Two non-lenders Blueacorn and Womply, have been suspended by the U.S. Small Business Administration (SBA) immediately from working with the agency in any capacity. These are companies that worked with PPP lenders according to the announcement from the SBA.
The SBA recently issued a statement regarding the findings from the House Select Subcommittee on the Coronavirus Crisis report on Paycheck Protection Program (PPP) fraud. A number of fraud cases have been exposed, with the monies involved reaching into the tens of millions.
SBA Suspends 2 Companies, Launches Investigation Into PPP Loan Lenders
The SBA’s statement reads: “The House Select Subcommittee report details serious problems of fraud and self-dealing by lenders and by companies who were paid fees by lenders to help PPP funds reach small business owners. In response to new revelations detailed in the report of possible fraud facilitated by third-party companies, the Small Business Administration (SBA) is taking additional action.”
“The SBA has immediately suspended non-lenders Blueacorn and Womply, companies that worked with PPP lenders, from working with the SBA in any capacity. The SBA will be investigating appropriate action against their management, owners, and successor companies. In addition to the actions announced today, SBA launched a full investigation of the lenders — Benworth, Capital Plus, Celtic Bank, Customers Bank, Cross River Bank, Fountainhead, Harvest, and Prestamos — as well as the individuals and other related entities named in the report. The SBA will continue to work with the House Select Subcommittee to examine the evidence laid out in its report and continue taking corrective action to address the fraud and weak controls that were so prevalent at the onset of the PPP.
“As part of the investigation, the SBA will work with federal partner agencies including the Consumer Financial Protection Bureau, the U.S. Department of the Treasury, Federal Deposit Insurance Corporation, Federal Reserve Board and the Office of the Comptroller of the Currency to ensure that federal financial regulators have a coordinated response to wrongdoing by lenders.
“The SBA will continue to prioritize its response to findings of potential fraud in pandemic relief programs, efforts that have been positively recognized by the SBA Office of the Inspector General.”
Fintechs Blame the SBA
There has previously been some back and forth regarding who is to blame for the amount of PPP fraud. While the SBA has been quite clear about where they place the blame, some banks and fintech companies accused of facilitating the fraud have pointed the finger at the SBA’s rules.
Emails obtained by the Select Subcommittee revealed some CEOs and Heads of Policy at accused entities named in the above report blamed the SBA as far back as 2020.
The Cost of PPP Fraud
According to U.S. Rep. Gary Palmer (R-Alabama), about 10%, or $80 billion of the PPP funds were lost to fraudulent activities. For the thousands of small business owners who applied for the loan but didn’t get it, this news is devastating. This is because the program was intended to save small business owners from going under during the pandemic. And since most of them didn’t have to pay it back, the program was intended to do some great good by helping the small business sector during bad economic times.
The federal government has been going after these criminals and in many cases recouping the money they have stolen from the program. The COVID-19 Fraud Enforcement Task Force along with the resources of the Department of Justice in partnership with agencies across the government says it will go after pandemic-related fraud until everyone is caught.
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