$5.4 billion in Covid loans went to applicants using fishy Social Security numbers

The federal government awarded more than $5.4 billion in Covid loans to businesses with “questionable” Social Security numbers, according to an alert issued Monday by the government’s Covid watchdog, the Pandemic Response Accountability Committee (PRAC).

The alert was released before the first hearing on Covid fraud Wednesday of the Republican-led House Oversight Committee, chaired by James Comer, R-Ky.

The alert was first reported by The Washington Post.

The potentially fraudulent Social Security numbers were used to secure approval of loans under the Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP), which together provided almost $1.2 trillion in loans to small businesses from 2020 to 2022.

As NBC News reported last year, the government estimated that 10% of the more than $800 billion in PPP loans was obtained fraudulently, while private experts think Covid unemployment benefit fraud may have accounted for as much as $400 billion of the $900 billion disbursed. The Government Accountability Office issued a report earlier this month that estimated unemployment fraud at more than $60 billion, but said that was a low estimate.

According to the alert, PRAC analyzed 33 million loan applications for potentially fraudulent Social Security numbers. PRAC then sent the results to the Social Security Administration for verification. The SSA told PRAC that 221,427 of the Social Security numbers used in the applications “were either not issued by SSA or … did not match the name and/or date of birth information provided … suggesting potential identity fraud.”

Despite the problems with the numbers, just under a third, 69,323, were used successfully to secure EIDL or PPP loans totaling $5.4 billion.

The alert noted that when the Small Business Administration launched PPP in April 2020, there were “limited controls in place to ensure program integrity.”

“Although SBA subsequently added certain fraud prevention controls in 2021, the initial implementation of PPP prioritized the speed of disbursing funds rather than scrutiny of applicant eligibility, a trade-off that contributed to widespread fraud.”

In a statement, an SBA spokesperson said, "The issue of identity theft in PPP and COVID-EIDL programs highlighted by the PRAC report is a prime example of why it was a mistake to not implement additional anti-fraud measures during the Trump administration. Soon after taking office, the Biden-Harris administration took concrete steps to address fraud, including the implementation of the use of Treasury’s Do Not Pay system, and we continue to work to fix this issue.”

Gene Sperling, coordinator for the White House's American Rescue Plan, said PRAC's alert "documents both the significant fraud and identity theft that occurred under the prior administration due to the lack of basic anti-fraud controls, as well as how consequential were the Biden administration quick actions to reinstate strong anti-abuse measures.”