Small Business Administration Administrator Kelly Loeffler said Thursday that nearly 7,000 people in Minnesota could face prosecution over potentially fraudulent federal loans taken during the COVID pandemic.
Loeffler said her team had identified around $400 million in loans that may have been fraudulently obtained through the Paycheck Protection Program and the Economic Injury Disaster Loan program. As a result, 6,900 borrowers in Minnesota were suspended from participating in SBA loan programs and could face further punishment.
“Over the last week, SBA has reviewed thousands of potentially fraudulent pandemic-era PPP and EIDL loans approved in Minnesota,” Loeffler posted on X. “Today, our agency took action to suspend 6,900 Minnesota borrowers amid suspected fraudulent activity. In total, these borrowers were approved for 7,900 PPP and EIDL loans worth approximately $400M.”
She added that some individuals could be referred for federal prosecution.
“These individuals will be banned from all SBA loan programs, including disaster loans, going forward. We will also refer every case, where appropriate, to federal law enforcement for prosecution and repayment,” she said. “After years, the American people will finally begin to see the criminals who stole from law-abiding taxpayers held accountable — and this is just the first state.”
Loeffler’s announcement comes as Minnesota faces a flurry of federal probes into alleged widespread fraud at purported daycare centers. In response, the Department of Health and Human Services froze all child care payments to the state on Tuesday. At the same time, U.S. Attorney General Pam Bondi said more fraud prosecutions would follow.
The Trump administration is also looking into an alleged scheme where parents have their child falsely diagnosed with autism at clinics where no such evaluations are performed. Much of the investigation has focused on the Somali immigrant community in the state, with 85 of the 98 people charged by the feds in fraud cases being of Somali descent.
Democrat Governor Tim Walz has defended his record on fighting fraud, claiming that President Donald Trump was attempting to justify cutting off funding for his state.
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Reports have found COVID-era relief efforts rife with fraud. According to the Small Business Administration Inspector General, at least $200 billion in potentially fraudulent handouts were disbursed, representing approximately 17% of all funds distributed through the PPP and EIDL programs.
“The allure of ‘easy money’ in this pay and chase environment attracted an overwhelming number of fraudsters to the programs. [The inspector general’s] continuing reviews pertaining to oversight of SBA’s pandemic response have identified multiple weaknesses in controls that allowed fraudsters to take advantage of the economic crisis and divert funding intended for deserving, eligible American small business owners,” an inspector general report from June 2023 found.
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