SBA Mistakenly Paid Out $692 Million In Duplicate PPP Loans: Watchdog

Just when you thought the Paycheck Protection Program couldn’t get more fraudulent, an internal watchdog for the US Small Business Administration (SBA) acknowledged that $692 million in duplicate small-business pandemic relief loans were issued due to ‘technical errors and other mistakes,’ according to Reuters.

Lenders participating in the Paycheck Protection Program (PPP) distributed the cash to 4,260 borrowers who had already received funds due to multiple technical glitches within the SBA’s loan processing systems, which struggled to process the volumes of loans, the SBA Inspector General wrote in a report.

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The watchdog did not say how much if any of the $692 million mistakenly distributed by lenders had subsequently been reimbursed by the government. It initially said it would only guarantee one loan per borrower, meaning lenders, rather than the taxpayer, may be on the hook for the error. –Reuters

Reuters first reported in June that the SBA had approved thousands of duplicate loans due to technical errors ‘potentially worth hundreds of millions of dollars’ – while lenders had been attempting to retrieve duplicate loans from borrowers.

The SBA says they will resolve the matter by September, and that it did not see any evidence that borrowers were intentionally exploiting the system to obtain more than one loan.

The glitch occurred after an SBA computer program designed to detect duplicate applications failed when switching an applicant’s Social Security number and employee identification number were switched around on the second application.

At one point, more than 40,000 duplicate loans were issued, only to be caught before most of the lenders distributed the cash.

Meanwhile as we reported last month, Office of Inspector General (DOL-OIG) has found an unprecedented amount of fraud in the unemployment program created by the CARES Act – estimating that at least $63 billion of the $630 billion in disbursements were squandered by fraudsters. The agency warns that taxpayer funds loss could be higher, with some figures suggest north of $100 billion.  

And they aren’t all getting away with it.

On Monday, one of the fraudsters, 48-year-old Mukund Mohan, pleaded guilty to wire fraud to obtain over $5.5 million from the PPP program. Mohan “submitted at least eight fraudulent PPP loan applications on behalf of six different companies to federally insured financial institutions,” and lied all over the applications.

In support of the fraudulent loan applications, Mohan submitted fake and altered documents, including fake federal tax filings and altered incorporation documents. For example, Mohan misrepresented to a lender that, in 2019, his company Mahenjo Inc. had dozens of employees and paid millions of dollars in employee wages and payroll taxes. In support of Mahenjo’s loan application, Mohan submitted incorporation documents showing that he incorporated the company in 2018 and filed federal unemployment tax forms for 2019. In truth, Mohan purchased Mahenjo on the Internet in May 2020 and, at time he purchased the company, it had no employees and no business activity. The incorporation documents he submitted to the lender were altered and the federal tax filings he submitted were fake. -DOJ

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Readers may recall Paycheck Protection Program (PPP) fraud exploded across the country last summer because there were virtually no checks and balances, allowing criminals to file fraudulent loans. 

Fraudsters were buying mansions, exotic cars, fancy clothing, and even Bitcoin. Some of these folks were caught; others remain on the loose as their fraud’s complexity has yet to be uncovered. 

California observed a great deal of unemployment fraud. One rapper netted $1.2 million in an unemployment benefits scheme. He even made a video about the scam. He gave a “shoutout” to President Trump for the CARES Act. 

Orange County District Attorney Todd Spitzer said this “isn’t just a California problem – it’s a breakdown of catastrophic proportions that has failed the American taxpayer.”

The Justice Department has launched a task force to find pandemic aid fraudsters across the country – it’s only now that the true extent of the loss is being realized. 

“Early indications in some states point to massive problems,” said NBC. 

A shocking review of pandemic aid payments last June revealed Nebraska’s auditor found two-thirds of unemployment payouts were misspent. Kentucky’s auditor found that its vetting process was so inadequate that it breached federal law. 

Read the rest of the February report here.