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Epic Fail: Questionable Loans [1]
['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.']
Date: 2025-01-08
Fifth of five posts.
In January 2022, Musings of a Nobody ran a series of posts about the Trump administration’s historic failure in its handling of the coronavirus as detailed in a report from the House Select Subcommittee on the Coronavirus Crisis.
As we approach Trump’s inauguration, we’re running the series again. The goal is to remind people of the corrupt, politically driven mismanagement that led to hundreds of thousands of unnecessary deaths and the accompanying financial crisis, to serve as a warning of the type of administration we may be seeing during the next four years, and to illustrate the kind of damage and suffering that it’s corruption and incompetence is capable of creating.
***
The Trump administration’s questionable management of pandemic relief programs left the federal government vulnerable to fraud and profiteering, while failing to effectively and equitably deliver relief, according to a report by the House Select Subcommittee on the Coronavirus Crisis.
For example, the subcommittee found that the Pandemic Economic Injury Disaster Loan Program (EIDL) lacked vital fraud controls during the Trump administration.
Background
*The Small Business Administration (SBA) was authorized to provide EIDLs and EIDL Advance Grants to small businesses harmed by the pandemic.
*As of November 2021, SBA had approved more than 3.8 million EIDL applications and a total of over $292 billion in EIDLs for American businesses.
*Although these loans were crucial to keeping millions of small businesses afloat, there are clear indications that the Trump administration did not implement adequate fraud controls while it administered the program, leading to billions of dollars in potential fraud.
*The EIDL program was particularly vulnerable to fraud during its first months of operation under the Trump administration.
Questionable applications
The SBA Office of the Inspector General (OIG) identified billions of dollars in EIDL loans and advances paid on applications despite indicators of fraud in the applications, including:
*$67.5 billion in loans and advances paid to applicants with duplicate IP addresses, email addresses, physical addresses, or bank accounts.
*$7.9 billion in loans and advances paid to applicants using bank accounts that differed from the accounts listed on their original loan application.
*$3.2 billion in loans and advances linked to alleged identity theft.
*$557 million in loans and advances paid to potentially ineligible recipients with employer identification numbers (EINs) registered after the program cutoff date.
Investigations
The Department of Justice has formed the COVID-19 Fraud Enforcement Taskforce to investigate fraud in pandemic relief programs. Here’s a report of its work through November 2021 from the subcommittee:
*The DOJ pursued 95 prosecutions of 145 defendants for EIDL fraud involving at least $40 million in fraudulently obtained EIDL funds.
*Although DOJ’s prosecutions are only a small fraction of the potential fraud identified in the program, these cases provide a detailed look at the timing, manner, and means used to commit EIDL fraud in cases that have been subject to in-depth investigation.
*Nearly 97 percent of EIDL fraud prosecutions have involved fraudulent applications submitted during the Trump administration’s implementation of the program in its first five months. This finding is consistent with the SBA OIG reports that there were serious deficiencies in fraud controls used in the early operation of the program.
*Nearly 50 percent of these prosecutions involved fictitious, inactive, or inoperative businesses, many of which lacked business registrations entirely, were shell companies registered after the pandemic began, or were publicly registered as “inactive.”
*23 percent of the prosecutions involved applicants that used stolen identities to submit fraudulent applications, and in some of these cases applicants used stolen identities in conjunction with fictitious business entities.
*12 percent of the prosecutions involved fraud rings where a central group of conspirators solicited personal information from many other individuals in order to submit dozens or hundreds of fraudulent applications.
The subcommittee also reported that it uncovered evidence that Trump White House officials were involved in the approval of a questionable $700 million CARES Act national security loan.
Background
*The Trump Administration’s Treasury Department announced in July 2020 that it had approved a $700 million loan to the trucking company YRC Worldwide Inc. -- now named Yellow Corporation -- under the CARES Act loan program for businesses “critical to maintaining national security.”
*This single loan represented 95 percent of the funds expended as part of the program.
*In announcing the loan’s approval, the Treasury said that it had relied on a certification by the Secretary of Defense that Yellow was “critical” to national security and stated that Yellow provides “68 percent of less-than-truckload services to the Department of Defense.”
*Subsequent reports raised doubts that Yellow satisfied the criteria to be deemed “critical” to national security.
*Despite the CARES Act requirement that Treasury only approve loans to address “losses incurred as a result of the coronavirus,” Yellow used much of its loan for long-term capital investment -- replacing its trucking fleet.
*Documents show that Trump White House officials were involved in the process of approving Yellow’s loan, communicating with Yellow frequently and contacting Treasury on Yellow’s behalf.
*Trump White House involvement is particularly concerning because any interference in the consideration of Yellow’s loan application by White House advisor Jared Kushner could present a conflict of interest, as Kushner’s family business received a $184 million loan from Apollo Global Management -- also a major Yellow creditor -- earlier in his White House tenure.
*The subcommittee is continuing to investigate to determine whether the loan to Yellow was improperly approved and whether loan funds were improperly used.
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Thank you for reading my post. You can see my other writings on my blog: Musings of a Nobody. Please share and subscribe for free via email on its home page.
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