(The Center Square) — While business leaders say the Paycheck Protection Program was invaluable to businesses struggling to stay afloat during the COVID-19 pandemic, it’s now clear the initiative was ripe for fraud.
“The problem with following the rules is that it often puts you at a disadvantage in a world where fraud and deception seem to be the norm,” Dennis Shirshikov, head of growth at Awning.com and a professor at the City University of New York, wrote in an email to The Center Square. “If you’re not cheating, you’re not trying hard enough. That seems to be the message from the government these days when it comes to PPP loans.”
PPP fraud has caught the attention of watchdogs at the national level, who recently told the U.S. House Committee on Oversight and Accountability that government agencies did not prevent fraud before doling out pandemic relief aid, including PPP loans.
The feds have charged dozens with lying on PPP loan applications to secure federal money fraudulently; what about the businesses that didn’t lie on loans and didn’t receive money? What does it say to those who followed the rules?
“Fraud, waste, and abuse are rampant in many government programs and Washington needs [to] be a better steward of Americans’ hard-earned money,” U.S. Rep. Rich McCormick, R-Georgia, said in a statement to The Center Square.
“Some people tried to defraud the system for their own benefit in a time of need for so many families,” McCormick added. “The original PPP bill needed to have greater guardrails on the verification and distribution process, but today we need to allow the DOJ to investigate fraud and bring these individuals to justice.”
Business leaders recognize that some business owners flouted the laws but say the bulk of the funding went to law-abiding citizens, which helped businesses when they needed it.
“These PPP loans were essential to Georgia’s small businesses at a time when they were really struggling to keep the lights on and keep people working,” National Federation of Independent Business State Director Hunter Loggins said in a statement to The Center Square.
“Some individuals may have taken advantage of the situation, and that’s frustrating, but it doesn’t change the fact that the vast majority of these loans went to Main Street businesses that genuinely needed them,” Loggins added. “I don’t want to think about what might have happened to Georgia’s economy and Georgia’s families if the federal government hadn’t provided this financial assistance to small businesses when the pandemic was at its worst.”
A GAO report this month concluded the “extent of fraud associated with PPP … has not yet been fully determined.” For their part, the feds say they will continue to crack down on business owners who fraudulently filed PPP applications.
“We will continue to aggressively pursue those who defrauded the Paycheck Protection Program which was funded by taxpayers and designed to assist businesses during the pandemic,” J. Russell George, Treasury Inspector General for Tax Administration, said in a recent press release.
Still, a crackdown on PPP fraud is “a drop in the bucket” compared to the other fraud perpetrated daily against the government, Shirshikov said.
“Sure, the feds are cracking down on PPP loan fraud, but what about all the other fraud that goes on every day? It’s a drop in the bucket,” Shirshikov said. “The real fraud is the system itself. The fact that the government is handing out money with few questions asked is an invitation to fraudsters.”
“The government wants to blame small business owners for lying on PPP loan applications, but they created a system that practically begs for fraud,” Shirshikov said. “It’s a classic case of blaming the victim.”