Associated Press, "Financial firms failed to do their duty to prevent Paycheck Protection Program fraud, investigation finds"

Summary

An Associated Press article by Fatima Hussein, dated December 1, 2022, about a report by the House Select Subcommittee on the Coronavirus Crisis on financial technology firms and Paycheck Protection Program fraud. The article says the subcommittee launched its investigation in May 2021 and that the report found the firms abdicated their responsibility to screen out fraud. It states that the report said Blueacorn PPP and Womply Inc. were connected to significant percentages of PPP loan applications with indicators of fraud. It quotes Womply's lawyers as saying Womply did not approve PPP loan applications or serve as a lender, and reports that Womply referred 128,813 applicants to lenders in 2020 and 2,584,420 in 2021.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Trending now

1

‘We are going to start looking a lot more like Europe’: Millennials are living at home into their 30s, signaling a major shift

2

Billionaire oil tycoon Harold Hamm donates $150M to the University of Oklahoma to help study a cause that’s personal to him: diabetes

3

Uber CEO says ‘really demanding’ work culture includes expecting employees to answer emails over the weekend: ‘Don’t come here if you want to coast’

1

‘We are going to start looking a lot more like Europe’: Millennials are living at home into their 30s, signaling a major shift

2

Billionaire oil tycoon Harold Hamm donates $150M to the University of Oklahoma to help study a cause that’s personal to him: diabetes

3

Uber CEO says ‘really demanding’ work culture includes expecting employees to answer emails over the weekend: ‘Don’t come here if you want to coast’

Finance American Politics

Financial firms failed in their to do their duty to prevent Paycheck Protection Program fraud, investigation finds

By

Fatima Hussein

Fatima Hussein and

The Associated Press

The Associated Press

By

Fatima Hussein

Fatima Hussein and

The Associated Press

The Associated Press

December 1, 2022, 12:23 PM ET

House Majority Whip James Clyburn, D-S.C., leaves the chamber at the Capitol in Washington on Nov. 17, 2022. J. Scott Applewhite—AP Photo

Add Fortune on Google for similar content.

Financial technology firms abdicated their responsibility to screen out fraud in applications for a federal program designed to help small businesses stay open and keep workers employed during the pandemic, a report by a House investigations panel said Thursday.

The House Select Subcommittee on the Coronavirus Crisis launched its investigation of the firms in May 2021 after public reports that the firms were linked to disproportionate numbers of fraudulent loans issued under the Paycheck Protection Program.

Former President Donald Trump rolled out the Paycheck Protection Program to help small businesses stay open and keep their workers employed. President Joe Biden maintained the program and directed money to more low-income and minority-owned companies. All told, $800 billion was spent on the program.

The financial technology firms reviewed PPP applications for lenders, which would ultimately distribute PPP money to businesses.

The report said two start-ups, Blueacorn PPP and Womply Inc. — which reviewed one in every three funded PPP loans in 2021 — were connected to significant percentages of PPP loan applications with indicators of fraud.

It said the firms used questionable screening procedures and business practices in reviewing the loans, leading to “the needless loss of taxpayer dollars,” the report said. The firms “took billions in fees from taxpayers while becoming easy targets for those who sought to defraud the PPP.”

Neither firm responded immediately to a request for comment.

The report said Womply’s fraud prevention practices were so lax that lenders describe its systems as “put together with duct tape and gum.” It said Womply’s software became a preferred product for criminal enterprises seeking to defraud the government of PPP loans. The firm also received over $5 million in PPP loans for itself, which the Small Business Administration later determined it was ineligible to receive.

Womply said in a statement sent to the committee in January that the firm’s role in the screening process was limited. “Womply did not approve PPP loan applications, issue PPP loans, or otherwise serve as a lender in the PPP. Womply helped connect borrowers with PPP lenders, which were responsible for reviewing, approving, submitting, funding, and servicing the PPP applications and loans,” the company’s lawyers wrote.

Womply referred 128,813 PPP applicants to lenders in 2020, and 2,584,420 applicants to lenders in 2021.

“We must learn from this inexcusable misconduct to erect guardrails that will help ensure that federal programs — including emergency assistance programs in future crises — are administered more effectively, efficiently, and equitably while keeping waste, fraud, and abuse to an absolute minimum,” said Rep. Jim Clyburn, D-S.C., who chairs the coronavirus crisis subcommittee.

Clyburn said the committee’s findings were sent to the Justice Department and the Small Business Administration.

In March, the Government Accountability Office reported that while agencies were able to distribute COVID-19 relief funds quickly, “the tradeoff was that they did not have systems in place to prevent and identify payment errors and fraud” due in part to “financial management weaknesses.”

Billions have been fraudulently claimed through various pandemic relief programs — including Paycheck Protection Program loans, unemployment insurance and others that were rolled out in the midst of the worldwide pandemic that shut down global economies for months.

The U.S. Secret Service in August said it has recovered $286 million in fraudulently obtained pandemic loans and returned the money to the Small Business Administration.

Our new weekly Impact Report newsletter will examine how ESG news and trends are shaping the roles and responsibilities of today's executives—and how they can best navigate those challenges. Subscribe here .

About the Author s

By Fatima Hussein

See full bio

By The Associated Press

See full bio

Latest in Finance

Most Popular

File and source

File

financial-firms-failed-to-screen-out-fraud-ppp-loans-house-investigati_f36174790933ad16.html

Size

438,554 bytes

SHA-256

6e948b2726b3feef88557a4b0dcdd702250537851f83ad60383f3d341c169b40

Our copy

financial-firms-failed-to-screen-out-fraud-ppp-loans-house-investigati_f36174790933ad16.html

Original

fortune.com