Millions of dollars from a relief fund that Congress created to help small businesses through the coronavirus crisis has gone to:
• Companies with thousands of employees.
• Companies with past penalties from government investigations.
• And companies at risk of financial failure even before the coronavirus walloped the economy
Those were the findings of an Associated Press investigation of the Paycheck Protection Program, which was supposed to infuse small businesses with $349 billion in emergency loans that could help keep workers on the job and bills paid on time.
At least 75 companies that received the aid were publicly traded, the AP found, and some had market values well over $100 million.
AP’s review also found examples of companies that had foreign owners and that were delisted from U.S. stock exchanges, or threatened with removal, because of their poor performance. Other companies had annual losses for years.
Overall, 25% of the companies AP examined had warned investors months ago — while the economy was humming along — that their ability to remain viable was in question.
The list of recipients the AP identified is a fraction of the 1.6 million loans that banks approved before the program was depleted last week, but it is the most complete public accounting to date. Lawmakers from both political parties were negotiating an additional relief package that in large part would replenish the Paycheck Protection Program. Agreement was reached on major elements of the nearly $500 billion aid package, said Senate Democratic Leader Chuck Schumer. He said he thought it would pass on Tuesday.
Since launching April 3, the relief package has faced criticism about slow loan processing, unclear rules and limited funding that left many mom-and-pop businesses without help.
By design, the Paycheck Protection Program was meant to get money out quickly to as many small businesses as possible, using a formula based in part on payroll size. Some businesses with more than 500 employees could qualify if, for example, they met certain size standards for their industries.
The owners behind large restaurants chains like Potbelly, Ruth’s Chris Steak House and Taco Cabana were able to qualify despite employing thousands of workers and get the maximum $10 million in loans.
Some other big companies that received loans appeared to have enough cash on hand to survive the economic downturn. New York City-based Lindblad Expeditions Holdings, for example, a travel company with 650 workers and a branding deal with National Geographic, got a $6.6 million loan. At the end of March, the business reported having about $137 million in cash on its balance sheet.
Five of the companies AP identified were previously under investigation by financial and other regulators, including firms that paid penalties to resolve allegations.
Quantum Corp., a data storage company based in San Jose, California, that has a workforce of 800, paid a $1 million penalty last December over allegations that accounting errors resulted in overstated revenues. Quantum received a maximum $10 million loan.
That big companies and ones with questionable records received such precious financial aid frustrates Zachary Davis, a Santa Cruz, California businessman who runs two artisanal ice cream shops, a beachside café and a taco bar with partner Kendra Baker.
“If you’re a little guy, chances are you’re going to the back of the line,” Davis said.