One lucky borrower got 17 PPP loans: How the Trump administration lost millions in an effort to shore up small businesses
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WASHINGTON — Computer errors caused the government to hand out duplicate loans to thousands of borrowers under the Trump administration’s program to rescue businesses from the economic ravages of the coronavirus pandemic.
While the Paycheck Protection Program has been subject to fraud, the revelations contained in a new report by the inspector general of the Small Business Administration speak instead to a faulty — and costly — implementation.
Aging federal technology may have hampered the SBA’s inability to track and cross-reference loans. Two years ago, the Government Accountability Office found that information systems across the federal government were badly outdated. Some computer hardware at the SBA was a decade old, that investigation found.
A series of malfunctions took place in the spring and summer of 2020, resulting in millions of taxpayer dollars being handed out inadvertently as duplicate loans. In all, SBA Inspector General Mike Ware found, banks authorized to issue PPP loans “made more than one PPP disbursement to 4,260 borrowers, which totaled about $692 million and involved 8,731 PPP loans.”
Businesses were allowed to apply for PPP loans with several banks; it was the SBA’s duty to make sure that if a borrower had an application before one bank, applications before any other banks were withdrawn. If the SBA did not alert a bank that one of its prospective borrowers had other outstanding applications, that borrower would have no barrier to securing several loans.
At least 104 borrowers received three or more loans. One borrower received 17 loans from the federal government, for a total of $1.3 million. It was not clear who that 17-loan recipient was or how the borrower managed to secure so many loans when other prospective borrowers struggled to win a single award through the business-rescue program.
An official with the SBA inspector general’s office declined to divulge information about that borrower, or whether the borrower was being investigated by the agency. That official did confirm to Yahoo News that the 17 loans were not separate franchises of a large corporate chain, in which case the loans would have adhered to the program’s guidelines.
The SBA has attempted to recoup some of the duplicate loans but could not tell its inspector general the extent to which it had managed to recover funds.
The SBA declined to elaborate on the inspector general’s findings. “We have nothing additional,” spokesperson Carol Wilkerson told Yahoo News in a text message.
The revelations about widespread problems with the initial round of PPP loans come as President Biden and Vice President Kamala Harris tour the nation to tout the just-passed $1.9 trillion American Rescue Plan, which has a business-relief component of its own, including a new $28.6 billion fund to help restaurants.
Congress is also moving to extend the PPP for two more months, giving businesses more time to apply.
The logistical challenges that appear to have frustrated the previous administration could plague the current one as well, even though the SBA said the problems highlighted by the inspector general have been fixed. The prospect of massive errors looms any time huge amounts of money are disbursed, no matter who is president. The Obama administration’s Troubled Asset Relief Program, intended to rescue the American economy after the financial crisis of 2007-08, faced similar scrutiny.
Critics of the Trump administration seized on the new report as evidence of how much damage the 45th president managed to inflict on the federal government before leaving office in January. “This money was meant for mom-and-pop small businesses struggling to keep the lights on, not big corporations, grifters and cheats,” said Kyle Herrig, head of the watchdog group Accountable.US. “But given the Trump administration’s insistence that banks and companies could self-regulate, it’s no surprise so much fraud and sloppiness slipped through the cracks.”
Defenders of Trump’s small business relief efforts say the goal was to move billions of dollars to thousands of businesses with unprecedented speed, in the middle of a pandemic. Errors were inevitable, those defenders say, and are evidence of neither abuse nor incompetence.
The duplicate loans in question were made between April and August 2020, when the Trump administration first implemented the PPP program, which was initially allotted $349 billion by Congress in the coronavirus relief bill.
Sometime on April 30, an SBA computer script meant to speedily process large numbers of loans malfunctioned. The malfunction prevented the system from checking when a business had applied with more than one bank for a loan. When the computer script functioned properly, each PPP applicant was left with a single loan for the 5,460 participating banks to consider.
The error persisted for about 14 hours before SBA officials spotted and fixed the relevant code. Because the SBA was facing a massive backlog of applications, officials there decided not to go back and correct whatever duplicate loan applications were processed during that 14-hour period. That means thousands of applicants had an extra opportunity — or several extra opportunities in some cases, and 17 extra opportunities in one case — at funds that others did not have.
There was another error, this one related to an SBA computer program known as E-Tran. That program was supposed to eliminate any duplicate loan applications by comparing tax identification numbers and other information that businesses submitted. For thousands of applicants, E-Tran failed to spot that a business had submitted more than one application.
In all, the federal government has made 5.2 million PPP loans; the 8,731 duplicate loans represent an outlier. Yet the ease with which some borrowers saw their fortunes doubled stands in stark contrast to the experiences of many people of color who own businesses, who have said they were marginalized and not given the same access to credit as white business owners. Analysis of PPP loans has backed up such accusations.
The Biden administration has pledged to fix racial and other inequities when it comes to small business outreach, but it will have to work with more or less the same technological infrastructure as Trump did. (The SBA has pledged not to use bulk processing programs again.)
Ware’s investigation was conducted at the behest of a congressional coronavirus subcommittee. That subcommittee’s chairman, Rep. James Clyburn, D-S.C., said the new report was “more evidence of the Trump administration’s poor implementation of PPP, which ignored the intent of Congress by failing to get vital assistance to the neediest small businesses.”
Cover thumbnail photo illustration: Yahoo News; photos: AP, Getty Images
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