| | | Here's some nasty socialism in the Trump White House - including Trump's family, Larry Kudlow's wife and Mitch McConnell's wife - in spite of the pandemic aid specifically excluding these people.
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Treasury, SBA data show small-business loans went to private-equity backed chains, members of Congress - washingtonpost.com
Almost 90,000 employers also appear to have received money despite not saying how many jobs they would save
Data released Monday by the Small Business Administration shows that businesses owned by members of Congress and the law practice that represented President Trump were among the hundreds of thousands of firms that received aid from the agency.
As part of its $660 billion small-business relief program, the SBA also handed out loans to private schools catering to elite clientele, firms owned by foreign companies and large chains backed by well-heeled Wall Street firms. Nearly 90,000 companies in the program took the aid without promising on their applications they would rehire workers or create jobs.
The data, which was released after weeks of pressure from media outlets and lawmakers, paints a picture of a haphazard first-come, first-served program that was not designed to evaluate the relative need of the recipients. While it buttressed a swath of industries and entities, including restaurants, medical offices, car dealerships, law firms and nonprofits, the agency did not filter out companies that have potential conflicts of interest among influential Washington figures.
Lawmakers express frustration with the Small Business Administration
The Small Business Administration is under fire due to budget cuts and slow processing times as it tried to distribute disaster-relief loans.
Several major chains who have private-equity investors, including PF Chang’s and Silver Diner, received millions of dollars, which may rekindle questions about whether large companies with Wall Street connections should accept the money or not. Over the past weeks, dozens of publicly traded companies returned money after they were told by the Treasury Department that the program was not meant for large, well-capitalized companies.
Companies applying for the money were required to certify that the money was “necessary to support the ongoing operations,” while taking into account “their ability to access other sources of liquidity,” the SBA’s website states.
Treasury and SBA spokespeople declined to comment. Other administration officials declined to speak on the record about the data.
“We think we’ve done a reasonably good job of suggesting that those who were not going to be able to meet the certification should have returned money,” said one senior administration official, speaking on the condition of anonymity in accordance with the administration’s rules for releasing the information.
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Among some of those receiving relief were Transportation Secretary Elaine Chao’s family’s shipping business. In addition, at least seven members of Congress or their spouses received loans, including lawmakers who were directly involved in shaping regulations and also benefited from a blanket waiver of ethics concerns.
Among the loan recipients disclosed is KTAK Corp., a Tulsa-based operator of fast food franchises owned by Rep. Kevin Hern (R-Okla.). Hern had advocated increasing the size of loans available to franchisees, including in a March letter to Senate leaders Mitch McConnell (R-Ky.) and Charles E. Schumer (D-N.Y.).
KTAK reported receiving between $1 million and $2 million to support 220 jobs. Hern spokeswoman Miranda Dabney said the letter was “a bipartisan idea meant to simplify the way loans were calculated,” and said the franchise rule that Hern advocated did not benefit KTAK because it employs fewer than 500 people.
“These PPP loans are all about paying employees so any expansion or increased funding measures were aimed at helping employees of franchisees stay employed,” Dabney said. “The whole program was designed to keep people off of unemployment.”
Rep. Mike Kelly (R-Pa.) benefited when three of his car dealerships, located outside of Pittsburgh, received a combined total of between $450,000 and $1.05 million to retain 97 jobs, according to the data.
Kelly is not involved in the day-to-day operations of his auto dealerships, said spokesman Andrew Eisenberger, and did not participate in discussions between the dealerships and the PPP lender.
“Kelly’s small family business employs more than 200 Western Pennsylvanians whose jobs were at risk because of [Pennsylvania Gov. Tom Wolf’s] business shutdown order,” Eisenberger said.
Several plumbing businesses affiliated with Rep. Markwayne Mullin (R-Okla.), all based in Broken Arrow, Okla., each received between $350,000 and $1 million. A spokeswoman said Rep. Mullin is not involved in the day-to-day operation of his businesses.
Explore the SBA data on businesses that received PPP loans
Craig Holman, an advocate from the watchdog group Public Citizen, said policymakers involved in shaping the program should not be allowed to profit off taxpayer-backed loans.
“If they have some sort of influence over how the money gets awarded, or how much money gets awarded, they should not be the recipients of those funds,” Holman said. “If they are the recipients of their own cash that they’re handing out, it really raises questions of self-dealing.”
Steve Ellis, president of Taxpayers for Common Sense, said a line should be drawn with policymakers who are directly involved in charting the path of federal funds.
“You can write the policy to be blind to the nature of the entities, but certainly if you are involved in drafting it, or modifying it to benefit certain businesses, that’s where the alarm bells should be raised,” said Ellis.
The lawyer who represented Trump in the Mueller investigation, as well as dozens of tenants of Trump’s real estate company, also received money, the latest in a series of instances in which Trump’s company and his government have overlapped.
At 40 Wall Street, an office building Trump owns in Lower Manhattan, 22 companies received loans, for a combined total of at least $16.6 million. The recipients included the pro-Israel group Hadassah, the Girl Scout Council of Greater New York and the engineering and consulting firm Atane, according to the data.
Triomphe Restaurant Corp, which operates the Jean-Georges restaurant at the Trump International Hotel on Central Park West, got between $2 million and $5 million. Sushi Nakazawa, a restaurant in the Trump D.C. hotel, received between $150,000 and $350,000 to support 22 jobs, according to the data.
Another politically connected loan recipient was New York law firm Kasowitz, Benson & Torres, headed by longtime Trump attorney Marc Kasowitz, which received between $5 million and $10 million in PPP funds to support about 400 employees.
No one from the firm had any contact with anyone in the Trump administration about the PPP loan, said spokeswoman Emily Thall. She said the loan was coordinated through the bank without the partners’ involvement and along with other cost-saving measures “enabled us to preserve the jobs of our hundreds of employees at full salary and benefits without interruption.”
Foremost Maritime, a shipping business controlled by the family of Chao, the Transportation Secretary, also received money from the program — between $350,000 and $1 million, according to the SBA data. The company was founded by her parents, James S.C. Chao and his late wife, Ruth Mulan Chu Chao, while her sister, Angela Chao, is the current chief executive.
When asked for comment, the Transportation Department said in a statement: “The Secretary has no connection to the business and she had no idea a loan was obtained.”
The PPP disclosure includes the names of 660,000 small businesses and nonprofit organizations that received at least $150,000 in funding. Although that is less than 15 percent of the total number of loans, it is the most detailed disclosure yet on one of the largest economic stimulus packages created by the federal government, part of the $2 trillion Cares Act.
The data shows the government issued $521 billion in loans in all, with an average loan size of $107,000. Treasury and SBA officials say the program helped support about 51 million jobs, according to self-reported data provided by borrowers. They said that accounts for 84 percent of all employees working at small businesses, based on Census Bureau data.
Recipients of loans between $5 million and $10 million include several prominent restaurant owners: PF Chang’s, a chain of more than 200 U.S. restaurants acquired by Paulson & Co and TriArtisan Capital Advisors last year; Legal Sea Foods, a chain whose investors include Graycliff Partners; and Silver Diner, the chain of diners listed as part of the portfolio of Goode Partners.
PF Chang’s issued a statement saying its leadership team “sought additional funding so we could continue to operate our restaurants and keep team members employed.”
“As a direct result of receiving the PPP loan, we have been able to keep more than 12,000 team members on the job and most of our restaurants open throughout this crisis with a modified offering of takeout and delivery as mandated by jurisdictions,” the company said. Other companies did not respond to requests for comment.
Questions remain however about how the program has affected jobs. The program’s rules require that borrowers show their lenders how many jobs they have retained to have their loans forgiven.
Among the loan recipients, 48,922 reported zero as the number of jobs they would retain with the money, and 40,506 applicants appeared to leave that section blank. It appeared that 10 other companies received between $5 million and $10 million but reported retaining only one job with the money they received.
SBA exempted lawmakers, federal officials from ethics rules on $660 billion loan program
Borrowing from the program has slowed to a trickle despite Congress and officials at the Treasury Department and the SBA repeatedly loosening the rules to allow more companies to receive funds and making it easier for borrowers to have the loans forgiven and turned into grants, as most are.
Questions about when and how data would be released have dogged the program almost since its launch. The government’s failure to release information on the loans as they were issued prompted 11 news organizations, including The Washington Post, to file a Freedom of Information Act lawsuit seeking business names and loan amounts for all PPP recipients.
The agencies missed a deadline to release the information Thursday as planned.
“We were really trying to verify the data and just clean it up. We wanted to make sure it was as accurate as possible,” said the senior administration official.
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Government transparency advocates said the public should have access to detailed information about every loan provided with government funding.
“This data is a good start, but totally insufficient,” said Danielle Brian, executive director of the nonprofit Project on Government Oversight.
About half of the money went to five industries. The health-care and social assistance industry received 12.9 percent of the money; 12.7 percent went to professional and technical services; 12.4 percent went to construction; 10.3 percent went to manufacturing; and 8.1 percent went to hotels, restaurants and other food service employers.
Foreign firms were not barred from receiving money, and Korean Air received a loan of $5 million to $10 million, according to the data. The South Korean airline reported sales equivalent to $11 billion in 2019, and Jill Chung, a company spokeswoman, said it received the loan to aid its small American operation, which Chung said employs about 500 people and has been hard hit by the downturn in travel caused by the pandemic.
Other borrowers are in controversial fields but were nonetheless eligible to receive support.
Numerous defense contractors and gun companies listed were among the recipients of loans totaling $2 million or more. The data also lists 43 Planned Parenthood locations that received a combined $60 million in loans, funds that prompted 127 Republican lawmakers to call for a federal investigation. The SBA sent letters to dozens of Planned Parenthood affiliates ordering them to give back the money, but the data released Monday does not indicate whether any of the loans were returned.
Congress passed legislation last week extending the deadline to apply to through Aug. 8 and are considering how best to repurpose money that is left over. About $130 billion remains in the program, and the administration plans to release more data about the program after that deadline.
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SBA exempted lawmakers, federal officials from ethics rules in $660 billion loan program - washingtonpost.com
A ‘blanket approval’ allowed Congress, officials and their families to receive Paycheck Protection Program funds without a required conflict of interest review
A brief and barely noticed “blanket approval” issued by the Trump administration allows lawmakers, Small Business Administration staff, other federal officials and their families to bypass long-standing rules on conflicts of interest to seek funds for themselves, adding to concerns that coronavirus aid programs could be subject to fraud and abuse.
Under normal circumstances, lawmakers and some federal employees who apply for small business funds in some cases have to seek approval of a little-known SBA body called the Standards of Conduct Committee. The rule applies to officials who are business owners, officers, directors or shareholders with a more than 10 percent business interest, plus any “household members” of those officials.
But in a rule the administration issued April 13, the administration disclosed that the approval requirement had been suspended for all entities seeking funds from the $660 billion program “so that further action by the [ethics committee] is not necessary.”
Policy experts and government watchdogs said the blanket waiver could allow officials to write the rules to benefit themselves. Josh Gotbaum, a Brookings Institution scholar who has worked in economic policy under Democratic and Republican administrations, said he was “appalled” by the waiver.
“The idea that the Small Business Administration can, without any review or publicity, secretly let all of its employees arrange loans for their family members or associates is outrageous,” Gotbaum said.
Because the administration has not yet released any information about the individual borrowers, it is unknown how many members of Congress or SBA officials have benefited from the nearly $700 billion program, but several representatives did, according to media reports and financial records.
Rep. Susie Lee (D-Nev.) played a role in shaping the Paycheck Protection Plan when she joined other Nevada legislators to urge the Trump administration to make casinos eligible for funds. Excluding casinos from loans, as the SBA had long done, “unfairly impacts countless small businesses throughout Nevada” the legislators argued in an April news release.
What Lee did not mention is that among the businesses being barred from applying for the funds was her husband’s Las Vegas casino company, Full House Resorts. When the administration complied with Lee’s request and allowed casinos to apply, Full House received two loans totaling $5.6 million, according to securities filings.
Lee was not aware of her husband’s interest in applying for PPP loans at the time she was urging the administration to allow casinos to receive funding, according to her spokesman, Jesús Espinoza.
“Congresswoman Lee joined the rest of Nevada’s congressional delegation, which includes members from both parties, in fighting to reverse that decision and give our state needed resources in a crisis,” Espinoza said. He added that Lee played no role in Full House’s loan application or in the Treasury Department’s decision to issue a blanket waiver for members of Congress and their families.
Full House, where Lee’s husband, Daniel R. Lee, is president and chief executive, received its loans after the blanket waiver was put in place. The company did not return requests for comment.
SBA spokesman Jim Billimoria said the administration issued the blanket waiver because it treated PPP similarly to loan programs that the agency provides in the wake of natural disasters and because agency officials were concerned that there could be large volume of waiver requests.
The Standards of Conduct Committee is made up of the deputy general counsel, acting chief operating officer and associate administrator of human resources.
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“The Standard of Conduct Committee gave a blanket approval rather than case-by-case consideration in recognition that PPP loans were in some respects akin to disaster loans (which do not require any Standards of Conduct Committee approval) and in anticipation of the large volume of potential cases that might come before the Committee,” Billimoria said in statement.
Sen. Marco Rubio (R-Fla.), who chairs the congressional committee overseeing the SBA, said he wasn’t specifically aware of the blanket approval rule but that Congress doesn’t decide which loan applicants receive funding. Applicants are required to apply through their banks, which then send loans to SBA for final approval.
Although the first round of funding quickly ran out, more than $100 billion has been available in the second round for weeks. As long as the loans are used appropriately, they are turned into grants and forgiven.
“Congress plays no role in who gets a loan and who doesn’t,” he said. “If you qualified for the loan, you got one. If your business qualified for the loan, you got one. It wasn’t like Congress was deciding who got a loan and who didn’t.”
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Lee is not the only member of Congress to benefit. One of the wealthiest, Rep. Roger Williams (R-Tex.), said in a May 5 blog post that his auto dealerships had received loans. Rep. Vicky Hartzler (R-Mo.) said that businesses owned by her family had received PPP loans, after they were disclosed in the Columbia Tribune.
Connecticut artist Judith Pond Kudlow applied for PPP funds, according to remarks made in an interview with ABC by her husband, Larry Kudlow, White House chief economic adviser and director of the National Economic Council. Her application probably didn’t require a waiver because her husband’s job isn’t covered by the provision. Larry Kudlow has advocated against disclosing the names of PPP borrowers.
“Larry Kudlow’s wife is a small-business owner and private citizen,” said Kudlow spokesman Judd Deere in a statement. He called any speculation that something improper was taking place “false.” Judith Pond Kudlow did not return a request for comment.
Economists from both parties have mostly complimented the SBA for getting money out the door to millions of small businesses and their employees, buttressing the economy against staggering unemployment.
But the move to waive ethics rules is one of several high-level decisions that could hamper effective oversight of the program. The Trump administration has told congressional oversight committees it is not required to provide information about loan recipients. It also declared that the special inspector general leading Cares Act oversight cannot submit reports to Congress without “presidential supervision.”
The SBA in particular has been singled out by watchdog groups and members of Congress for poor transparency. The nonpartisan Government Accountability Office wrote in a recent audit of government-wide Cares Act spending that it had more trouble getting information from the SBA than any other agency. And the agency’s Office of Disaster Assistance has failed to communicate important policy changes affecting loan applicants, such as a $150,000 cap on coronavirus disaster loans.
Richard Painter, a lawyer who served as the top ethics adviser in the George W. Bush administration, questioned whether a “blanket waiver” would be legal in the first place.
“We watched [the SBA] very closely when I was in the White House because people were always trying to get their fingers in the pie over there,” Painter said. “It’s one of the areas that is very sensitive, where you have a ‘friends and family’ problem. SBA has often been a focal point of that problem, so we’ve kept an eye on it.”
He said the SBA is of particular concern for ethics watchdogs.
“Once you set up a system that says this is a conflict of interest, but there can be a waiver, the whole point of that system is it’s case-specific. If you do a blanket waiver, then you’ve basically repealed the rule,” Painter said. “This is a departure from the norm and I’ve never seen it before, where you have a rule and then you issue a waiver that essentially abolishes it.”
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Scott Amey, general counsel with the nonprofit Project on Government Oversight, expressed concern that the SBA is waiving its normal ethics rules as it rushes to spend hundreds of billions of dollars.
“This is the exact time when we should be worried about government officials, even members of Congress, taking money out of the hands of others in need,” Amey said in an email. “Let’s hope someone else is minding the store because SBA seems more about speed and less about accounting for taxpayer dollars.”
The SBA has previously said it would release “individual loan data” for PPP recipients the way it has for other loan programs since 1991. It also informed borrowers on the application form that the names of borrowers would be released to the public.
Despite a brief claim by Treasury Secretary Steven Mnuchin that PPP borrowers would not be disclosed, the SBA announced last week that it plans to disclose the names of borrowers receiving at least $150,000. That accounts for about 15 percent of the 4.5 million PPP loans, according to administration’s data.
A Freedom of Information Act lawsuit filed by 11 news organizations, including The Washington Post, seeks business names and loan amounts for all PPP recipients, including those receiving smaller amounts of funding. |
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