Exhibit F - USA Today Article, "Congress Widens PPP Fraud Probe to more Online… — Blueacorn Beringer (Dkt. 71.7)

Full text

EXHIBIT F

Case 5:21-cv-00251-BO Document 71-7 Filed 01/24/22 Pagelof4
USA
TODAY

INVESTIGATIONS

Congress widens PPP fraud probe to
more online financial companies

Nick Penzenstadler
USA TODAY

Published 9:00 a.m. ET Nov. 23, 2021 | Updated 2:31 p.m. ET Nov. 23, 2021

A congressional subcommittee aimed at investigating financial fraud during the pandemic
broadened its probe into online lending this week to include two of the most prominent
processors of coronavirus assistance.

Rep. James Clyburn, D-S.C., chairman of the Select Subcommittee on the Coronavirus Crisis,
sent letters to Blueacorn and Womply on Tuesday requesting information about fraud
prevention. Both emerged as major players that fused tech and financing to speed up lending
through the government’s Paycheck Protection Program.

Womply had no lending experience before COVID-19 and Blueacorn did not exist, yet
together the companies captured more than $3 billion in fees — eclipsing their direct
competitors.

The startups are not banks but worked as middlemen, marketing to struggling businesses
and quickly approving loans with partner banks, backed by the Small Business
Administration. The companies make their money through a government-paid fee for
facilitating the loans.

“Unfortunately, many of these fees may have been earned by processing fraudulent or
ineligible loan applications,” Clyburn wrote in his letter requesting a trove of internal
compliance documents, including “emails, chat room logs and transcripts, direct electronic
messages and minutes” that discussed financial crimes.

Womply worked with 17 lenders and processed 1.4 million loans totaling more than $20
billion of the government’s $800 billion program. Blueacorn processed at least $14 billion in
loans, according to Clyburn.

Case 5:21-cv-00251-BO Document 71-7 Filed 01/24/22 Page2of4
More: Online financial companies’ processes facilitated fraud in PPP loans, Texas university
study finds

In August, USA TODAY spotlighted a University of Texas, Austin paper that identified more
than 1.8 million loans with indications of potential fraud by borrowers. Some of the most
egregious examples cited by the researchers involved Kabbage, Womply and Blueacorn.

The Texas report outlined how borrowers, including criminals, could create fake companies
with fake head counts and fake salaries to capture a slice of the pandemic assistance,
facilitated by the largely automatic review of lenders.

“IT am deeply troubled by reports alleging that financial technology (FinTech) lenders and
their bank partners failed to adequately screen PPP loan applications for fraud,” Clyburn
wrote. “This failure may have led to millions of dollars worth of FinTech-facilitated PPP loans
being made to fraudulent, non-existent, or otherwise ineligible businesses.”

Fintechs have raised concerns throughout the pandemic among regulators at the SBA,
Department of Justice and Congress. In February, Clyburn sent letters in his probe to
Kabbage, BlueVine, Cross River Bank and Celtic Bank.

Clyburn gave Womply and Blueacorn until Nov. 26 to indicate whether they would cooperate
with the requests.

In a previous statement to USA TODAY, Blueacorn CEO Barry Calhoun said the company
was “incredibly proud of the work we have undertaken to dramatically reduce fraud in the
PPP program,” adding that it focused on serving a “traditionally overlooked population.” A
spokeswoman said Tuesday the company would cooperate with the congressional inquiry.

Toby Scammell, founder and chief executive officer of Womply, called PPP “an imperfect
program” that nonetheless succeeded in saving millions of small businesses.

“Womply helped the program succeed, and I am particularly proud that our efforts leveled
the playing field, so America’s very small and minority-owned businesses were able to
participate,” Scammell said Tuesday.

On its website, Womply directs anyone who suspects fraud to report it directly to the SBA.
“We know the vast majority of PPP borrowers are deserving, eligible businesses,” it says. “We
will seek to address potential fraud in a manner that minimizes the negative impacts to
legitimate borrowers using our platform.”

Case 5:21-cv-00251-BO Document 71-7 Filed 01/24/22 Page 3of4
Nick Penzenstadler is a reporter on the USA TODAY investigations team. Contact him at
npenz@usatoday.com or @npenzenstadler, or on Signal at (720) 507-5273.

Case 5:21-cv-00251-BO Document 71-7 Filed 01/24/22 Page4of4

File and source

File

gov.uscourts.nced.187990.71.7.pdf

Size

1,072,126 bytes

SHA-256

e4d085f8c44b7a7b98d17fc25cecaa7dcc088a2f5f9f7ddfa2532f1f42f1692c

Our copy

gov.uscourts.nced.187990.71.7.pdf

Original

PACER (login required)