Small Businesses, Large Fraud at the SBA
by Brent E. Zepke, Esq,
This is the story of the Small Business Administration’s (SBA) large fraud.
A fraud that involved SBA employees using those still in baby cribs as well as those in cemeteries, to mask their distribution of hundreds of millions of dollars.
The structure for the SBA was created when Congress passed, and President Herbert Hoover in 1932 signed the Reconstruction Finance Corporation (RFC) bill. RFC was a federal lending program for all businesses, large and small, that were hurt by the Great Depression.
In 1952, all the functions of the RFC were transferred to the Department of the Treasury.
On July 30, 1953, President Dwight D. Eisenhower signed a bill similar to the RFC – the Small Business Act – which created the SBA, whose mission was to:
“Aid, counsel, assist, and protect, insofar as possible, the interests of small business concerns.”
The SBA was also charged with ensuring that small businesses earn a “fair proportion” of government contracts and sales of surplus property.
The success, or failure, of the SBA depended upon how closely their leader, called an “Administrator,” and their employees used the taxpayers’ money to “aid, counsel, assist and protect…the interests of small business concerns.”
The Biden Administration
During the Obama-Biden presidency, President Obama’s Chief of Staff Rahm Emanuel said about the 2008 financial crisis, “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.”
President Joseph Biden’s team used the “serious crisis” of Covid-19 to take the opportunity to add to the SBA’s existing programs:
–The Green New Lender Initiative that introduced increased flexibility for climate lenders, and
–The Community Navigator Pilot Program that targeted underserved businesses, such as minority, women, veteran owned businesses, and, of course, Diversity, Equity, and Inclusion (DEI) activities.
It is important to note that to fund these programs, money had to be taken from the mission of “aid, counsel, assist and protect” the interest of businesses not involved in climate or diversity, equity, and inclusion.
To manage this shift in priorities, the Biden team replaced SBA Administrator Jovita Carranza with Isabella Casillas Guzman on March 17, 2021.
Inspector General
“The SBA’s Office of Inspector General (OIG) provides auditing, investigative, and other services to support and assist the SBA in achieving its statutory mission.” (SBA website).
“OIG conducts financial performance audits of internal agency functions and of participants in SBA programs to promote the economical, efficient, and effective operation of SBA programs.”
And that “audits give SBA managers an objective and systematic assessment of how well their offices are (sic) carrying out their SBA-related programs and operations. Financial audits examine the presentation of financial information, internal controls, and adherence to financial requirements.”
On February 14, 2018, Hannibal “Mike” Ware wrote, in support of his nomination to be Inspector General, to the leaders of the senate that as the Deputy Auditor in the OIG in 2017, the 100 OIG employees reporting to him had indicated that he had increases of:
28 % in Diversity and Inclusion,
21% in Leadership/Knowledge Management,
17% in Global Satisfaction,
11% in Employee Engagement and
7% in Results Oriented Performance Culture.
It appears that Ware’s putting four times the emphasis on Diversity and Inclusion as he did on Results Oriented Performance Culture continued through his tenure as Inspector General.
Trump Administration
On March 17, 2025, President Donald Trump appointed former senator Ms. Kelly Loeffler as Administrator of the SBA, which by then listed 49 positions as “just a few of our leaders,” and ten regional offices for the approximately 8,000 employees.
President Trump issued Executive Order 14210 to implement the Department of Government Efficiency (DOGE), who was asked to conduct an audit to determine where the SBA was distributing taxpayers money for the years 2020 -2021.
Their audit found that an estimated $200 billion of fraud in the Paycheck Protection Program (PPP) and Covid Economic Disaster Loan Programs was ignored during the four years of the Biden administration.
During 2020 and 2021, their audit found that the SBA had distributed $312 million through 5,500 loans to children under 11 years of age, with the youngest being a nine-month-old who received a $100,000 loan. The average loan was $56,727.
DOGE uncovered that the SBA was also lending $333 million in making 3,095 loans to alleged persons over 115 years old. The 3,095 loans averaged $107,593.
Who approved the 8,595 transactions that contained false Social Security numbers?
Who actually received the $645 million?
What did the auditing records of the OIG show for these 8,595 transactions?
These questions also raise the concern that the alleged 115+ year-olds were the same alleged 115+ year-olds who were still receiving Social Security benefits.
It is reasonable to conclude these 8,595 transactions would never have been disclosed without the efforts of DOGE.
Investigation
DOGE accomplished its role of providing the new SBA administrator with a valid audit of how the SBA distributed funds.
Now it is up to the SBA, perhaps aided by other agencies, such as the DOJ, to investigate:
1) Was the $645 million delivered by check, automatic deposit, or some other way traceable?
2) Who made the applications and approved the payments
3) Who received the money?
Since DOGE only audited the years 2020 and 2021, it is time to audit the years 2022, 2023, and 2024.
Responses
The new SBA Administrator Kelly Loeffler indicated that the SBA would investigate the fraud, cancel the programs added by the Biden team, reorganize the SBA, and reduce the number of employees by 43% to bring it back to pre-pandemic levels.
It remains to be seen if one of the “progressive” – to use the words of the Democrat Senate leader Chuck Schumer – judges use a Temporary Restraining Order (TRO) to try and delay, or stop, the actions of Administrator Loeffler and ban DOGE from accessing the SBA records.
Can’t wait for your next article on both Santa Barbara County and City government prohibiting contracts to non-Union local small and mid-sized businesses. Adopted BOS and Council policies discriminate favoring only Democrat controlled union businesses from L.A. and Sacramento that require taxpaid hotel rooms for their union work crews. (My street resurfacing was done by union workers from Elk Grove bringing heavy equipment 250 miles, while Challenge and Santa Barbara Asphalt are a mile away employing local non-union workers. Infuriating, wasteful, and wrong!)
Excellent update on SBA Fraud and DEI Priorities. May the DOGE never end. Too many local men put their clueless wives as company heads to access SBA money; while the Women’s Economic Ventures, along with SCORE - Senior Core Of (volunteer) Retired Executives, actively worked with legit single females determined to start and expand their business. There’s simply no oversight, and too few with personal integrity.
Inspector Generals have failed taxpayers, just as do complicit school bond oversight and other citizen committees in our bureaucrat controlled community.
Appreciate your factual informative articles.
Breathtaking fraud is a gross understatement. Lock them up asap, whichever party they are in. We are being taxed into oblivion to pay for theft, grift, and programs no sane person would endorse. It is pervasive in every branch of the federal government where DOGE has probed. Anyone griping about Elon is obviously full of bovine excrement, and should be pitied and ignored. We desperately need SB DOGE and California DOGE!