February 23, 2024

(LR) Kevin Chambers, Director of Justice Department’s COVID-19 Fraud Enforcement Unit; Hannibal “Mike” Ware, Small Business Administration Inspector General; Michael Horowitz, Chair of the Pandemic Response Accountability Committee; Roy D Dotson Jr., Acting Special Director, U.S. Secret Service, National Pandemic Fraud Recovery Coordinator; House Select Subcommittee on the Coronavirus Crisis, at a mixed hearing at the Rayburn House Office Building, Washington, D.C., June 14, 2022 testify.

Joe Raeder | Getty Images

Fraudsters may have stolen more than $200 billion in federal loans meant to help struggling small businesses during the coronavirus pandemic, government regulators said Tuesday.

At least 17 percent of the $1.2 trillion paid out by the Small Business Administration may have been stolen by fraudsters, the Office of Inspector General estimated in a new report.

The inspector general found that more than $136 billion from the Economic Injury Disaster Loan Program and $64 billion from Paycheck Protection Program loans may have been stolen. In total, the SBA disbursed $400 billion in EIDL funds and $800 billion in Paycheck Protection Program loans during the program’s lifespan.

The inspector general said the vast majority of fraudsters attracted to easy money were able to take advantage of the programs as the Small Business Administration loosened internal controls and rushed to provide assistance to struggling small businesses during the pandemic shutdown.

The SBA disputed the inspector general’s conclusions in a letter included in the report. Bailey DeVries, a senior SBA official, said the report vastly overestimated the amount of fraud involved in these schemes.

De Vries said the Trump administration rushed the loans in the first few months of the program but introduced additional fraud controls in 2021.

Investigations by the Office of the Inspector General have resulted in more than 1,000 indictments, 803 arrests and 529 convictions related to loan program fraud, the report said. These investigations have resulted in the seizure or return of nearly $30 billion in stolen loans by federal law enforcement agencies.

The inspector general’s office is still investigating tens of thousands of leads of investigation into waste, fraud and abuse in the lending program, the report said. Thousands of such investigations are expected to continue for years, the inspector general said.

The Paycheck Protection Program provides guaranteed loans to small businesses, individuals and nonprofits that can be forgiven if the borrower meets certain conditions. The Economic Injury Disaster Loan Program provides low-interest, fixed-rate loans to help small businesses and other organizations cover their operating expenses.

About 1.6 million EIDL loans worth $114 billion were past due, delinquent or in liquidation as of May, the report said. More than 69,000 of those loans, worth $3.2 billion, have been written off.More than 500,000 PPP loans have defaulted

Nonpayment is often an indicator of loan fraud, the inspector general report said, although not all loans that are past due, delinquent or charged off are fraudulent.

CNBC Health and Science

Read CNBC’s latest health coverage: