More than half of the money from the Treasury Department’s coronavirus emergency fund for small businesses went to just 5% of the recipients, according to data on more than 5 million loans released by the government Tuesday evening in response to a Freedom of Information Act request and lawsuit.
According to data on the government’s Paycheck Protection Program, about 600 mostly larger companies, including dozens of national chains, received the maximum amount allowed under the program of $10 million.
Officials from the Treasury Department and the Small Business Administration have argued that the program primarily benefited smaller business because a vast majority of the loans ― more than 87% ― were for less than $150,000, as of August. But the new data show that more than half of the $522 billion in the same time frame had gone to bigger businesses, and only 28% of the money was distributed in amounts of under $150,000.
The newly released data comes after a federal lawsuit filed by 11 news organizations under the Freedom of Information Act challenging the SBA’s refusal to release records on borrowers and loan amounts. A federal judge ordered release of the data by Tuesday and the agency did not appeal.
Devised as a way to temporarily pay small companies to keep their employees on staff for eight weeks, PPP is widely credited with helping millions of businesses make payroll during the early months of the pandemic, benefiting tens of millions of employees. A bipartisan group of senators unveiled plans Tuesday for another $908 billion in stimulus, including nearly $300 billion in new funding for PPP and other SBA programs.
However, the program’s spring rollout was fraught with confusion over rules for borrowers, and an early run on the money by large chains and big banks that caused the first pot of funding to run dry in eight days. The Treasury Department later asked large well-capitalized borrowers to return their funding, though the agency has not disclosed which borrowers have done so.
The data released Tuesday disclosed for the first time the exact dollar figures received by some of the top recipients, showing that a number of restaurant chains received the maximum $10 million, among them the parent companies of Uno Pizzeria & Grill, Legal Seafoods, Boston Market and Cava Mezze Grill.
Law firms, churches and professional staffing services were also among recipients of $10 million loans.
SBA calculated loan amounts based on monthly payroll figures and capped loans at a maximum of $10 million. Businesses with up to 500 employees were eligible, though that limit was relaxed for restaurant and hotel companies.
Previous disclosures of PPP loan data showed that the program was falling fall short of the Trump administration’s claims of its success. A Washington Post analysis of 4.9 million loans initially released by SBA contained numerous errors, casting doubt on the administration’s claim that the $517 billion in lending had “supported” 51 million jobs.
Many companies were reported to have “retained” far more workers than they employ. Likewise, in some cases the agency’s jobs claim for entire industries surpassed the total number of workers in those sectors. For more than 875,000 borrowers, the data showed that zero jobs were supported or no information is listed at all, according to the analysis.
There is also increasing evidence that the program was subject to considerable fraud. Investigators at the Justice Department, FBI, IRS and other agencies have joined forces to identify fraudulent borrowers and in September the government announced that it had charged 57 people with trying to steal a total of $175 million. The SBA Inspector General’s office has received tens of thousands of fraud tips, and federal officials have launched hundreds of investigations.
Additionally, a ‘blanket approval’ allowed Congress, officials and their families to receive PPP funds without a required conflict of interest review. Several members of Congress, including some who helped shaped the program’s rules, benefited from funds, according to media reports and financial records.
The Post filed a Freedom of Information Act for complete records about the lending program on April 24. After the SBA failed to respond in the time required by law, The Post and 10 other national news organizations sued for the release of records on PPP and a separate smaller loan program, the Economic Injury Disaster Loan program, or EIDL.
In response to the lawsuit, the SBA posted loan-level data of 660,000 business and nonprofit organizations that received at least $150,000 in funding. But despite a disclaimer on the loan application stating that the names of borrowers and amounts of loans would be “automatically released” in response to FOIA requests, the agency argued to the court that it should not have to provide exact loan figures for any of the loans as well as borrower information for loans under $150,000, an estimated 87 percent of all PPP loans.
The agency claimed that FOIA’s confidential business information and personal privacy exemptions allowed the agency to withhold the records.
Ultimately, District of Columbia federal court Judge James Boasberg rejected the agency’s arguments and ordered the SBA to “release the names, addresses, and precise loan amounts for all individuals and entities that obtained PPP and EIDL COVID-related loans by December 1, 2020,” noting that while the agency had the right to appeal the ruling “the Court sees no basis for any further delay.”
As the pandemic continued into the summer and fall, some of the employment gains proved temporary. The payroll processor Gusto estimates small businesses laid off about 232,000 workers nationwide soon after their PPP expired, according an analysis of the records of about 37,000 Gusto clients who received PPP.
Losses were sharpest in retail trade, facilities management, and other sectors hit hard by the pandemic, said Gusto economist Luke Pardue. “This is a significant headwind to the economy in the fall,” he said.
In rolling out PPP, SBA and Treasury stripped away much of the paperwork that is traditionally required for business loans, something that allowed banks to move quickly but also made the program more vulnerable to abuse. And the federal government promised that PPP loans could be entirely forgiven, making them far more attractive than what most businesses could find without government help.
In addition, to traditional mom-and-pop shops, PPP was open to a broad array of businesses, representing nearly every corner of the U.S. economy. Loan recipients included independent contractors such as Uber drivers, franchises of international brands, health-care workers, nonprofits, churches, schools, Wall Street investment firms and others.
Some industries successfully lobbied for access to the program after they were initially excluded. The Trump administration removed a restriction on businesses that profit from gambling after the gaming industry argued it should be eligible. Strip clubs and payday lenders argued that their businesses had been hurt by the virus as well, and many of them ended up receiving loans.
In other cases, the SBA sought to claw back funding from loan recipients that were seen as controversial.
Later the SBA sent letters to dozens of Planned Parenthood nonprofits, which offer a range of health-care services including abortions, demanding that they return the loan funds. Republican lawmakers including Marco Rubio, a key architect of PPP, argued that the organization’s local affiliates did not qualify because they were too closely associated with Planned Parenthood for America, the national advocacy organization.
Jonathan O’Connell, Andrew Van Dam, Aaron Gregg and Alyssa Fowers, The Washington Post via Bloomberg