Pandemic era financial losses still haven’t run their course

Tom Temin: Before we get into this, maybe a little bit of background on what the Main Street Lending Program is and why it’s so important to still pay attention to.

Geoff Cherrington: Main Street Lending Program was designed under the CARES Act to provide funding and loans to small and medium-sized businesses. Those who went under or would have gone under based on the pandemic. So it was a $17 billion program. Obviously, like any time there’s money, there’s potential for fraud. So we started investigating. Brian Miller, the special inspector general, was confirmed by Congress in June of 2020, and we know.

Tom Temin: He’s no slouch.

Geoff Cherrington: That’s correct. He’s been in the business as a federal prosecutor and also as the General Services Administration inspector general. He’s been fighting fraud for for many, many years.

Tom Temin: All right. And this program then, many, many billions of dollars. What are you telling Congress to watch out for? Because the loans are still out there, correct?

Geoff Cherrington: Sure. That’s correct. So we are due to sunset next month, March 2025. Just as the loan losses for the MSLP have reached $1.35 billion. Now our staff has shrunk nearly in half where under 20 employees, most of whom are special agents, a couple of analysts, and a couple of former prosecutors that are in the battle to fight fraud in MSLP. To date, we have a return on investment of over 300%. So to put it into saving taxpayer money, that would be like somebody going to the ATM, taking out $300 and only being charged $100. So we think that’s a great return on investment for what’s been invested in us so far. We’re asking Congress for five more years. Right now we have nearly a half a billion dollars, $462 million in investigations with potential 130 defendants. We think all of them will go free, and we think that money will not be recovered if we sunset and aren’t around anymore.

Tom Temin: There’s no one else in government that can take up this fraud case? Say the Justice Department, for example.

Geoff Cherrington: We’ve referred all of these investigations to the Department of Justice, and they are working them, but without the special agents to work them, bring the evidence, testify in court on those cases, they will probably die on the vine. There are other inspectors general that could assume those that have jurisdiction, but all of them are completely overwhelmed with all of the pandemic fraud that they have to do on top of their regular nexus and jurisdiction.

Tom Temin: So you think that in five years, then the special inspector general for pandemic recovery could recover billions in fraudulent loans? You think that there’s that potential?

Geoff Cherrington: I’d say hundreds of millions, definitely. And it definitely would be many times more than would be invested in us. And it might not take us five years. We don’t want to be around forever. We don’t believe that special Inspectors general should be around forever, but we want to be around long enough to finish the fight against fraud, waste, and abuse.

Tom Temin: And getting back to the report, the latest or what is at this point the final report, unless you get re authorized by Congress, what are you telling them in terms of dollars is the potential here of losses under this kind of signature program of pandemic relief?

Geoff Cherrington: Right. So right now, the Federal Reserve’s reported loan losses at $1.35 billion. And that’s of January 31st, 2025. And that’s a B-billion, not an M-million. That’s a lot of money. And in March 2025, just when we sunset is when the bulk of those loans come due. So that’s when the principal comes due. Now we think there’s going to be a great amount of defaults on those loans. Now is that necessarily fraud? Of course not. But it’s definitely an indicator of fraud, and it’s definitely something that you’re going to need, that the taxpayer is going to need, to look at.

Tom Temin: Do you know the organizations that hold those loans?

Geoff Cherrington: They’re just small and medium-sized businesses around the country.

Tom Temin: So it’s not major companies people would have heard of?

Geoff Cherrington: No, it’s it’s the mom and pops shops. It’s your pizza shop. It’s your small businesses around the country. But it’s also fraudsters, who have taken advantage of this, along with what you hear all the time, the Payroll Protection Plan. You know, there’s double and triple dippers among these fraudsters. And so they find one government program and they know other government programs are doing it. And so we are the experts in rooting out fraud, waste and abuse in the Main Street Lending Program. And we are the ones who are able to dig in and find find that fraud. 93% of the cases that we have were proactive. That means we found them ourselves. We didn’t sit and wait for a hotline tip like the Maytag repairman waiting on a phone call.

Tom Temin: What are some of the highlights in this most recent report, or is it pretty much you’re telling them red alarm for making sure we don’t lose on this Main Street Lending Program.

Geoff Cherrington: It’s definitely red alarm. We could be extended through the appropriations cycle that’s going right now. We also want to thank Senator Joni Ernst for bringing up S-68, which is the complete Covid Collections Act. It also has sponsorship from Senators Todd Young, Marsha Blackburn, James Lankford and John Curtis. That would give us a five-year extension, and also it would strengthen the small business statute of limitations from 5 to 10 years. But what we are trying to say is we have a good return on investment. We have 49 arrests, 31 guilty pleas and 66 federal indictments. Now, when you look at guilty pleas as 31 defendants that pled guilty because they knew we had a strong case and we’ve had 12 sentencings on top of that, that’s only a few years of working, again, we started in 2020 when Mr. Miller was confirmed by the Congress. It takes time to gin up everything, it takes time to get people on board. And now, with a lean and mean staff, we’re laser focused on fighting fraud, waste and abuse in these programs.

Tom Temin: And you have also found some fraud and abuse among federal contractors and got some action against them.

Geoff Cherrington That’s correct. Aside from the criminal prosecutions. We like to refer companies for suspension and debarment, which means they can no longer do business with the federal government. And to date, we have referred 26 for suspension and seven for debarment. So aside from the criminal cases, you don’t want to spend taxpayer money on companies who’ve defrauded the government.

Tom Temin: And earlier, I spoke some time ago with Michael Horowitz, who’s now the IG of justice. He’s been involved with pandemic relief. He mentioned an analytical program, a fraud analysis piece of technology that would sunset if the special IG sunsets. And he was calling on Congress to preserve that mechanism for other inspectors general to use. What’s the status of it? And is this something you’re also hoping to sustain?

Geoff Cherrington: Well, the status is they sunset around the same time we do. We have been working with the other inspectors general because again, when you have triple and double dippers, they tend to, you know, fraudsters tend to go up against the all of these programs. So this is a way for us to share information, to share intelligence. It’s a way for the special agents to work together so that the taxpayer gets the biggest bang for the buck.

Tom Temin: All right. So that you would preserve not only the Inspector General’s office, but also this mechanism that you have for evaluating patterns of fraud in financial transactions.

Geoff Cherrington: Right. That would be a separate bill. But we would certainly continue to be part of that task force and continue to work with the other inspectors general.

Tom Temin: And what happens to you if it’s sunsets after all?

Geoff Cherrington: Well, I’m going to go on hopefully continuing what I’ve been doing for over three decades, and that’s fighting fraud, waste, and abuse for the taxpayer.