POLITICO, "Justice Department launches probe of small business loans"

Summary

In this POLITICO article of 04/30/2020, Zachary Warmbrodt reports that the Justice Department has launched a review of the $670 billion Paycheck Protection Program and that its inquiry has already turned up potential fraudulent activity, as a spokesperson confirmed. The article says Treasury Secretary Steven Mnuchin warned companies of possible criminal liability for pursuing the aid improperly and announced extra Small Business Administration scrutiny of loans of more than $2 million. It notes that Bloomberg News first reported the review. It also reports a new SBA rule that businesses in a single corporate group would not be allowed to receive more than $20 million in aggregate.

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Justice Department launches probe of small business loans

The department’s inquiry has already turned up potential fraudulent activity by businesses that sought the so-called Paycheck Protection Program loans.

The Justice Department building. | Samuel Corum/Getty Images

By Zachary Warmbrodt

04/30/2020 10:04 PM EDT

The Justice Department has launched a review of the $670 billion emergency loan program that Congress created to avert layoffs at small businesses, as the Trump administration ratchets up scrutiny of whether certain borrowers should have received funding.

The department’s inquiry has already turned up potential fraudulent activity by businesses that sought the so-called Paycheck Protection Program loans, a spokesperson confirmed.

The disclosure came after Treasury Secretary Steven Mnuchin warned companies this week that they would face possible criminal liability if they pursued the government-backed aid improperly — a comment made in the context of discouraging larger companies from seeking the forgivable loans.

Mnuchin also announced that the Small Business Administration would apply extra scrutiny to loans of more than $2 million.

Bloomberg News first reported the Justice Department review.

The news of the DOJ’s involvement was probably inevitable. Policymakers designed the program to rapidly deliver aid to businesses and workers struggling during the pandemic. That required lenders to sacrifice traditional due diligence to an extent, exposing the program to potential fraud.

Separately, the Small Business Administration in a new rule Thursday made it more difficult for large corporations to obtain tens of millions in loans across their subsidiaries .

The SBA, which administers the program, said businesses that are part of a single corporate group would not be allowed to receive more than $20 million in aggregate.

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