WASHINGTON, D.C. — The U.S. Small Business Administration suspended 24,492 Pennsylvania borrowers tied to about $1.19 billion in approved Paycheck Protection Program and COVID-19 Economic Injury Disaster Loan funding as part of a nationwide crackdown on suspected pandemic-era fraud.
The Pennsylvania suspensions are part of action against 870,000 borrowers nationwide connected to an estimated $39 billion in suspected fraudulent PPP and COVID EIDL activity, according to the SBA. The agency described the recent action as its largest suspension announcement to date.
Suspension bars affected borrowers from receiving future SBA small-business and disaster loans and from participating in other agency programs, including federal contracting through the 8(a) Business Development Program.
The action expands an enforcement effort that previously covered more than 150,000 borrowers tied to roughly $10 billion in suspected fraud in California, Ohio, Minnesota, Maine and Wisconsin. The latest round extends the suspensions to borrowers in 45 additional states, six territories and the District of Columbia, the SBA said.
The agency is also beginning what it calls Operation No Doze, under which final 30-day demand letters will be sent to borrowers suspected of improperly receiving PPP or COVID EIDL funds. The first roughly 8,000 letters are being directed to borrowers in Kansas and Missouri.
Recipients will be required to repay the debt or respond through the process identified in the notice. Borrowers who do not resolve the government’s claim could face Treasury collection activity and referral for administrative, civil or criminal action, according to the SBA Office of Inspector General.
The SBA previously referred more than 560,000 suspected fraudulent pandemic-era borrowers associated with $22 billion in loans to the Treasury Department for collection.
Potential collection measures include referral to the Justice Department, administrative False Claims Act proceedings and transfer of delinquent debt to the Treasury Department’s Cross Servicing Program. The latter may add interest and collection fees of as much as 28%.
Federal payments may also be offset through the Treasury Offset Program, including tax refunds, federal salaries, contractor and vendor payments and certain Social Security and other benefit payments.
SBA Administrator Kelly Loeffler said the suspensions are intended to recover taxpayer funds and prevent borrowers suspected of fraud from obtaining additional agency assistance. The agency’s $39 billion figure represents loans connected to suspected fraudulent activity, not adjudicated losses or findings that every suspended borrower committed fraud.
The broader federal enforcement effort also includes criminal cases brought through a Justice Department initiative involving more than 40 U.S. Attorney’s Offices and federal and state investigative agencies. Prosecutors said actions conducted from June 12 through Sept. 1 involved more than 160 defendants and approximately $245 million in intended losses nationwide.
Support the local news that supports Chester County. MyChesCo delivers reliable, fact-based reporting and essential community resources—free for everyone. If you value that, click here to become a patron today.