Letter to U.S. Small Business Administrator Jovita Carranza - Outraged by Preventable Fraud & Waste Uncovered by WPRI, Reed Demands Investigation & Calls on Trump Admin to Fix SBA Lending & Protect Taxpayers

Letter

Dear Administrator Carranza:

I write to urge you to take immediate action to investigate claims of fraud associated with the Small Business Administration (SBA) disaster loan program, hold Rhode Islanders who are the victims of fraud harmless from any liability, and protect victims from future acts of fraud.

I make this request because it has come to my attention that the SBA has approved Economic Injury Disaster Loans (EIDL) for fraudulent businesses in Rhode Island. An investigation by a local Rhode Island news outlet revealed that $3.8 million in such loans was approved for at least 80 "farm" businesses that do not exist. In addition, many of these fraudulent businesses in falsifying their applications used the addresses and names of single-family homes, apartment complexes, and other non-business properties. The individuals, whose names and names were used, are now receiving bills from the SBA asking them to pay back these loans they never applied for. Several of the constituents interviewed in the local news story reported the fraud to the federal government, including to the SBA Inspector General, and were told the loans were under review. It is unclear whether these constituents have been alerted that they are not expected to pay back the loans taken out in their names.

It is my understanding that similar fraud has been perpetrated in states other than Rhode Island as well. In both October and July, the SBA Inspector General published reports raising serious concerns of potential fraud in the EIDL program. For example, the October report showed that the SBA approved $14.3 billion in EIDLs to accounts that differed from the original bank accounts listed on the loan applications, as well as $62.7 billion in EIDLs to applicants using the IP addresses, email addresses, bank accounts, or businesses listed at the same addresses. The SBA Inspector General attributed the fraud to the fact that SBA relaxed internal accountability controls as it tried to get out aid to businesses during the COVID-19 pandemic, which significantly increased the risk of program abuse.

Due to this lax SBA oversight, victims of fraud have already had to suffer the consequence of having their personally identifiable information used or stolen. They should not be further punished by being financially or legally on the hook for loans taken out with this information. Therefore, I urge the SBA to expeditiously start an investigation and review reports that a person has been a victim of fraud in the EIDL program, and to ensure that victims of fraud are held harmless from any financial or other liability. I also urge you to take corrective steps, including following recommendations from the SBA Inspector General, to prevent additional EIDL fraud -- particularly given that Congress has just approved an additional $20 billion for this program.

Thank you for your immediate attention to this matter, and I look forward to your prompt response.

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