According to a new report, Small Business Administration employees were told not to use the word “ fraud ” when processing applications for pandemic disaster loans.
Employees reviewing requests for the Small Business Administration’s $ 212 billion Covid-19 Economic Injury Disaster Loan (EIDL) program were told to use alternative expressions such as “ duplicate, ” four employees told. Bloomberg.
A manager told staff that “fraud is the new F word,” said one of the people.
Employees were told this was to prevent public record requests targeting the keyword “ fraud, ” but said the alternative terms suggested to different teams varied, potentially causing problems for the program to be monitored.
According to a new report, Small Business Administration employees were not allowed to use the word “ fraud ” when processing applications for pandemic loans in disasters.
In a statement, the SBA said it “strongly denies that staff handling EIDL loans were discouraged from detecting suspected fraud.”
“If red flags are triggered by system control or manual review, actions are taken to put the loan application on hold so that the agency can conduct additional due diligence,” the agency said.
“SBA takes fraud very seriously and works with its Office of Inspector General and other government agencies to investigate and ensure that fraud is prosecuted.”
The EIDL program has provided $ 3.6 million in loans worth $ 192 billion to small businesses since March, as well as $ 5.8 million in grants totaling $ 20 billion that are non-repayable.
It stands out from the SBA’s $ 525 billion salary protection program, which relied on banks to provide forgivable loans intended to cover payroll.
Both programs, designed to help small businesses survive in the pandemic, are plagued by allegations of fraudulent applications.
Jovita Carranza, the SBA administrator, has said a report from an inspector general exaggerated the risk of EIDL fraud
In one instance, two Florida neighbors were charged with inventing farms they claimed were out of their property in central Miami to defraud utilities to the tune of $ 1.1 million.
The Justice Department said it had charged at least 57 defendants with attempts to steal more than $ 175 million from a pandemic aid program.
SBA loan officers are not expected to prove fraud just to flag suspicious applications.
Credit officials told Bloomberg that they had been given conflicting instructions on how to write down their suspicions about dubious applications.
Some said they were told to mark suspicious applications as ‘duplicates’ in the agency’s internal loan system.
Others said they were told to annotate dubious files with terms such as “unusual” or “inconsistency.”
The reported variations give rise to concerns about how easy it will be to control the program.
A report last month from the agency’s inspector general found the SBA’s program to be fraud-prone and identified tens of billions of dollars in applications that he said should be further inspected.
Jovita Carranza, the SBA administrator, has said the report exaggerates the risk of EIDL fraud.