US Small Business Administration suspends 6,900 MN borrowers for suspected fraud

MINNEAPOLIS (FOX 9) - The U.S. Small Business Administration is suspending 6,900 Minnesota borrowers for suspected fraud activity.

READ MORE: Through the years: A decade of investigating fraud in Minnesota

Minnesota small business fraud

Big picture view:

The agency says it spent the last week reviewing thousands of potentially fraudulent pandemic-era Paycheck Protection Programs and Economic Injury Disaster loans.

About 7,900 Paycheck Protection Program and Economic Injury Disaster loans, worth approximately $400 million, were approved. 

Federal officials say these individuals will be banned from all SBA loan programs moving forward.

READ MORE: Federal audit reveals oversight flaws in Minnesota’s child care payments

What they're saying:

Administrator of the U.S. Small Business Administration Kelly Loefler shared the following social media post announcing the suspension:

What's next:

Federal officials say these individuals will be banned from all SBA loan programs moving forward.

READ MORE: Minnesota fraud: Congressional investigators increase scrutiny

SBA officials will also refer appropriate cases to federal law enforcement for prosecution and repayment. 

The U.S. House Committee on Oversight and Government Reform will hold hearings on fraud in Minnesota on Jan. 7 and Feb. 10. 

Minnesota Gov. Tim Walz and Minnesota Attorney General Keith Ellison are invited to testify at the second hearing in February. 

Fraud in Minnesota programs 

The backstory:

Gov. Walz is under ever-increasing criticism for how his administration has handled rampant fraud in state-administered federal programs. The issue is a huge liability for Walz, who is running for a third term as governor, as opponents accuse him of doing too little to stop fraud and his administration of retaliating against whistleblowers.

In recent months, as more fraud schemes have been uncovered, the Walz administration has taken steps to combat the fraud, suspending or pausing licensing for programs that have raised red flags. In October, the state began auditing the 14 high-risk Medicaid programs and earlier this month, Gov. Walz tapped Tim O'Malley to head a state fraud prevention program.

Walz agrees the issue is serious and requires significant attention, but accuses opponents of amplifying it for political gain, especially as the state faces increased publicity and scrutiny over fraud in state programs.

National scrutiny

Dig deeper:

All this comes days after First Assistant U.S. Attorney Joe Thompson announced a new round of charges related to fraud in autism, Medicaid and housing programs. During the news conference, Thompson said fraud against 14 vulnerable Medicaid programs in Minnesota is just the tip of the iceberg, suggesting Medicaid program fraud could total as high as $9 billion or more.

READ MORE: Fraud in Minnesota: Detailing the nearly $1 billion in schemes

However, Walz and officials from the Department of Human Services (DHS) said there’s no evidence to suggest a number anywhere near that much.

It should be noted, fraud against the Federal Child Nutrition Program, including the massive Feeding our Future scheme, is estimated to have bilked $300 million from taxpayers, according to federal prosecutors. Prosecutors suspect fraud against the state's Housing Stabilization Program and autism programs also could number in the hundreds of millions of dollars.

Days after Thompson announced new charges, the House Committee on Oversight and Government Reform to expand its investigation into Medicaid fraud in Minnesota.

All of this has been happening as President Donald Trump has become increasingly focused on Minnesota, targeting Somalis and criticizing Walz and other Minnesota Democrats. 

Timeline:

A viral video published in December thrust Minnesota child care centers back into the spotlight as the state is facing allegations of widespread fraud in government programs.

This has also prompted a surge of federal officers on the ground in Minnesota investigating fraud allegations.

Since 2013, FOX 9 has been detailing and breaking stories of fraud in Minnesota, where millions of dollars were stolen from government programs.

In 2015, the FOX 9 Investigators uncovered day care fraud, which led to charges and guilty pleas.

In 2018, the FOX 9 Investigators spent more than five months looking into significant fraud in a massive state-run program.