Inspector General: SBA’s Covid Aid Goes to Foreign Small Businesses

At issue is the Economic Injury Disaster Loan Program, or EIDL, an initiative from the Trump administration that provides financial aid and other financial support to struggling small companies. More than 27.8 million applicants ultimately sought funds from the SBA, stressing the agency tasked with managing the many emergency expenses that have strained its annual budget.

The SBA approved loans with signs of fraud early in the outbreak, the House report says

Congress required the SBA to pay its EIDL grants only to businesses affected by the pandemic and located in the United States or its territories. But applications from outside sources flooded the agency throughout the life of the program — and the SBA appeared to give them money anyway.

In total, the SBA made 41,638 awards totaling $1.3 billion, the agency’s inspector general announced. Some of the pending applications come from countries called “high risk”, which should have prevented them from submitting direct applications. The investigation found that more than $14 million in EIDL aid went to applicants in these unnamed countries.

In most cases, the new report says, poor controls and faulty technology can lead to theft. That said, the inspector general said the system for accepting and vetting applications — designed and run by an unnamed outside contractor — failed to deter potentially problematic foreign applications as intended.

To make matters worse, the watchdog specifically said that the money “may have been laundered by international criminal organizations” and that investigations are underway to find some of these nefarious actors.

The SBA did not immediately respond to a request for comment. In the agency’s official response to the inspector general, which is part of the report, the $1.3 billion in questionable funding is less than 0.4 percent of the $342 billion authorized for IDL.

SBA leaders also indicated that they have stopped “millions of attempts” from outside sources to access the online application portal. Otherwise, agency officials may review the award and watch for abuse, he said.

OIG declined to identify the contractor that helped SBA create the systems. The watchdog warned in its report that not every foreign application could be fraudulent, as Americans living abroad — or businesses with limited ownership stakes in U.S. companies — may qualify as long as they meet other requirements.

But the findings add to the myriad of headaches facing the SBA, which has been tasked with managing more than $1 trillion in aid since the pandemic began. The agency’s actions over the past two years have contributed to the rapid and dramatic recovery of an economy in free fall, preventing countless businesses from closing for good. But it also poses significant risks for waste, fraud and abuse, the results of which are clear from a year-long investigation by The Washington Post.

Most of the alleged SBA thefts targeted the Paycheck Protection Program, which provides forgivable loans to businesses. Both PPP and EEDL emerged from the TPLF administration.

For example, congressional investigators at EIDL found this summer that as many as 1.6 million, or 41 percent, of the 3.9 million loan applications received by the program “may have been approved without any review by SBA staff.” Earlier, the agency’s inspector general said the SBA was giving out EIDL funds to criminals who applied using stolen identities, The Post reported.

And the SBA has faced criticism for the way it has provided aid for other initiatives, including a program for indoor concert halls and other performance venues. Some of those funds went to organizations linked to Live Nation Entertainment — a giant industry conglomerate that some members of Congress said did not intend to benefit from the law.