FROM VALLEY FORGE TO VALLEY FRAUD

Wall Street Journal:

Reports of waste and abuse in the Paycheck Protection Program inundate government watchdogs and federal prosecutors

The federal government is swamped with reports of potential fraud in the Paycheck Protection Program, according to government officials and public data, casting a shadow on one of Washington’s signature responses to the coronavirus pandemic.

Congress and the Trump administration designed the PPP to give small businesses fast and easy access to taxpayer funds, and it worked: About $525 billion in loans were distributed to 5.2 million companies between April 3 and Aug. 8. Many business owners say it was a lifeline in turbulent times.

But evidence is growing that many others took advantage of the program’s open-door design. Banks and the government allowed companies to self-certify that they needed the funds, with little vetting.

The Small Business Administration’s inspector general, an arm of the agency that administers the PPP, said last month there were “strong indicators of widespread potential abuse and fraud in the PPP.”

The watchdog counted tens of thousands of companies that received PPP loans for which they appear to have been ineligible, such as corporations created after the pandemic began, businesses that exceeded workforce size limits (generally 500 employees or fewer) or those listed in a federal “Do Not Pay” database because they already owe money to taxpayers.

Tens of thousands of organizations also appear to have received more money than they should have based on their headcounts and compensation rates, it said.

The Treasury Department in September received 2,495 suspicious activity-reports involving business loans from banks and other depository institutions, more than the total for any year dating back to 2014, according to public data.

One type of suspicious activity banks reported were multiple government payments from coronavirus-relief programs to a single account, suggesting potential abuse, according to Kenneth Blanco, director of the Treasury Department’s Financial Crimes Enforcement Network.

The fraud is sometimes abetted by online vendors that sell a kind of how-to guide for ginning up a fraudulent application for the program, offering “data, instruction, and complete packages of PII,” or personally identifiable information, Mr. Blanco told a group of anti-money-laundering experts this fall.

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