SBA Suspends 7,800 Wisconsin Borrowers in $375 Million Fraud Crackdown
The SBA suspended 7,800 Wisconsin borrowers linked to $375 million in suspected pandemic-era loan fraud, extending its enforcement campaign to more than 150,000 borrowers and $10 billion across five states.
The Small Business Administration suspended 7,800 Wisconsin borrowers on July 8, cutting off access to future loans for people linked to $375 million in suspected pandemic-era fraud. The action expands a state-by-state enforcement campaign that now covers more than 150,000 suspended borrowers and over $10 billion in questionable lending across five states.
The suspensions trace to a structural flaw Congress built into the CARES Act in 2020. Lawmakers forced the SBA to issue emergency loans through self-certification with no upfront verification. Within 21 days of the law's passage, the agency issued more loans than it had in the previous 14 years combined. Over the pandemic, the SBA disbursed approximately $1.2 trillion in COVID-19 EIDL and PPP funds.
The SBA Office of Inspector General estimates at least $200 billion, or 17 percent of all pandemic lending, went to potentially fraudulent actors. The Wisconsin action shows how rushed government spending with minimal safeguards created a $200 billion opportunity for fraud. The Trump administration is now addressing what it calls two years of Biden-era inaction.
SBA Administrator Kelly Loeffler announced the suspensions from Washington alongside Vice President JD Vance's activities in Milwaukee. The banned borrowers cannot receive future SBA loans or participate in other agency programs. Loeffler stated the agency is "conducting a state-by-state review to expose every fraudster who cheated small businesses and taxpayers during the pandemic."
The $200 billion fraud estimate originates from the OIG's June 2023 report. Investigators found the agency "weakened or removed the controls necessary to prevent fraudsters from easily gaining access to these programs." In its rush to distribute funds, the agency created what the report called a "pay and chase environment attracted an overwhelming number of fraudsters."
Congress required the SBA to issue PPP loans based on credit scores and self-certification alone. The agency waived standard verification procedures, dropped its second-review requirement, and set aggressive production targets. Loans were approved in large batches while system warnings went ignored. The EIDL program proved even more vulnerable. The House Committee on Small Business found a 33 percent fraud rate in EIDL compared to 8 percent in PPP.
The committee's November 2024 report determined $136 billion in EIDL funds and $64 billion in PPP funds went to fraudulent actors. OIG collaboration with federal agencies has recovered about $30 billion through seizures and returns. "In future programs, self-certification should be avoided, and fraud risk controls should not be relaxed in favor of the rapid dispersal of funds," the committee concluded.
In April, the SBA referred 562,000 suspected fraudulent loans totaling $22.2 billion to the Treasury Department for collection. It was the largest referral package in agency history. Those loans were flagged during the Biden administration but never sent to Treasury. Fewer than 1,000 of the 562,000 borrowers faced OIG investigations before the referral.
"For years, the Biden Administration shielded these borrowers from debt collectors as part of a de facto amnesty scheme — but today, they will finally face accountability," Loeffler stated on April 24.
The Wisconsin suspensions follow similar actions in four other states. California leads with 112,000 borrowers suspended for $8.6 billion in suspected fraud. Ohio follows with 27,486 borrowers and $1.1 billion, Minnesota with 6,900 borrowers and $400 million, and Maine with 1,500 borrowers and $93 million.
Wisconsin cases reveal how organized criminals exploited the programs. Nearly 40 people in the state face COVID-19 fraud charges. Members of the Wild 100s street gang used pandemic unemployment funds to finance murder-for-hire plots, firearms, and controlled substances. A Milwaukee grocery store owner pleaded guilty in April to a $1.6 million SNAP fraud scheme.
"The Biden-Harris Administration's SBA leadership was overly preoccupied with optics, resulting in it taking actions that increased fraud risk and wasted taxpayer dollars," the House Committee on Small Business found.
Vance, who chairs the White House Task Force to Eliminate Fraud established in March, told Milwaukee crowds that fraud threatens America's social fabric. "When we allow the money that ought to by rights go to feed poor children but instead goes to fraudsters, we destroy the social fabric of the United States of America," he said July 8.
Congress extended the statute of limitations for PPP fraud to 10 years in 2022. Applications from 2020 remain prosecutable through 2030. Federal conviction rates for PPP fraud are exceptionally high, with some analyses citing rates exceeding 90 percent. The SBA OIG issued 77 recommendations for pandemic programs. Fifteen remain unresolved as of December 2024.