Allegations of insider trading threaten to derail a plan by the Trump Administration to provide a $765 million covid-related loan to Eastman Kodak. This comes on the heels of controversy over the administration’s use of $700 million in coronavirus relief funds as a loan to trucking company YRC Worldwide, supposedly for national security reasons.
There will undoubtedly be more revelations about these specific sweetheart deals, but they also highlight a broader question about the vast amounts of federal assistance that has been flowing to businesses during the pandemic: to what extent are funds going to companies that have a track record of misconduct and may very well continue those misdeeds while getting taxpayer aid.
My colleagues and I have been seeking to answer at least the first part of that question with our work on two databases: Covid Stimulus Watch, which collects information on recipients of CARES Act business assistance, and Violation Tracker, which for the past five years has been assembling data on penalties paid by thousands of companies for regulatory infractions and other wrongdoing.
Each of the databases seeks to match the companies named in individual covid awards or penalties to a universe of more than 3,000 larger parent corporations. That allows us to aggregate the data to show the full extent to which a parent is getting aid or being penalized across its various operations.
We are also connecting the parents across the two datasets. We have 700 examples of medium and large companies that are both receiving covid aid and that have paid federal or state penalties for misconduct.
These corporations and their subsidiaries have received a total of $52 billion in grants and $54 billion in loans from CARES Act program. They have paid a total of $112 billion in fines and settlements since 2010. The assistance has, in effect, almost totally reimbursed them for their penalties.
Behind these aggregate numbers are some significant differences among the 700 corporations. About 250 of the largest companies are on the list because the Federal Reserve has been purchasing their bonds under the Secondary Market Corporate Credit Facility. Those purchases total about $1.8 billion, but the average amount per company is only about $7 million—a small figure for the Fortune 500 and Global 500 firms that dominate the list. At the same time, these companies — which include the likes of BP, Volkswagen and Merck – account for $101 billion of the penalties, or about 90 percent.
About 150 of the parents are medium-size companies that received only Paycheck Protection Program loans worth a total of $712 million. Their penalty total is about $560 million.
The remaining 300 parents fall into two main categories. First, there are the major airlines and other aviation companies being assisted through the Payroll Support Program. They account for $17 billion in grants and $7 billion in loans. Their penalty total is $614 million, with the major airlines accounting for most of that. American Airlines, for instance, has since 2010 paid $79 million in safety penalties, $42 million in employment penalties, and $22 million in federal contracting penalties.
The subset of common parents between Covid Stimulus Watch and Violation Tracker that accounts for a substantial number of covid recipients, a large aid amount and a hefty penalty total is healthcare. About 250 for-profit and non-profit providers have received some $34 billion in grants and $44 billion in loans and accelerated payments.
These hospitals, nursing homes and medical practices have paid $8.5 billion in fines and settlements since 2010. This includes more than $1 billion in penalties for employment-related violations such as wage theft and discriminatory practices.
Yet by far the biggest portion — $5.3 billion — of the penalties paid by the healthcare providers stem from False Claims Act matters. These are cases in which they have been accused by the federal government of improperly billing Medicare and Medicaid, thus engaging in fraud. In most cases the providers face only civil charges and are allowed to pay their way out of liability.
The poster child for this group of corporations is the for-profit hospital chain Tenet Healthcare, which has received $684 million in covid grants and $817 million in loans and accelerated payments. Since 2010 Tenet has paid more than $600 million in False Claims Act penalties, including a case in which two subsidiaries pled guilty to criminal charges relating to the payment of illegal kickbacks for patient referrals.
If policymakers want to explore whether covid aid is being misused, recipients such as Tenet — which are now receiving aid from the same federal government they were previously accused of cheating — might be a good place to start.
Note: we are also in the process of identifying small companies receiving covid aid that have a history of misconduct.