Five farmers recently received thousands of dollars in Small Business Administration disaster loans which have interest rates of 3 percent. Instead of using them to clean up after their calamities, they allegedly used $1.4 million of the government loans to buy certificates of deposit, stocks and taxfree municipal bonds which paid interest rates up to 10 percent.

In another case, a small business complained to the government that a competitor which had received small business set-aside contracts wasn't a small business. The allegation was confirmed by the SBA inspector general and was turned over to a grand jury. It turned out the accused firm already had received $24 million in small business set-aside contracts.

The cases are only a sample of abuses of the SBA's programs investigated by the Inspector General's Office within a six-month period beginning last October as part of the office's congressional mandate. SBA Inspector General Paul Boucher estimated that during those six months his office saved the SBA $12 million, some of which "would have been lost" or "disbursed in violation of applicable law or regulation," according to his report.

Most of the abuses weren't criminal but regulatory in nature, said Boucher's special assistant Robert Lheureux. However, as a result of the investigations, four SBA officials have resigned and three have been removed from office, he said. Lheureux added that he couldn't release the names of the officials and that a reporter would have to submit a Freedom of Information Act request for the information.

In his second semiannual report since his appointment as inspector general, Boucher focused on investigations of small business investment corporations licensed by the SBA to aid small businesses in capital formation. But the SBICs sometimes were involved in conflicts of interest, misused funds, funded pornographic shops and strip joints, and charged excessive interest rates on loans to small businesses, Lheureux said.

Also investigated were the SBA's loan programs, minority business set-asides and disaster loans.

The Inspector General's Office is supposed to protect the SBA's programs from fraud and abuse and help them become more efficient.

During the six months ended last March, Boucher referred 24 cases to the Justice Department, 229 to the Federal Bureau of Investigation and 8 to other agencies, the report said. In addition, the names of 105,130 SBA assistance applicants were checked, resulting in SBA decisions to reject disbursements of $1.4 million to ineligible persons, the report said.