Cleaving Back Some of the SBA’s $Lambda$Si$_191$$ from COVID-19

The report says the SBA and federal investigators are clawing back some of the stolen money. It points to “1,011 indictments, 803 arrests, and 529 convictions related to COVID-19 EIDL and PPP fraud as of May 2023.” All told, the report says “nearly $30 billion” in aid has been seized or returned to the government.

The most complete assessment so far by the Office of Inspector General of the Small Business Administration is what happened with the aid.

At the time, government officials said the potential economic emergency posed by the pandemic shutdowns of 2020 necessitated a quick loans — despite the likelihood of fraud.

“The agency weakened or removed the controls that were needed to prevent fraud from gaining access to the programs and made sure only eligible entities received funds,” the report says. “However, the allure of ‘easy money’ in this pay and chase environment attracted an overwhelming number of fraudsters to the programs.”

“There is something to that argument, especially when it’s applied to the very early weeks of the program,” says Sam Kruger, an assistant professor of finance at the University of Texas who has studied pandemic fraud. But he says the data analysis behind this new report shows the government did have the ability to tighten up the system.

In its response to the OIG’s report, the leaders of the SBA estimate that 86% of the potential fraud happened during the first nine months of the program, and they point to the anti-fraud measures they implemented in early 2021.