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WASHINGTON – Thousands of Paycheck Protection Program loans meant for small businesses bludgeoned by the coronavirus pandemic were awarded improperly to firms that already had received a PPP loan or were barred from doing business with the federal government, a House oversight committee concluded in a report released Tuesday.
The report from the Select Subcommittee on the Coronavirus Crisis examined the Trump administration’s dissemination of more than 5.2 million PPP loans totaling $525 billion since April. It found that:
- Some 10,000 loans totaling more than $1 billion went to companies that received more than one PPP loan, a violation of the program.
- More than 600 loans totaling about $96 million were given to firms that have been excluded from doing business with the government because they’ve been “debarred or suspended” from receiving federal contracts.
- More than 350 loans totaling $195 million were awarded to businesses that have been flagged for “significant performance and integrity issues.”
- More than 11,000 loans totaling about $3 billion were given to companies that did not include complete information from applicants.
Restaurant industry is in serious trouble due to the COVID-19 pandemic (Photo: Getty)
“Treasury must improve oversight and accountability to ensure that taxpayer dollars are not squandered,” committee Chairman James Clyburn, D-S.C., said during a hearing Tuesday where the report was released. “Taxpayers should not have to choose between quickly getting aid to those who need it and wasting federal funds, and there are simple steps that could have been taken to improve oversight and reduce fraud.”
The program which helped keep more than 5 million small businesses afloat during the coronavirus pandemic, expired Aug. 8 with no clear consensus about its future. The PPP fund has about $140 billion left from the roughly $660 billion Congress provided.
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Discussions on Capitol Hill about refashioning the PPP program have stalled amid a larger stalemate between congressional leaders and the White House over another round of stimulus relief. There is bipartisan sentiment to extend the program in a way that helps even smaller businesses survive but there is disagreement over exactly how to do that.
Senators are in discussions to revamp the program so that smaller businesses could apply for a second loan, with Republicans saying those with up to 300 workers should be eligible and Democrats proposing a cap of 100 employees.
Many businesses have credited the program with keeping them alive when much of the economy closed down in the spring. But the need for such assistance has been alleviated somewhat by the decision by many state and local governments to ease social distancing restrictions.
Treasury Secretary Steve Mnuchin, right, speaks next to President Donald Trump during a Coronavirus Task Force news briefing in April at the White House. Attempts by the Small Business Administration and the Treasury Department to effectively shame public companies into returning paycheck protection loans of more than $2 million by May 18 had mixed success. (Photo: Yuri Gripas/Abaca Press/TNS)
Under the program, businesses with 500 or fewer workers were eligible for loans up to $10 million, which become forgivable if at least 60% of the amount is spent on payroll.
Republicans during the hearing defended the overall success of the program, which rescued, at last temporarily, some 51 million jobs by the administration’s count.
“When you approve $3 trillion and expect the federal government to get it out the door and to people in a matter of days, of course there may be a few mistakes,” said Rep. Jim Jordan, R-Ohio, referring to the total amount of coronavirus stimulus relief Congress has approved since March. “What should be commended though is the hard work done to correct those mistakes. These programs save and continue to save jobs.”
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And Rep. Blaine Luetkemeyer, R-Mo., said during the hearing the loans flagged in the committee’s report were just a small portion of the total number of PPP loans.
“Let’s keep some perspective on this,” he said.
Created by the Coronavirus Aid, Relief and Economic Security (CARES) Act Congress passed in March, the PPP stumbled out of the gate due to technical issues posed by a massive volume of loan applications.
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There were accusations that private banks in charge of processing the loans put favored clients at the head of the line as smaller businesses were forced to wait. Then the fund ran out of money and Congress had to approve a second round.
More than 400 publicly traded companies like Shake Shack and professional sports teams like the NBA’s Los Angeles Lakers also took advantage, as did businesses associated with members of Congress.
Profitable firms also had access to loans, a loophole that would not be permitted under the revamped program lawmakers are now discussing. And a USA TODAY investigation found that at least 700 vendors that scored lucrative federal coronavirus contracts also received emergency aid, including PPP loans.
In April, Treasury Secretary Steve Mnuchin said federal loans exceeding $2 million would get a “full review” after it was revealed the Lakers received a $4.6 million loan. At the time, Mnuchin said it was “inappropriate” for such businesses to apply for and receive PPP loans.
The committee’s report said the decision to fully audit loans valued at $2 million or more leaves “the other 99.4% of loans with little or no oversight.”
Mnuchin told the committee Tuesday that he expects smaller loans will get some level of scrutiny as well.
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