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U.S. watchdog sees signs of ‘widespread’ potential fraud in small business disaster loans

The internal watchdog at the U.S. government agency responsible for managing COVID-19 emergency loans and grants to small business owners and nonprofits said it has found “strong indicators of widespread potential fraud” in the disaster loan program.

The Office of the Inspector General at the U.S. Small Business Administration (SBA) said it has been “inundated” with contacts to investigative field offices, receiving complaints of more than 5,000 instances of suspected fraud from financial institutions receiving economic injury loan deposits through the Economic Injury Disaster Loan and Advance grant programs, according to a public memo issued on Tuesday.

The emergency loan program is designed to provide economic relief to businesses experiencing a hit to revenues. SBA inspectors have launched numerous investigations into reports of suspected fraud received from financial institutions, the memo from SBA Inspector General Hannibal “Mike” Ware to SBA Administrator Jovita Carranza said.

The review also found indications of internal control deficiencies related to disaster assistance for the COVID-19 pandemic. SBA had approved more than $250 million in COVID-19 economic injury loans and advance grants to potentially ineligible businesses as of June 19, the OIG said. As of June 6, SBA had made duplicate economic injury loans to nearly 300 business, the memo said.

The OIG memo said SBA management has been responsive and taken steps to address the concerns. A spokesman for the agency did not respond immediately to request for comment.
Source: Reuters (Reporting by Chris Prentice Additional reporting by Lawrence Delevingne Editing by Jonathan Oatis and David Gregorio)

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