A financial technology firm that acted as an intermediary to facilitate the issuance of emergency loans in the early stages of the coronavirus pandemic defrauded the federal government of large sums of money, according to a report.
A congressional report cited by The Washington Post named at least three companies — Blueacorn, Womply and Kabbage — as the government desperately tried to keep the economy afloat when the coronavirus lockdown began in spring 2020. ing.
These companies were initially tasked with helping PPP loan applicants file paperwork with financial institutions and process urgent cash requests.
But companies allegedly took advantage of the lack of government oversight to squeeze more money out of the $800 billion Paycheck Protection Program (PPP).
Blueacorn, an Arizona-based fintech company that “combines technology and financial expertise to help small businesses, independent contractors, the self-employed, and gig workers meet their financial needs.” He allegedly pressured loan reviewers to “push through” the PPP loan. Even if they seemed inherently suspicious.
According to The Washington Post, the company prioritized “VIPPP” clients who submitted the highest amount of applications because it was able to collect more brokerage fees at the expense of smaller businesses that had more needs. It is said that.
The post requests comments from Blueacorn.
Fintech firm Cabbage, which was acquired by American Express, is said to have dismissed concerns expressed by its own employees who issued several warnings about potentially fraudulent loans, according to The Washington Post. increase.
One Kabbage employee told his boss early in the pandemic that he was concerned that “the level of fraud we are investigating is grossly underestimated.”
Kabbage executives allegedly ignored obvious signs of fraud, including inaccurate tax documents, names and addresses that didn’t match the application, stolen IDs, and grossly exaggerated profit margins.
Congressional investigators said they got an internal message that senior Kabbage officials acknowledged the problem of what they were doing, saying, “The risk here is not ours, it’s SBA.” added. [sic] dangerous. “
“SBA” stands for Small Business Administration, and $4 billion worth of PPP loans are estimated to be fraudulent.
The Washington Post has reached out to Kabbage’s parent company, American Express, for comment.
KServicing, which oversaw Kabbag’s PPP loan portfolio following its acquisition of American Express, issued the following statement: [doing business as] KServicing is proud of the role it played in supporting American businesses during the COVID-19 pandemic, resulting in nearly 300,000 small businesses opening their doors and providing critical support to keep their employees paid. received the funds. “
“Kabbage’s existing online lending platform was able to process the sudden flood of loan applications in a timely manner in the midst of the national crisis and in light of ever-changing federal lending regulations,” the statement said. has read.
“Kabbage has conscientiously complied with applicable rules and regulations. Two and a half years later, Kabbage has issued a 100% refund to borrowers who used our services during a time when access to Paycheck Protection Program (PPP) loans was difficult. We remain committed to
The company added: “Kabbage worked diligently with the subcommittee to provide timely and transparent information in engaging this investigation.”
“Unfortunately, this report does the American public a disservice by disregarding context and parsing piecemeal information to arrive at predetermined conclusions,” the company said. rice field.
“Looking back at the turbulent times of the COVID-19 pandemic, the fintech community has played a key role in strengthening the small business community in the United States, and we are proud to be a part of that effort.”
Another fintech firm, Womply, which made about $2 billion in fees in the course of the PPP, according to congressional investigators, pocketed the money despite ignoring “rampant fraud.”
Benworth, a Florida-based lender, claimed that the loans Wompley referred to “put us in a very bad position because of the high likelihood of fraud.”
Another lender said Womply’s attempt to prevent fraud amounted to an effort of “a combination of duct tape and gum.”
Womply also allegedly fraudulently received $7 million in PPP loans in 2020 and 2021.
The Post reached out to Womply for comment.