Congress Needs to Press SBA to Investigate PPP Fraud


The pandemic taught us that the world can be unpredictable and we must have systems in place in order to deal with the unexpected. The rampant fraud and waste that took place in the Small Business Association Paycheck Protection Program, which was intended to keep the United States from financial collapse during pandemics, shows just how unprepared we are to deal with the next crisis.

Business leaders are continuing to pressure the government to identify and prosecute PPP frauds that were under $100,000. They have issued a call to actions to the Office of Inspector General, law enforcement agencies including the Justice Department, FBI and other to intensify investigations, hold fraudsters accountable and ensure this does not happen again.

In December, the House Select Subcommittee on the Coronavirus Crisis issued a staff report detailing how four companies–Blueacorn, Womply, Kabbage, and Bluevine, essentially permitted and perpetuated PPP fraud. Blueacorn was paid over $1 billion by taxpayers to process PPP loans. Womply received fees of $2 billion despite its CEO Toby Scammell being a felon and not eligible to participate in this program. Kabbage sold his company to AMEX, and declared bankruptcy.

The December report stated that “agreements” between Womply, its lending partners and the Select Subcommittee revealed that Womply took up to 90% of all taxpayer-funded fees paid to lenders by SBA for the processing of PPP loans.

Why have these fintech companies gotten away with such a massive fraud, at the expense our hardworking and honest taxpayers?

The House Small Business Committee and Senate Small Business and Entrepreneurship Committee can start by asking the SBA to look into the fees that these fintechs charge to SBA PPP lenders. Senator Joni Ernst, R-IA, who is the ranking member of the Small Business and Entrepreneurship Committee has a unique opportunity to lead Congress and press the SBA into finding a way to recover these funds from fintechs in order to pay for programs that are needed in the next budget.

SBA has recently stated that it will not prosecute borrowers who have committed frauds of less than $100,000. We should never give a pass to borrowers who take advantage of the system.

The congressional report stated:

The SBA Office of Inspector General identified previously billions of dollars of PPP funding approved and disbursed by ineligible candidates, but taxpayers do not yet know the exact extent of fraud against the PPP. It is important to confirm the scope and nature to fraud to establish best practices and reduce future financial crime in emergency programs.

The Congress, under the leadership of Senator Ernst, must pressure the SBA into pursuing a “Treasury Offset” which would place liens against these fraudsters in the event that they were ever owed an IRS refund. The Treasury Department has a system in place for this type of situation.

Why hasn’t Congress been more aggressive in pushing for accountability? It’s time to put aside partisan politics for the sake of taxpayers and ask the hard questions that could result in billions of dollars being recovered to cover the budget gaps and also to help us understand and prevent this horrible history from repeating itself.