PPP loans favored companies with resources, clout

New relief package aims to help more small businesses get money
Recently-released federal data shows six companies connected to U.S. Secretary of Agriculture Sonny Perdue received Paycheck Protection Program loans totaling $361,000. Perdue is seen here speaking at a Republican rally in Gainesville in November. (Alyssa Pointer / Alyssa.Pointer@ajc.com)

Credit: Alyssa Pointer / Alyssa.Pointer@ajc.com

Credit: Alyssa Pointer / Alyssa.Pointer@ajc.com

Recently-released federal data shows six companies connected to U.S. Secretary of Agriculture Sonny Perdue received Paycheck Protection Program loans totaling $361,000. Perdue is seen here speaking at a Republican rally in Gainesville in November. (Alyssa Pointer / Alyssa.Pointer@ajc.com)

Jessica Perdue wanted to know if taking small business bailout money for several of her companies would be ethical, since one of the financial stakeholders, her father-in-law Sonny Perdue, is a Trump cabinet member.

The pandemic had just begun, and within days banks across the country would start taking applications for the first round of the federal government’s Paycheck Protection Program, offering hundreds of billions of dollars in forgivable loans.

She posed the question to an ethics attorney within her father-in-law’s agency, the U.S. Department of Agriculture, who gave his blessing: Because Sonny Perdue owns only a tiny fractional interest in the companies, and because they aren’t regulated by the department he oversees, and so long as he plays no role in applying, there’s no violation, USDA Ethics Office Director Stuart Bender told her in an email.

Businesses tied to the Perdue family would receive six PPP loans totaling $361,000 — for two Georgia trucking companies and four car washes in South Carolina and North Carolina, according to recently released data from the U.S. Small Business Administration.

Nothing in federal law or in PPP program rules prevented money going to companies affiliated with high-ranking political figures. But critics say such loans highlight a major flaw in the $659 billion first round of COVID relief that went out last spring and summer, a shortcoming that that’s expected to be partially corrected in the next round in 2021.

Many struggling mom-and-pops and minority-owned companies, the critics say, were effectively shut out of this year’s program. Facing a complex loan forgiveness process, many small businesses were intimidated by the prospect of going into debt and didn’t apply, said Ashley Harrington, federal advocacy director for the nonprofit Center for Responsible Lending.

What’s more, banks were encouraged to work with existing clients and earned higher fees when they worked with larger companies.

Advantages also went to companies that have attorneys, accountants and compliance experts at their disposal, Harrington said.

“There was a lot of ways that this program really was designed for well-resourced, well-connected businesses to really take advantage first,” Harrington said.

The next round of PPP, a $284.45 billion portion of the $900 billion stimulus package signed by President Trump on Sunday, will be geared more to smaller companies, lowering the cap from 500 to 300 employees, changing the fee structure to accommodate smaller loans, lowering the maximum loan from $10 million to $2 million, and setting aside $15 billion for lenders that work more frequently with communities of color.

“They have clearly further facilitated the ability of small businesses to get smaller-dollar amount loans,” said Joseph Lynyak, a partner at the international law firm Dorsey & Whitney and an expert on PPP.

The next program will also include a conflicts-of-interest section that would prevent some loans to politically-connected firms.

Governor Brian Kemp has a 50% stake in Specialty Stone Inc., a landscape masonry company in Hoschton, Ga., that received a $38,000 COVID relief loan, federal data shows. A Kemp spokesman said the money benefitted four employees, not the governor, who has no involvement in day-to-day business operations. (Steve Schaefer for The Atlanta Journal-Constitution.)

Credit: Steve Schaefer

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Credit: Steve Schaefer

More holdings, more loans

PPP loans tied, however tenuously, to politicians and others with clout have been an ongoing source of controversy with the bailout program. Those controversies re-ignited last month, after a federal judge, in response to a Freedom of Information Act lawsuit by news organizations, forced the SBA to release detailed information about all the companies that received loans and the specific loan amounts.

With the new data, NBC News reported that tenants of properties owned by President Trump and his son-and-law and senior adviser Jared Kushner received at least 25 PPP loans totaling more than $3.65 million. San Francisco’s ABC7 News reported that the new data showed that nine businesses connected to Democratic California Gov. Gavin Newsom’s wine and hospitality company received nearly $3 million in PPP loans, more than eight times the amount originally reported.

Data also revealed that a landscape masonry company in Hoschton, Ga., which has Gov. Brian Kemp as a 50% stakeholder, received a $38,000 loan.

Earlier data released by the SBA showed that Augusta-based R.W. Allen Construction, once controlled by U.S. Rep. Rick Allen, R-Ga., received a large loan. The new data listed the amount as $917,000.

And the data revealed that the nonprofit New Georgia Project — founded by former gubernatorial candidate Stacey Abrams to register voters statewide and formerly chaired by U.S. senatorial candidate Raphael Warnock — received a $482,000 loan.

In the new relief bill, nonprofits will still be eligible, but publicly traded companies will not, one of several ways Congress has retooled the program to boost smaller businesses.

A conflicts-of-interest provision added to the new package addresses the backlash over politicians’ companies benefitting. Now, companies that are more than 20% owned by a member of Congress, an executive branch department head, the president, vice president, or the spouse of any such person would be barred from participating. If any company fitting that description has already received a loan, its connections must be disclosed if it wants the loan forgiven.

Those terms don’t cover Gov. Kemp, because he is not a federal official, and they apparently won’t apply to the loans connected to Perdue or Allen either, since their stakes in the companies are below the threshold.

Though Rep. Allen’s wife, Robin, is listed as chairman on R.W. Allen Construction’s website, she and her husband own less than a 20% stake, company CEO and president Scott Clark said.

In response to an inquiry from The Atlanta Journal-Constitution about the six loans to the Perdue family’s companies, an Agriculture Department spokeswoman said in an email that the secretary “has no involvement or ownership with any of these companies. These businesses are owned indirectly by a trust of which Secretary Perdue’s adult children are 99% stakeholders.”

But because his wife, Mary, is a trustee with a 1% stake, under federal ethics rules that makes her husband a 1% stakeholder, too, the spokeswoman said.

Under federal ethics rules, since his wife has a 1% stake in a family trust, that make U.S. Secretary of Agriculture and former Georgia governor Sonny Perdue a 1% stakeholder in the family's complex, multimillion-dollar business holdings, an Agriculture spokeswoman said. Perdue is seen here preparing to speak at a GOP briefing at Georgia Republican headquarters in Buckhead in November. (Alyssa Pointer / Alyssa.Pointer@ajc.com)

Credit: Alyssa Pointer / Alyssa.Pointer@ajc.com

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Credit: Alyssa Pointer / Alyssa.Pointer@ajc.com

Enough distance?

The new provisions may not lay to rest the controversies about loans to the politically connected.

The nonprofit government watchdog group Accountable.US, which brought the Perdue-tied PPP loans to the AJC’s attention, said the former Georgia governor hasn’t sufficiently separated himself from his family’s complex, multimillion-dollar business holdings. Perdue contends he has done just that, in compliance with an ethics agreement he signed when Trump nominated him for the post, by restructuring his family’s management trust so that he and his wife have no ownership interest.

But Perdue’s disclosure filed last year revealed he had become a co-trustee of a fund that holds many of the same assets as his original family trust, Politico reported in October.

Specialty Stone Supply in Hoschton, Ga., received a $38,137 loan from the federal Paycheck Protection Program on advice from its accountant. Gov. Brian Kemp owns a 50% stake in the business, his spokesman told the AJC.  (Curtis Compton / Curtis.Compton@ajc.com)

Credit: Curtis Compton / Curtis.Compton@ajc.com

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Credit: Curtis Compton / Curtis.Compton@ajc.com

In the case of the $38,137 loan to Specialty Stone Inc., a company connected to Georgia’s current governor, Accountable.US director of strategic initiatives Chris Saeger called out Kemp for taking government assistance after prompting $46 million in cuts last year to the Department of Human Services, which oversees child welfare, elder abuse prevention and food stamp programs. “He has supported massive cuts to human services that are probably needed now more than ever during a global pandemic,” Saeger said.

Kemp spokesman Cody Hall said the governor has supported the PPP program, and he is not one of the four employees who benefitted from the relief loan to Specialty Stone Supply, nor is he involved in day-to-day business operations. The company applied for a loan on advice from its accountant, amid supply chain challenges and customers postponing projects because of the struggling economy, Hall said.

Georgia ethics experts said they don’t see where Kemp did anything wrong.

“I would have a lot more of a problem if it was state money,” said Stacey Kalberman, chief ethics officer for DeKalb County and former director of the Georgia ethics commission.

The campaign of Republican U.S. Sen. Kelly Loeffler has lambasted the large loan to the New Georgia Project, an organization known for raising millions of dollars from wealthy Democratic donors and formerly helmed by her runoff opponent, Warnock. A press release last month called out Warnock and Abrams for taking part in the program even though they criticized PPP as benefitting wealthy businesses.

A spokeswoman for the nonprofit said Warnock resigned as board chairman in January, well before the awarding of the federal loan, and neither he nor Abrams are on the payroll.

Kemp and UGA help small businesses navigate COVID aid

Small business owners confused by the process of applying for federal pandemic relief funds can get a crash course in a series of webinars being offered by University of Georgia’s Small Business Development Center and the office of Gov. Brian Kemp. The webinars will show business owners what assistance is available them, including forgivable loans through the federal Paycheck Protection Program.

The next webinars are Tuesday at 10 a.m., Wednesday at 2 p.m. and Thursday at 10 a.m. Consultants in the UGA Small Business Development Center’s regional offices will be available to assist with the application process. Registration links are at https://www.georgiasbdc.org/2nd-round-covid-funding-webinars/.

An informational website is at https://www.georgiasbdc.org/sba-economic-injury-disaster-loan/.