SBA’s Handling of Virus Aid Draws Scrutiny From Key Lawmaker

The Small Business Administration’s handling of a pandemic bailout program beset by evidence of fraud is drawing fresh scrutiny from the House lawmaker who leads the panel overseeing the agency.

“As Small Business Oversight Chair, I’m demanding answers from SBA on how they plan to recover this taxpayer money,” California Democrat Judy Chu wrote Friday on Twitter, posting a Bloomberg News article describing how the agency’s Economic Injury Disaster Loan program distributed billions of dollars based on suspicious applications. In an interview, Chu said she will hold a hearing on the issue and that she’s already writing a letter to the agency “demanding accountability.”

The disaster-aid program offers loans to small businesses of as much as $150,000 and has distributed $192 billion to date. A different pot of money -- $20 billion in grants that didn’t need to be repaid -- ran out of funds in July as scammers swarmed.

Bloomberg described this week how strategies for deceptively tapping the program went viral on social media, and how the agency rushed out grants of as much as $10,000 to applicants who weren’t eligible, sometimes ignoring concerns raised by loan officers. In a separate report, Inspector General Hannibal “Mike” Ware cited evidence the program was widely abused, noting $450 million in doubtful payments already were seized by law enforcement.

“American taxpayer dollars were wasted at a time of historic need,” Chu said in the interview. “You would think that the SBA would jump to find ways to fix this, to stop it from happening again.”

A spokesman for the SBA declined to comment. SBA administrator Jovita Carranza has repeatedly defended the agency’s handling of the program, pointing to its “robust” internal controls and the unprecedented scale and speed at which it was rolled out.

Ware has disagreed.

“Even though we have repeatedly tried to sound the alarm with SBA, it is concerning that SBA’s response to this report does not acknowledge the extent of ongoing fraud or a willingness to undertake all necessary steps to identify and strengthen the existing ineffective controls,” Ware wrote in his report.

©2020 Bloomberg L.P.

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