A congressional subcommittee probing financial fraud during the coronavirus pandemic expanded the scope of its investigation Tuesday to include two of the most prominent processors of COVID-19 financial assistance, The Hill reported.
Select Subcommittee on the Coronavirus Crisis Chairman Rep. James Clyburn, D-S.C., sent letters seeking information about fraud prevention to both Blueacorn and Womply, two online startups that emerged as significant players to speed up lending through the government’s Paycheck Protection Program (PPP).
Even though before the pandemic Womply had no lending experience and Blueacorn did not exist, these two companies together eclipsed their direct competitors by capturing more than $3 billion in fees, USA Today reported.
“I am deeply troubled by reports alleging that financial technology (FinTech) lenders and their bank partners failed to adequately screen PPP loan applications for fraud,” Clyburn said in a letter to each company. “This failure may have led to millions of dollars worth of FinTech-facilitated PPP loans being made to fraudulent, non-existent, or otherwise ineligible businesses.”
Clyburn’s expansion of the investigation came after information from a University of Texas at Austin’s McCombs School of Business paper revealed more than 1.8 million loans that had indications of potential fraud by borrowers, with some of the worst examples involving Womply and Blueacorn.
The Texas report described how borrowers, including criminals, could create non-existent companies with fake head counts and salaries in order to receive a slice of the pandemic assistance, according to USA Today.
The Select Subcommittee’s investigation will go on after findings earlier this year showed the Trump administration did not put in place adequate safeguards and failed to “prevent waste, fraud, and abuse in pandemic relief programs,” causing almost $84 billion in possibly fraudulent loans, according to Clyburn’s statement.