Cass County received over 26 million in forgivable PPP loans
During the hardest times of the pandemic, the Paycheck Protection Program (PPP) was established in 2020 through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The main purpose was to help select businesses, self-employed workers, sole proprietors, certain nonprofit organizations, and tribal businesses to continue to pay their workers during the shuttering of business. Two and a half years later both success stories and fraudulent claims work their way through the media outlets. According to statistics found online Cass County has received a boon of over 27 million dollars, with over 26 million forgiven by the federal government. The $953-billion business loan program was established by the United States federal government during the Donald Trump administration.
According to the U.S. Department of the Treasury, the “Paycheck Protection Program allow(ed) entities to apply for low-interest private loans to pay for their payroll and certain other costs. The amount of a PPP loan (was) approximately equal to 2.5 times the applicant’s average monthly payroll costs. In some cases, an applicant may (have) received a second draw typically equal to the first. The loan proceeds may (have been) used to cover payroll costs, rent, interest, and utilities. The loan may be partially or fully forgiven if the business keeps its employee counts and employee wages stable. The program (was) implemented by the U.S. Small Business Administration. The deadline to apply for a PPP loan was March 31, 2021.
“The Paycheck Protection Program established by the CARES Act, (was) implemented by the Small Business Administration with support from the Department of the Treasury. This program provided small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds (could have been) also be used to pay interest on mortgages, rent, and utilities.
“The Paycheck Protection Program prioritized millions of Americans employed by small businesses by authorizing up to $659 billion toward job retention and certain other expenses.”
The PPP loans came in two disbursements, better known as draws. “The First Draw Loans,” noted by CPMlaw. com, “are PPP loans made to first-time borrowers under the original program’s rules, as have been updated from time to time. Second Draw Loans can only be made to borrowers who took First Draw Loans, used all the funds, and still suffered the 25%+ reduction in gross receipts.”
According to Tim Wilson, director of SBDC or Northeast Texas even though there has been reports of fraud around the county, he saw businesses that were on brink of disaster saved by the loans because businesses were able to keep their employees on during the pandemic. “The PPP loan program was pushed out quickly but did a phenomenal job to helping save businesses that may have been lost during the pandemic.”
Nationally it appears that there has been a ramping up of the Federal government trying to catch those individuals and businesses that used the funds illegally. In March of this year “the Justice Department announced the appointment of a Director for COVID-19 Fraud Enforcement to lead the department’s criminal and civil enforcement efforts to combat COVID-19 related fraud, along with the latest results of criminal and civil enforcement actions that include alleged fraud related to over $8 billion in pandemic relief.
“Effective immediately, Associate Deputy Attorney General Kevin Chambers will serve as the Director for COVID-19 Fraud Enforcement. Mr. Chambers will lead Justice Department efforts that to date have resulted in criminal charges against over 1,000 defendants with alleged losses exceeding $1.1 billion; the seizure of over $1 billion in Economic Injury Disaster Loan proceeds; and over 240 civil investigations into more than 1,800 individuals and entities for alleged misconduct in connection with pandemic relief loans totaling more than $6 billion.”
One such case in Texas involved 19 people arrested when “According to the indictment, the defendants, led by Michael Hill and Andrew Moran, are alleged to have executed a scheme to defraud lenders and the Small Business Administration’s (SBA’s) Paycheck Protection Program (PPP). Hill is alleged to have recruited co-conspirators to use an existing business or create a business to submit applications to obtain PPP funding.
Once enlisted, Moran is alleged to have assisted his co-conspirators with the application paperwork, including fabricating supporting documentation and submitting the application through the online portals.
“On the applications, the defendants are alleged to have misrepresented material information such as the true nature of their business, the number of employees, and the amount of payroll. Based on these material misrepresentations, the SBA and other financial institutions approved and issued loans to the defendants. Once in receipt of the fraudulently obtained funds, the defendants did not use the money as intended, such as to pay employee salaries, cover fixed debt or utility payments, or continue health care benefits for employees. Instead, the defendants typically paid Hill and Moran, transferred money to their personal accounts, and spent the funds on various personal purchases. In other instances, the defendants sent the fraudulently obtained funds to Jonathon Spencer for purported investment in foreign exchange markets.
In total, the defendants are alleged to have fraudulently obtained at least 16 loans and at least $3.5 million.”
In a press release from the U.S Department of Justice, Attorney General Merrick B. Garland was quoted saying, “The Justice Department remains committed to using every available federal tool — including criminal, civil, and administrative actions — to combat and prevent COVID-19 related fraud. We will continue to hold accountable those who seek to exploit the pandemic for personal gain, to protect vulnerable populations, and to safeguard the integrity of taxpayer- funded programs.” “As our thousands of COVID-19 fraud investigations demonstrate, our message to those who seek to line their own pockets and benefit from the suffering of so many Americans is: your crimes are not and will not be forgotten,” said Deputy Attorney General Lisa O. Monaco.
Despite the fraud, the program no doubt helped many to keep their jobs and some businesses to remain afloat that otherwise would have collapsed. That said, on the better side of the pandemic, economists are looking at what we could do better next time.
In an article titled, “The $800 Billion Paycheck Protection Program: Where Did the Money Go and Why Did It Go There?”, from the Journal of Economic perspectives, they estimate that the program cumulatively preserved between 2 and 3 million job-years of employment over 14 months at a cost of $169K to $258K per jobyear retained.”
However, “these numbers imply that only 23 to 34 percent of PPP dollars went directly to workers who would otherwise have lost jobs; the balance flowed to business owners and shareholders, including creditors and suppliers of PPP-receiving firms. Program incidence was ultimately highly regressive, with about three-quarters of PPP funds accruing to the top quintile of households.”
Ultimately the article concludes that on the other side of the pandemic “the PPP was essentially untargeted because the United States lacked the administrative infrastructure to do otherwise. Harnessing modern administrative systems, other high-income countries were able to better target pandemic business aid to firms in financial distress. Building similar capacity in the U.S. would enable improved targeting when the next pandemic or other large-scale economic emergency inevitably arises.” Here in Cass County approximately 27.8 million of the loans were forgiven with over 26.4 million forgiven from local, regional, and banks outside the area.
At the time this article was published, Atlanta businesses received over 10.6 million with 9.6 forgiven; Avinger, approximately 520 thousand with 400k forgiven; Bivins, 590 thousand with 560k forgiven; Bloomburg, 174 thousand with 174k forgiven; Douglasville, 2.2 million with 2.1 forgiven; Hughes Springs, 8 million with 6.4 million forgiven; Kildare, 22 thousand with 22k forgiven; Linden, 3.2 million with 3.1 forgiven; Marietta, 120 thousand with 100k forgiven; Mcleod, 154 thousand with 150k forgiven; and Queen City 2 million with 1.9 million forgiven.
Additional searchable information and statistics about the amount of the PPP loans and who received them can be found at: https://data.theadvertiser. com/paycheck-protection- program-loans/