#ICYMI Update on Paycheck Protection Program Loans

Recent reports have divulged that the Paycheck Protection Program funding, rolled out by the federal government during the COVID-19 pandemic, was abused and misappropriated. Around 15% of PPP loans had one or more indications of potential fraud. Nearly 1.8 million of the PPP's 11.8 million loans showed signs of fraud.[1] Other estimates show that about 10% of the total PPP funding was misappropriated, equating to around $80 billion in lost funding.[2]

The Paycheck Protection Program (PPP) passed as a part of the CARES act during the COVID-19 pandemic to provide funding to struggling small businesses. The program, implemented by the Small Business Administration, was a part of job retention efforts and was supposed to serve as a safety net for employees who were unable to work due to closures. Loans were intended to cover up to 8 weeks of payroll costs plus benefits for small businesses. PPP loans were eligible for forgiveness if they were spent on qualified business expenses. Funds were distributed to small business owners, veterans organizations, eligible nonprofits, self-employed individuals, and independent contractors.[3]

PPP money was limited and loans were no longer offered once the pool of money was drained. Hannibal Ware, the Inspector General for the SBA, testified before congress that the SBA had revoked fraud-protection measures before the Paycheck Protection Program was implemented.[4] The Inspector General also testified that speed was the priority over due diligence during that time. Despite the Government Accountability Office repeatedly warning the SBA of fraud concerns, the program continued. “Money that was meant to provide necessary paychecks, benefits, and stability during difficult times was instead spent on luxury cars, dating sites, jewelry, child support payments, multiple homes, and more, according to prosecutor reports.”[5]

Misused funds from the PPP can be hard to regain due to the vast nature of the program. The Pandemic Response Accountability Committee is utilizing artificial intelligence to comb through large data sets in search of patterns that will provide more insight into how and where funds were disbursed.[6]

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3906395

[2] https://www.natlawreview.com/article/shedding-light-paycheck-protection-program-loan-abuse

[3] https://www.natlawreview.com/article/shedding-light-paycheck-protection-program-loan-abuse

[4] https://www.natlawreview.com/article/shedding-light-paycheck-protection-program-loan-abuse

[5] https://www.natlawreview.com/article/shedding-light-paycheck-protection-program-loan-abuse

[6] https://www.sba.gov/about-sba/oversight-advocacy/office-inspector-general/pandemic-response-oversight