underway questioning nearly 500 suspects who received loans cumulatively worth hundreds of millions of dollars.
By Garry Boulard
