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Treasury, SBA release data on 660,000 small business loans

UPDATED: Mon., July 6, 2020

Treasury Secretary Steven Mnuchin testifies June 30 before Congress. The Treasury Department released Monday the names of about 700,000 companies that received funds from the government’s small business lending program.  (Associated Press)
Treasury Secretary Steven Mnuchin testifies June 30 before Congress. The Treasury Department released Monday the names of about 700,000 companies that received funds from the government’s small business lending program. (Associated Press)
By Jonathan O’Connell </p><p>and Aaron Gregg Washington Post

WASHINGTON – Data released by the Small Business Administration on Monday show that private-equity-backed chains and companies owned by members of Congress received money from the Paycheck Protection Program along with almost 90,000 employers that either said they would not retain any jobs or did not say how many they’d retain.

Dozens of tenants of President Donald Trump’s real estate company also received funds, reviving questions about conflicts of interest brought by the president’s continued ownership of his company while in office.

Large chains – many of them backed by private equity – have received millions of dollars that they appear to be keeping, which could rekindle questions about whether larger companies with Wall Street connections should accept the money or not.

Recipients of loans between $5 million and $10 million include several prominent restaurants: PF Changs, 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.

None of the companies immediately responded to requests for comment Monday afternoon. Dozens of publicly traded companies returned money after initially receiving millions of dollars from the program but then being told by the Treasury that the program was not meant for large, well-capitalized companies and that they ought to return it.

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.”

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 order to follow the administration’s rules for releasing the information.

Several members of Congress are benefiting from loans, including some who were directly involved in shaping regulations and some who benefited from a blanket waiver of ethics concerns for some federal officials seeking loans.

Among the loan recipients disclosed Monday is KTAK Corporation, a Tulsa, Okla.-based operator of fast food franchises owned by Rep. Kevin Hern, R-Okla., according to public records. Hern has advocated to increase the size of loans available to franchises, including in a March letter to Senate Majority Leader Mitch McConnell, R-Ky., and Minority Leader Chuck Schumer, D-N.Y.

KTAK reported receiving between $1 million and $2 million to support 220 jobs. A Hern spokesperson did not immediately respond to a request for comment.

Rep. Mike Kelly, R-Pa., benefited when three of his car dealerships in the Pittsburgh area received a total of between $450,000 and $1.05 million to retain 97 jobs, according to the data. A spokesperson for Kelly did not immediately return a request for comment.

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% of the total number of loans, it is the most detailed yet on one of the largest economic stimulus packages created by the federal government, part of the $2 trillion Coronavirus Aid, Relief and Economic Security Act.

The data shows that the government issued $521 billion in loans, with an average amount of $107,000. Treasury and SBA officials say the program helped support about 51 million jobs, according to data provided by borrowers.

They said that accounts for 84% of employees working at small businesses, based on Census Bureau data.

Although experts credit the PPP with knocking down the unemployment rate from historic highs by requiring borrowers to spend most of their money on payroll to have their loans forgiven, questions remain about how the program has impacted jobs.

Officials said Monday that the 51 million jobs retained represented the total reported by applicants when they applied for their loans. But among the loan recipients, 48,922 reported zero as the number of jobs they would retain with the money and 40,506 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.

The program’s rules require that borrowers show their lenders how many jobs they have retained in order to have their loans forgiven. Treasury and SBA spokespersons declined to comment.

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 role 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 mortgage giant Countrywide, the pro-Israel group Hadassah, the Girl Scout Council of Greater New York, and the engineering and consulting firm Atane, according to the data.

Businesses leasing space in three Trump hotels received money as well. 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.

The Trump Organization was not barred from receiving PPP funds (as it was from other parts of the CARES Act), but officials there have said they would not seek any money directly.

Despite its successes, the PPP has also faced criticism for initially allowing hundreds of large, well-capitalized firms to receive funds as well as the changing and sometimes contradictory rules issued by the Treasury Department and the SBA. Publicly traded chains early on reaped millions, prompting more than $30 billion to be returned to the government after the administration condemned well-capitalized companies for taking funds.

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.

The agencies also 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.

“We wanted to make sure everything was clear and organized,” said another senior administration official.

Congress passed legislation this week extending the deadline to apply to through Aug. 8 and is 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.

Questions about when and how data would be released have dogged the program almost since its launch. The SBA has released the names of borrowers and the amount of their loans dating to 1991 for most recipients of the agency’s 7(a) loan program, on which PPP was fashioned. The agency also informed borrowers on the PPP application form that the names of borrowers would be “automatically released” to the public.

After a series of contradictory statements by officials about what would be released, SBA withheld the names of borrowers for loans of $150,000 or less, which likely omits most sole proprietors and independent contractors.

The SBA also withheld the exact loan amount companies received. Instead, it provided a dollar range for each loan, saying whether the loans fit into one of five broad ranges spanning from $150,000 to $10 million.

The government’s failure to release information on the loans as they were issued prompted 11 news organization, including the Washington Post, to file a Freedom of Information Act lawsuit seeking business names and loan amounts for all PPP recipients. The SBA’s inspector general also found in May that the agency failed to prioritize minority- and female-owned businesses as Congress intended when they started implementing the CARES Act.

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. “We are beginning to see some patterns of winners and losers in the program, but certainly not the details we need either to know if there’s corruption or if employment goals have actually been met.”

Overall, about half of the money that has been distributed so far went to employers in five industries. The health care and social assistance industry received 12.9% of the money; 12.7% went to professional and technical services; 12.4% went to construction; 10.3% went to manufacturing; and 8.1% went to hotels, restaurants and other hospitality and food service employers.

Other borrowers are in controversial fields but were nonetheless eligible to receive support.

Numerous defense contractors and gun companies were among the recipients of loans totaling $2 million or more. They include Yulista Tactical, an Alaska-based company; Patriot Contract Services, a California-based company that helps manage and operate Navy ships among others; Close Quarters Tactical, a Michigan-based shooting range that offers professional training to military, law enforcement and others; Quantico Tactical, a Virginia-based defense contractor; and TYR Tactical, an Arizona-based defense contractor.

The data lists 43 Planned Parenthood locations across the country that received a combined $60 million in loans. PPP loans to Planned Parenthood locations drew political fire in May, when 127 Republican lawmakers called for a federal investigation of the loans and 41 Democratic senators defended them.

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. The SBA said the local chapters are too closely affiliated with Planned Parenthood’s national organization to be considered independent entities.

Each of Planned Parenthood’s state and local affiliates is a separate nonprofit, with its own leadership and funding organization.

Information about the loans to date is likely to aid policymakers as they consider how to craft the next phase of stimulus. Questions also remain about whether the taxpayer-backed loans reached the smallest businesses and those who felt the economic crisis most sharply, as the law required borrowers to show no evidence that they had been harmed by the pandemic.

A study by the National Bureau of Economic Research based on an earlier, limited data set found that the geographic distribution of loan funds did not correlate with parts of the business community that are most closely affected by the coronavirus.

Other businesses that received funds early on have had to furlough or lay off employees a second time as the rise in infections in the United States forces a new round of business closures.

The share of loan funds that went to low and moderate income areas almost exactly matched that group’s share of the population, according to a Treasury Department analysis. It is unclear, however, whether minority-owned business received a proportionate share of PPP loans. The limited demographic information that was collected for PPP loans was withheld from the data sets released Monday.

In May, a federal inspector general report concluded that SBA did not direct private lenders to prioritize minority- and female-owned businesses as Congress intended under the program. SBA Inspector General Mike Ware found that the SBA failed to incorporate guidance on lending to businesses in underserved communities although he concluded what the SBA has “mostly” been aligned with the legislation.

Ideas from congressional leaders led by Sens. Marco Rubio, R-Fla., and Ben Cardin, D-Md., include directing more money to businesses that prove they were affected by the pandemic and better targeting businesses with fewer than 10 employees. Hotel or restaurant chains may also be legally prevented from receiving more than $2 million total.

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