Ernst Calls for Accountability for COVID Fraudsters

WASHINGTON – Today, Senate Committee on Small Business and Entrepreneurship Chair Joni Ernst (R-Iowa) highlighted widespread fraud in Small Business Administration’s (SBA) COVID relief programs and called on Congress to pass her SBA Fraud Enforcement Extension Act before the statute of limitations for both of these programs expire, to give investigators the time they need to hold bad actors accountable.

Ernst underscored that, while pandemic relief programs like the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) provided a critical lifeline to small businesses, weak oversight and reliance on self-certification opened the door to an estimated $200 billion in fraudulent loans that must be clawed back.

Watch Senator Ernst’s remarks here.

Ernst’s full remarks as delivered:

“Nearly six years ago, the Small Business Administration’s pandemic relief programs provided a much-needed lifeline for small businesses in Iowa and across America.

“Millions of small business owners and their employees were saved from closure and mass layoffs thanks to Paycheck Protection Program and Economic Injury Disaster Loan funds awarded by the SBA.

“But as we’ve seen time and again, when government funds seem ‘free’ for the taking, bad actors are ready to steal and scam.

“But government programs should never be able to be exploited at the American taxpayer’s expense in the first place.

“However, the lack of oversight mechanisms in SBA’s COVID relief programs, coupled with the quick disbursement of funds to save shuttered businesses, allowed swindlers to rob taxpayers of $200 billion in pandemic relief loans.

“The Pandemic Response Accountability Committee, or PRAC, sounded the alarm years ago on how allowing applicants to self-certify their eligibility increases fraud. Self-certification allows the government to rely on an applicant’s promise that they meet program requirements.

“The SBA Office of Inspector General repeatedly echoed their concerns about this system.

“Unfortunately for taxpayers, the Biden administration ignored repeated watchdog warnings, allowing blanket forgiveness without additional verification on PPP loans under $150,000 and potentially allowing a large swath of fraud to escape meaningful scrutiny.

“Self-certification was known to be a major problem as more pandemic relief programs were created.

“Consider the Restaurant Revitalization Fund (RRF) and Shuttered Venue Operators Grant (SVOG) programs.

“These opened a menu of fraud for the taking.

“In 2024, music artist Chris Brown exploited these awards to the tune of $10 million.

“Half of these funds were paid directly to the singer himself.

“Additional funds were spent on an $80-thousand-dollar birthday party.

“The SBA never should have been running a drive-thru for fraudsters.

“However, even though the RRF program had a 20-location limit for franchisees, restaurant chain CoreLife Eatery – with 29 locations – still got served $7.8 million from taxpayers that it never should have been allowed to receive.

“But talk about fast fraud made to order, one Oregon dentist – known for illegally distributing pharmaceuticals – used his personal address and fictitious restaurant names in Florida to generate nearly $8 million in RRF payments.

“To date, PRAC has diligently helped law enforcement partners expose more than $2.4 billion in estimated fraud loss.

“IG Kirk’s recent appointment as PRAC Chair highlights how critical it remains to claw back these funds, especially across SBA programs.

“Last July, the SBA OIG flagged an astonishing $544 million of potential improper payments in the SVOG program, yet the Biden administration continued ignoring the problem. Ultimately, officials from the previous administration did not refer a single case to Treasury.

“Fraudsters can’t be left off the hook just because time has passed.

“Congress must pass my SBA Fraud Enforcement Extension Act to extend the statutes of limitations for SVOG and RRF programs and give investigators the time they need to continue going after crooks.

“Without my legislation, as soon as April, fraudsters who stole funds will escape justice.

“You heard me right, folks, in a little over a month, some of SBA’s COVID programs can no longer be prosecuted.

“The good news is my statute of limitations bill has already passed the House, and this Committee.

“It is now pending before the full Senate.

“I call on Democrats to stop blocking this legislation, so there can be real accountability.

“I am grateful the current administration knows that the job is not finished.

“The SBA is conducting manual reviews of more than 10,000 RRF awards totaling over $3 billion.

“Just over 1,000 of these awardees did not submit the required post-award report documenting how the money was spent.

“SBA also sent demand letters to an additional 8,000 awardees who were not a part of the manual review and never submitted a post-award report, totaling over $1.2 billion in RRF disbursements.

“Additionally, last year the SBA issued hundreds of demand letters to SVOG grant recipients. The total grant value of recipients who have not responded totals over $150 million.

“The SBA has been dealt an incredibly difficult hand: reviewing the entirety of both programs before the statutes of limitation end and referring all fraud to investigators. This critical work must continue.

“A few weeks ago, Administrator Loeffler suspended more than 110,000 California borrowers who took home over $8.5 billion in potentially fraudulent COVID relief funds.

“The recent fraud investigations in Minnesota have uncovered at least $9 billion from state and federal programs, including $400 million in PPP loans, and Administrator Loeffler acted quickly to remedy the issue.

“Republican Members of this Committee sent a letter to Administrator Loeffler earlier this month applauding her work to shut down these schemes.

“I ask unanimous consent to enter into the record our January 8th letter requesting information from the SBA on its efforts to uncover fraud in SBA programs. Without objection, so ordered.

“I look forward to hearing from our federal watchdog partners today on how they are tackling fraud and recovering taxpayers’ hard-earned dollars.

“Thank you for your service, and I look forward to hearing your testimony.”

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