Big Businesses That Abused Paycheck Protection Program Should Get Ready for an Audit
If you’re a big business and you abused the Small Business Association’s new Paycheck Protection Program, you’re getting very close to the deadline for you to pay the government back.
If you don’t, that means the government is going to be coming after you — and you can definitely be ready for an audit.
That’s the message Treasury Secretary Steven Mnuchin has for those who took the PPP loans, with a promise to do a “full audit” of every loan over $2 million.
“We will make sure that what was the intent for taxpayers is fulfilled here,” he said during an April 28 appearance on CNBC.
Of everything in the largest phase of coronavirus relief legislation from Congress, the PPP has arguably been the most controversial program. That’s largely because more than 220 public companies have applied for $870 million in PPP loans, according to CNBC.
If your company has a stock price, you clearly shouldn’t be taking money for a program that’s supposed to be for mom-and-pop businesses and restaurants that couldn’t make ends meet otherwise — especially since the loans were meant to be forgiven if the companies used them to retain their employees.
While banks had acted as middlemen for the PPP funds, Mnuchin said any company that took the loans and didn’t need them would be the ones on the hook — although the Department of the Treasury has said businesses that didn’t qualify have until May 14 to return the money if they were publicly held or had “adequate sources of liquidity” when they took those loans.
Outrage ensued after some of America’s biggest brands were among those who took the loans during the first go-around — although the general excuse given by the entities in question was that they were unaware of the strictures of the program.
If you’re the Los Angeles Lakers, that’s not going to fly.
Other brands that took the loans included Ruth’s Chris Steak House and Shake Shack. They’ve since said they would return the money.
If you’re a company that received money and didn’t actually need it, be prepared for an uncomfortable time.
“It’s the borrowers who have criminal liability if they made this certification, and it’s not true,” Mnuchin said. “We’re going to do a full audit of every loan over $2 million.”
“This was a program designed for small businesses — it was not a program that was designed for public companies that had liquidity.”
And while Mnuchin is a Lakers guy, he wasn’t particularly a fan of the fact the team decided to take the loan.
“I never expected in a million years that the Los Angeles Lakers — which I’m a big fan of the team, but I’m not a big fan of the fact that they took a $4.6 million loan,” he said. “I think that’s outrageous, and I’m glad they’ve returned it, or they would have had liability.”
The Lakers have indeed returned the $4.6 million, although were defensive (pun unintended) over it.
“The Lakers qualified for and received a loan under the Payroll Protection Program,” a Lakers spokesperson said in a statement, according to CNN. “However, once we found out the funds from the program had been depleted, we repaid the loan so that financial support would be directed to those most in need. The Lakers remain completely committed to supporting both our employees and our community.”
The team’s qualifications, a source told CNN, were that they had 303 full- and part-time employees and weren’t planning to lay off or furlough any of them. However, they’re also worth, you know, $4.4 billion and most people aren’t going to be buying a basketball jersey of the small coffee place in your town.
What shaming won’t do, an audit will.
As Florida GOP Sen. Marco Rubio pointed out on Twitter, this wasn’t something that got clarified after all the money went out of the door to companies that didn’t qualify for it:
This isn’t new
As I have pointed out for days now,when we wrote #PPP we SPECIFICALLY added a requirement that borrower certify they need a loan to maintain operations
It’s always been the case that if you get a #PPPloan on a false certification you are going to have a problem https://t.co/BtCA8fNVfq
— Marco Rubio (@marcorubio) April 22, 2020
The restrictions were always there. Banks, it seems, were poor middlemen, but the job was to get the money out as fast as possible to save as many businesses as possible, and — well, banks tend to be good at this.
Big companies should have known better than to apply for PPP funding. For publicly listed companies, this never should have been a question.
For those that did so anyway, they have until May 14 to do the right thing. After that, be prepared for an audit.
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