BOSTON — When the Small Business Administration’s list of borrowers for the Payroll Protection Program (PPP) became public last week, 25 Investigates dug into the local data. Discrepancies quickly became apparent.
Why would a small clothing store with two employees need a five to ten million dollar government-backed loan to cover a few weeks of payroll? Similarly, why would a sole proprietor in Jamaica Plain with only two employees need upwards of two million dollars in tax payer dollars?
25 Investigates’ Ted Daniel has been reporting on the federal PPP since April. The program was designed as a safety net to keep small business afloat during the pandemic. But the latest figures published by SBA simply did not add up, so we went looking for answers. We found business owners who were as baffled as we were by the numbers.
Our first stop was in Longmeadow. We wanted to ask the owner of Added Attractions how she used the millions of dollars the SBA claims she got. After all, the loan data indicates the business got between $5 million to $10 million in PPP money to help retain only two jobs during the pandemic. When we arrived, camera rolling, we were informed the owner was not in that day. On our way out a friend of the owner contacted us and informed us the store received PPP money but the loan amount made public was off, way off. In fact, the friend claimed, the loan was for less than $10,000.
We also visited a dentist in North Grafton. The office of Monica Rao DMD also told us the information the SBA released about their loan was wrong. The official data suggests the business got between $5 million and 10 million to stay afloat during the state mandated COVID-19 shutdown.
Documents provided by the owner’s husband show the business received a total $96,000 for two branches.
In an email, her husband and business manager told 25 Investigates: “I am surprised SBA would release incorrect information to public and not check the validity of the data they are providing”
The SBA data comes from the banks that process the loans. According to the spreadsheet, 146 Massachusetts businesses received between $5 million to $10 million in loan money, and more than 18,000 businesses got $150,000 or more.
We also found errors involving J.P. Massage in Jamaica Plain. The official data shows the business got between $1 million and $2 million in aid. But when we contacted the owner’s financial institution, the bank confirmed the loan amount as actually $17,400.
“I do think these are terrible mistakes ... and could put that person’s business in jeopardy,” said Paul Miller, a Certified Public Accountant who worked on hundreds of PPP loan applications for clients.
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Miller says the loan program has been a lifeline for businesses struggling during the pandemic but the errors we found raise questions about the accounting. At stake is billions in tax payer money.
If a borrower spent the majority of the loan on payroll the loan can be turned into a grant, meaning that it doesn’t have to be paid back.
“For them to publish them, they would have to have loan documents that support that type of a number,” said Miller. “So that’s already an egregious thing to do, because the clients that you’re referring to would have had to sign for five or 10 million, which we know would be virtually impossible.”
The SBA database lists all PPP loans across the country. While were working on this report, Colorado Sun Reporter Tamara Chuang was tracking similar discrepancies in her state.
“There was a one dollar loan here in in Colorado, and the SBA director said it was probably a typo,” said Chuang to 25 Investigates. “I was talking to a banker this morning. I’m telling him, the SBA is blaming the lenders for bad information. And he’s like, well, it goes both ways.”
Richard Stocks tracks financial crimes for Symphony Ayasdi AI a financial technology company in California. He says accounting mistakes, typos and even fraud will be to be addressed when the loans come due. And with $521 billion dollars on the line, there will be a reckoning. Unfortunately, he says, the already struggling small businesses could be the ones caught in the middle.
“I think that there’s going to be a lot of ‘he said, she said’ between the SBA and the financial industry. I anticipate lawsuits flying backwards and forwards between financial institutions and borrowers and the SBA,” added Stocks. “I think that the government will take a hit. I think that the financial institutions are not fully prepared for what is coming their way.”
25 Investigates asked the SBA for an on-camera interview or an on-the-record statement about the discrepancies we found. An SBA spokesperson did not respond to that request.
PPP loans are still available. The deadline has been extended until Aug. 8.
You can view the entire database as published by the federal government below.
MORE: SBA faces questions about delays, lack of communication with coronavirus relief programs
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