(WASHINGTON) -- At the dawn of the COVID-19 pandemic, when offices and restaurants began shuttering, the federal government scrambled to keep small businesses afloat -- ultimately spending over a trillion dollars to help protect the American Dream for millions of workers and business owners.
But even before the first checks went out, alarm bells went off.
The person ringing those bells the loudest was Hannibal "Mike" Ware, the inspector general of the Small Business Administration. The veteran internal watchdog says he participated in a series of meetings with Trump administration officials and SBA program analysts that were laced with "testy exchanges" about how to expeditiously dispense funds without leaving them vulnerable to fraudulent claims.
His warnings went unheeded, Ware said, and the fallout has taken him "from a black-haired guy to a gray-haired guy."
"My frustration level was extremely high," Ware told ABC News in a recent interview. And now, a year and half later, he said "the magnitude of the fraud we are seeing is unheard of -- unprecedented."
As small businesses emerge from the pandemic, the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL), two key relief programs passed as part of the congressional CARES Act, are winding down. But for all the jobs they've rescued, their legacies may be tarnished by unprecedented amounts of fraud -- a reality that experts fear may impair efforts to pass future emergency relief programs.
"In terms of the monetary value, the amount of fraud in these COVID relief programs is going to be larger than any government program that came before it," Ware said.
All government programs suffer some amount of fraud, experts say. And emergency programs are even more susceptible, due to the inherent tension between the pressure to approve loans quickly and the need to screen applications and maintain other fraud-prevention measures that may prolong the process.
In an October 2020 report, Ware's office found that "to expedite the process, SBA 'lowered the guardrails' or relaxed internal controls, which significantly increased the risk of program fraud."
A senior SBA official in the Biden administration agreed with Ware's analysis, noting that "it should not be an expectation that we need to sacrifice speed for certainty -- you can do both."
"The story of 2020 for both PPP and EIDL is the fact that the previous administration's leadership did not have sufficient controls in place for determining individual identity or business identity," the official said. "Different choices could have absolutely been made to limit fraud vulnerabilities."
"With limited staff, few technological tools to conduct prepayment verification, and crushing need, SBA and other agencies abandoned many traditional controls and simply approved applicants with little or no verification of self-reported information," according to Linda Miller, the former deputy executive director of the Pandemic Response Accountability Committee, a government task force established as part of the CARES Act.
"Best practice calls for due diligence at the front end to avoid making the fraudulent or improper payment in the first place," Miller wrote in June, after leaving PRAC. "But in the rush to quickly distribute pandemic relief, we failed to do that and so now we are chasing [funds that were fraudulently granted] ... but the recovered funds will be a fraction of what was stolen."
Ware said this is precisely what his office sought to avoid. Before PPP and EIDL were even finalized, the SBA inspector general's office submitted three reports to the SBA "detailing the importance of up-front controls," according to Ware. During the testy exchanges in the spring of 2020, he said he warned the SBA to "pump the brakes" on the process.
"Fraudsters are going to do what fraudsters are going to do," Ware said. "But the upfront controls mitigate exposure to fraud, and doing so would have saved taxpayers a whole lot of heartache on the back end. Unfortunately, the heartache was not avoided because of the way these programs were implemented up front."
Jovita Carranza, the former SBA administrator who resigned when President Trump left office, could not be reached by ABC News for comment. Last October, in a letter responding to Ware's report, Carranza wrote that the inspector general "failed to acknowledge the enhanced and effective system controls and validations that SBA is using" to weed out fraudulent applications and "grossly overstates the risk of fraud, waste and abuse."
Carranza's successor as SBA administrator -- Biden nominee Isabella Casillas Guzman -- has said that "reducing the risks of fraud and waste and abuse" in the distribution of relief loans and grants is a top priority. She said a series of steps implemented in December -- including up-front verifications and tax information from applicants -- has already produced "a sharp decline" in fraud, and that she is working closely with Ware to further improve safeguards and vigorously track down and recover prior fraudulent dispersals.
Ware agreed that controls put in place late last year helped curb fraud, but said the efforts were too little, too late.
"By then, well, you already know how much money was gone," he said. "A lot of money was out."
Among the relief programs, the previous administration's EIDL rollout has attracted particular scrutiny. James W. Connor, a former federal prosecutor who is now with the law firm Arnold & Porter, called the program a "fraud magnet," citing a provision that allowed recipients to receive up to $10,000 up front "with essentially no strings attached."
"That money is gone," Connor said.
But that hasn't kept Ware from trying to recover it. His investigative efforts have resulted in 307 indictments, 205 arrests, and 69 convictions tied to PPP and EIDL fraud, resulting in the recovery of more than $600 million so far.