Fraud In Government Loan Program For Terror Victims

The Small Business Administration’s inspector general has released a damaging report that says most of the businesses receiving money from a loan program created to help victims of the September 11 attacks were not financially hurt by the event. They include a South Dakota radio station, a Virgin Islands perfume shop and a dog boutique in Utah.

Congress authorized the SBA, which helps businesses and families recover from disasters, to guarantee $4.5 billion in loans to small businesses adversely affected by the terrorist attacks. The program was called Supplemental Terrorist Activity Relief (STAR) and a few months ago the media raised concerns that STAR loans went to borrowers that were not affected by the attacks.

The detailed, 40-page report confirms those doubts and reveals that the SBA did not implement adequate control and oversight of the STAR program to ensure that only eligible borrowers obtained loans. In fact, the report found that eligibility could not be determined for 85 percent of loan recipients and that 25 of 34 borrowers interviewed said they were not adversely affected by the terrorist acts.

The SBA put quite a spin on the findings by issuing a press release with a header that reads: “Inspector General Does Not Find That STAR Loan Recipients Were Unqualified for Program.” Not the first time the government spins the facts.