SBA approved loans with signs of fraud early in pandemic, House report says – The Washington Post | Region & Cash


The Small Business Administration barely reviewed many emergency aid requests early in the pandemic, directing employees to approve requests with obvious signs of fraud, according to a report released Tuesday by a congressional oversight committee.

The report, which examined the agency’s actions during the Trump administration, also found that the contractor called RER Solutions Inc. hired by the SBA to process the relief requests was a small company that handled the barrage of requests during the worst of days could not cope with the economic crisis caused by the pandemic, although it ultimately paid $738 million in a no-bid contract in 2020. The company subcontracted much of the labor to two other firms but was still paid $340 million for the work of six employees in one year, the report said.

The Economic Injury Disaster Loan (EIDL) program, administered by the SBA, provides low-interest loans to companies in disaster areas. With the outbreak of the coronavirus pandemic in the United States in March 2020, millions of businesses were suddenly eligible for relief, and Congress also allocated funds under the program to provide non-repayable grants.

“Today’s report underscores once again the failure of the Trump administration to act as an effective custodian of U.S. taxpayer dollars in response to the economic crisis sparked by the coronavirus pandemic,” said Rep. James E. Clyburn (DS.C.) , Chair of the Select Subcommittee on the Coronavirus Crisis. “They failed to take reasonable steps to prevent EIDL funds from being lost to fraud, and they squandered additional public funds by overpaying a contractor who did little to implement the program.”

Government watchdogs have repeatedly raised concerns about fraud in the EIDL program, and federal investigators have found instances of identity theft, fictitious companies, fake or exaggerated employee numbers, and misuse of program funds.

Between March 2020 and May 2021, the EIDL program provided approximately $230 billion in loans and grants to businesses and nonprofits, according to the Government Accountability Office. This meant an astronomical increase in the workload for the SBA. From March 2020 to February 2021, the agency approved nearly 4 million loan and grant applications. That’s more than the agency had approved in the previous six decades: Between 1953 and March 2020, the SBA approved 2.2 million loan applications.

The agency turned to an existing contractor, RER Solutions, for help. RER was previously awarded a $10 million annual contract by the SBA for its work on economic disaster claims, but that amount rose to $738 million to work on the pandemic-era loans, the federal government’s largest response contract on the economic impact of the virus, the committee found. The contract was awarded without a competitive bidding process, instead the existing contract was modified by RER Solutions.

In the report released on Tuesday, the subcommittee found that the SBA had asked one of RER’s subcontractors to create a “batch” approval function that would allow government employees to approve loan applications en masse without a review.

“As a result, as many as 1.6 million, or 41 percent, of the 3.9 million loan applications that were eventually approved may have been approved without an actual review by an SBA staffer,” the committee noted. “The SBA’s guidelines also indicate that some applications were included in these batches without verification despite the presence of fraud indicators for approval.”

The SBA restricted its use of the batch approval in August 2020 following a critical report from a regulatory body, the report said.

RER did not immediately respond to requests for comment.

“The Trump administration has prioritized speed over certainty, a decision that has opened the floodgates for scammers and exposes taxpayers’ dollars to fraud, waste and abuse,” an SBA spokesman said in a statement to the Washington Post Biden-Harris SBA focused on unburdening small businesses quickly and efficiently without compromising the integrity of our programs. Today’s special committee report recognizes the success of the Biden administration’s reforms, which curbed fraud, protected taxpayers and ensured critical aid funds went to the small businesses Congress sought to help. ”

When applications were reviewed by SBA officials, reviewers were instructed to approve filings even if there was evidence of fraud, such as: B. Information that cannot be validated, evidence of the applicant’s death, or failed identity verification.

RER awarded part of the project to Rocket Loans, an online personal loan company. Another subcontractor was Rapid Financial Services, a Rocket-affiliated company, which “provided most of the labor and technology needed to complete the contract,” the committee said.

Rocket and Rapid did not immediately respond to requests for comment.

Of the $738 million paid by SBA for the contract through February 2021, RER received $357 million, Rocket $233 million and Rapid $148 million. Six RER employees, 20 Rocket employees and 163 Rapid employees worked on the project, the committee said. The committee found that after paying the costs associated with the project, RER brought in $340 million. Rocket Loans is part of Rocket Companies, which is chaired by billionaire Dan Gilbert, who had a relationship with President Donald Trump’s family during his tenure.

The committee’s report is based on 17,000 pages of SBA and contractor documents, staff meetings with the agency and companies, and testimonies from the SBA’s Inspector General.

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