Letter to Hannibal "Mike" Ware and Richard K. Delmar, Inspector General (September 1, 2020)

Summary

A letter dated September 1, 2020 from Rep. James E. Clyburn, Chairman, to Hannibal "Mike" Ware, Inspector General of the Small Business Administration, and Richard K. Delmar, Acting Inspector General of the Department of the Treasury. The letter requests that the two offices conduct a review of the management of the Paycheck Protection Program (PPP) by SBA and Treasury, citing a new staff report from the Select Subcommittee on the Coronavirus Crisis showing billions of dollars in PPP loans may have been diverted to fraud, waste, and abuse. It states that the enclosed memorandum analyzes loan-level data on the 5.2 million loans approved as of August 8, 2020. The letter also cites a Government Accountability Office report and an SBA Inspector General report on another SBA lending program.

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Full text

                                          September 1, 2020

The Honorable Hannibal “Mike” Ware
Inspector General
Small Business Administration
409 3rd Street, S.W.
Washington, D.C. 20416

Mr. Richard K. Delmar
Acting Inspector General
Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220

Dear Mr. Ware and Mr. Delmar:

        I am writing to request that your offices conduct a review of the management of the
Paycheck Protection Program (PPP) by the Small Business Administration (SBA) and
Department of the Treasury (Treasury) in light of a new staff report from the Select
Subcommittee on the Coronavirus Crisis showing billions of dollars in PPP loans may have been
diverted to fraud, waste, and abuse. In particular, I encourage you to examine the categories of
loans identified in the enclosed memorandum and any other loans that contain indicia of fraud, as
well as the program’s oversight and accountability mechanisms.

        The Select Subcommittee’s findings are especially concerning in light of recent criminal
indictments that allege significant fraud in the program, the SBA Inspector General’s recent
report that found “widespread potential fraud” in another SBA lending program, and a recent
report from the Government Accountability Office (GAO) that documented fraud in stimulus
programs due to the Administration’s failures to implement basic fraud controls.1 GAO warned,
“there is a significant risk that some fraudulent or inflated applications were approved” in PPP



        1
           Spotting $62 Million in Alleged P.P.P. Fraud Was the Easy Part, New York Times (Aug. 28, 2020)
(online at www.nytimes.com/2020/08/28/business/ppp-small-business-fraud-
coronavirus.html?action=click&module=Top%20Stories&pgtype=Homepage); Small Business Administration,
Office of Inspector General, Serious Concerns of Potential Fraud in Economic Injury Disaster Loan Program
Pertaining to the Response to COVID-19 (July 28, 2020) (online at www.sba.gov/sites/default/files/2020-
07/SBA_OIG_Report_20-16_508.1.pdf); Government Accountability Office, COVID-19: Opportunities to Improve
Federal Response and Recovery Efforts (June 25, 2020) (online at www.gao.gov/reports/GAO-20-625/).
The Honorable Hannibal “Mike” Ware
Mr. Richard K. Delmar
Page 2

and, “the limited safeguards and lack of timely and complete guidance and oversight planning
have increased the likelihood that borrowers may misuse or improperly receive loan proceeds.” 2

        The enclosed memorandum provides a preliminary analysis of PPP loan-level data by
Select Subcommittee staff as part of the Subcommittee’s ongoing investigation of the program.
To conduct this analysis, Subcommittee staff examined loan-level data produced by Treasury
and SBA on the 5.2 million loans approved as of August 8, 2020, and then leveraged publicly
available data sources to identify potentially problematic loans. The Subcommittee’s analysis
shows that PPP helped millions of small businesses and non-profit organizations stay afloat
during the coronavirus crisis, but a lack of oversight and accountability from SBA and Treasury
may have led to billions of dollars being diverted to fraud, waste, and abuse, rather than reaching
small businesses truly in need.

      The Subcommittee stands ready to share additional information with you if it would aid
your work. Thank you for your consideration of this request.

         If you have any questions regarding this request, please contact Select Subcommittee
staff at (202) 225-4400.


                                                Sincerely,



                                                __________________________
                                                Rep. James E. Clyburn
                                                Chairman

Enclosure

cc:     The Honorable Steve Scalise, Ranking Member




        2
         Government Accountability Office, COVID-19: Opportunities to Improve Federal Response and
Recovery Efforts (June 25, 2020) (online at www.gao.gov/reports/GAO-20-625/).


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