High-Minded Hypocrisy

As they push forward to fill a Supreme Court vacancy shortly before a presidential election, Republicans are putting on a master class in hypocrisy. A new report on self-proclaimed socially responsible corporations reminds us that the tendency to say one thing and do another can also be seen in the world of business.

The study, produced by consulting firm KKS Advisors and an initiative called Test of Corporate Purpose (TCP), looks at large corporations that were signatories to a much-ballyhooed statement issued in 2019 under the auspices of the Business Roundtable. That statement was meant to give the impression that big business is no longer concerned only with maximizing returns for shareholders and is promoting the well-being of other stakeholders such as employees.

Some of us responded to the Roundtable’s statement with skepticism, but KKS and TCP decided to put the 181 signatories to the test, looking at their behavior in dealing with the pandemic and the problem of inequality. Basing its analysis on news coverage of corporate actions, the report compared signatories and non-signatories on topics such as workplace safety, healthcare access, wage levels, diversity and environmental justice. The evaluations used data prepared by Truvalue Labs using the framework of the Sustainability Accounting Standards Board.

The report’s conclusion is that signatories were slightly less likely to respond in a responsible way to the pandemic and slightly more likely to do so with regard to inequality—in other words, endorsement of the Roundtable statement did not make a big difference one way or the other. KKS and TCP put it this way: “our results suggest that corporate commitments to purpose are less informative about a company’s future performance on social and human capital issues than other indicators. What matters more is whether a company has a strong track record of proactively managing issues that may become material during a crisis, and whether a company is an early responder on relevant issues during a crisis.”

I’m not sure exactly what is meant by “proactively managing issue” and being an “early responder” may be a good or bad thing depending on the nature of the response. I also think the report goes too far in trying to use news coverage to assess and rank corporate behavior.

My preference is to use concrete evidence relating to corporate behavior—especially the extent to which companies have been found to be violating regulations relating to the workplace, the environment, consumer protection, etc.

When the Roundtable statement was initially released, I ran the names of the signatories through Violation Tracker and found that they accounted for more than $197 billion in cumulative penalties, with 21 of them having penalty totals of $1 billion or more.

Serious violators can also be found among the companies—both signatories and non-signatories—that receive the highest ratings in the KKS-TCP report, which groups the firms into four quartiles without listing specific scores. For example, included in the quartile with the best ratings is drug giant Novartis, which according to Violation Tracker has paid more than $1.5 billion in fines and settlements over issues such as the promotion of drugs for purposes not approved as safe by the Food and Drug Administration.

That figure will increase to more than $2 billion next week when the database is updated to include recent cases such as one in which Novartis paid $642 million to settle Justice Department allegations relating to kickbacks and other illegal payments. Also in the first quartile are other repeat offenders such as the French bank BNP Paribas, whose Violation Tracker penalty total is more than $12 billion.

Until large corporations end their unlawful conduct, they have no claim to being models of social responsibility.

Covid Contracts and the Fraudsters

If you needed a plumber or a caterer, you would avoid a service provider who had in the past tried to bill you for work not performed or grossly overcharged for what was completed. The Trump Administration takes a different approach. In selecting contractors to provide the goods and services the federal government needs to deal with the pandemic, it has turned to dozens of corporations with a history of cheating Uncle Sam.

This finding emerges from a comparison of the recipients of coronavirus-related contracts to the data in Violation Tracker. The analysis focuses on a list of about 175 larger corporations and non-profits that account for nearly half of the roughly $12 billion in contracts awarded so far for laboratory services, medical equipment and much more.

Among this group, 69 contractors, or more than one-third of the total, have paid fines and settlements during the past decade for healthcare fraud and other violations relating to the federal False Claims Act or related laws. They have been involved in 189 individual cases with total penalty payments of $4.7 billion.

These are not trivial matters. Twelve of the contractors paid total penalties of more than $100 million and the average per parent company was $27 million.

The company with the largest penalty total is pharmaceutical giant Pfizer, which received a $13 million contract from the Department of Health and Human Services and whose separate covid-19 vaccine effort is being touted by the Trump Administration. Over the past decade, Pfizer has been penalized in 15 contracting cases, paying out a total of $987 million, most of it stemming from a 2016 lawsuit in which its subsidiary Wyeth had been accused of overcharging federal healthcare programs by misrepresenting its financial relationships with hospitals.

Drug wholesaler McKesson, which has been awarded contracts worth a total of $9 million, has paid penalties of $453 million to resolve allegations such as reporting inflated pricing information for a large number of products, causing Medicaid to overpay for those drugs.

The Walgreens pharmacy chain, which received a $72 million contract for covid-19 testing services, has paid $367 million in contracting penalties, three-quarters of which stemmed from a 2019 case in which the company had been accused of billing federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to beneficiaries who did not need them and that it overcharged Medicaid by failing to disclose lower drug prices it offered the public through a discount program.

Smaller but still significant penalties have been paid by the companies receiving the largest covid-19-related awards. The Dutch company Philips, recipient of $646 million in ventilator contracts, paid a penalty of $34 million through a subsidiary for giving illegal kickbacks to suppliers that purchased sleep apnea masks that were sold to Medicare beneficiaries. AstraZeneca, recipient of $436 million in contracts, has paid $170 million in penalties for False Claims Act and related violations.

The discovery that many covid-19 federal contractors have a history of misconduct in their government business is consistent with the recent finding by Good Jobs First that thousands of companies receiving CARES Act grants and loans have similar track records, including more than 200 healthcare providers that have paid $5 billion in False Claims Act penalties over the past decade.

Some of those aid recipients are also covid-19 contract recipients. Large companies such as Walgreens, Quest Diagnostics and Becton Dickinson are receiving money from the federal government through multiple channels despite having paid penalties in the past for contracting abuses. The awarding of federal contracts to corporations with a history of misconduct dates back long before the pandemic or this administration, but maybe now is the time to begin doing something about this wrong-headed practice.

Corporate Culprits Receiving COVID Bailouts

In implementing the CARES Act passed by Congress to rescue the economy from the effects of the pandemic, the Trump Administration has directed tens of billions of dollars in aid to companies with a track record of misconduct. This transfer of public wealth to private bad actors will likely turn out to be more expensive than the TARP bailout of the banks a decade ago, given that much of the new aid will not be repaid.

My colleagues and I at Good Jobs First have found that more than 43,000 regulatory violators and other business miscreants have so far received $57 billion in grants and $91 billion in loans, including many that are forgivable. Over the past decade, the penalties paid by these companies for their misdeeds amounted to more than $13 billion. Our findings are summarized in a new report titled The Corporate Culprits Receiving COVID Bailouts.

We derived these numbers through a careful comparison of the CARES Act data we have compiled for our Covid Stimulus Watch website and the entries covering the past decade in Violation Tracker.

More than 87 percent of the CARES Act recipients with a record of misconduct are small businesses, while the other 13 percent are units and subsidiaries of larger companies. The latter received $55 billion in grants and $53 billion in loans, while the smaller companies received $2 billion in grants and $38 billion in loans. The large companies account for 90 percent of the penalty dollars.

The largest violation category among all 43,000 companies is government contracting at $5.6 billion, or 42 percent of the total. Employment-related penalties and consumer protection penalties each add up to about $3 billion (23 percent), while environmental and safety penalties total $1.6 billion (12 percent).

Hospitals (both for-profit and non-profit) and other providers that received funding from healthcare-related CARES Act programs account for $9 billion of the penalties, or 68 percent of the total. More than half of these penalties derive from Medicare and Medicaid billing fraud.

Recipients of small-business loans account for $3 billion of the penalties (23 percent), with the largest portions coming from wage theft and workplace safety and health violations.

There are two other groups of CARES Act recipients with a significant history of misconduct: colleges and universities getting aid through the Higher Education Emergency Relief Fund and airlines receiving massive levels of assistance through the Payroll Support Program. They paid $900 million and $600 million in penalties, respectively.

Seventy CARES Act recipients had been involved in cases that included criminal charges. Of these, 33 of the defendants were large companies, which paid total penalties of $3 billion. The 37 smaller defendants paid $47 million.

While the bulk of CARES Act spending comes in the form of grants and loans, the Federal Reserve is also seeking to prop up the commercial credit market by purchasing corporate bonds, especially those issued by Fortune 500 and Global 500 corporations. The corporations whose bonds have been purchased by the Fed account for more than $100 billion in penalties over the past decade. Because the purchases, which averaged about $3 million per company, are small in comparison to the size of these corporations, we decided not to include the associated penalties in the main analysis of the report.

The revelation that tens of thousands of CARES Act recipients have records of misconduct—including some cases of a criminal nature—raises serious questions about how the aid was distributed. It appears that little screening was done by federal agencies before awarding grants and loans, partly because there were no strict eligibility requirements written into the CARES Act. In some programs the money was apportioned by formula rather than choosing some recipients over others.

In the Paycheck Protection Program there was an application process, but it was handled by banks – which received commissions for their efforts – rather than the Small Business Administration. The application form required business owners to state whether they personally had been convicted or pled guilty to felonies such as fraud and bribery, while for the companies themselves the only issue seemed to be whether they had been debarred by a federal agency.

While little can be done about aid awards that were technically legal, there are steps the federal government could take with regard with two categories of recipients. The first consists of those companies and non-profits which were accused of defrauding the federal government and which paid civil penalties (usually through a settlement) for False Claims Act violations. The other category consists of those involved in cases that were serious enough to be brought with criminal charges.

Given that companies involved in FCA cases are usually allowed to continue doing business with the federal government after paying their penalty, it would be difficult to debar them from future covid stimulus programs. These companies should, however, be subject to additional scrutiny to ensure they do not resume their fraudulent behavior while receiving grants and loans.

The most compelling case for excluding a group of companies from participation in future aid programs concerns those with a history of criminal misconduct. The PPP provision dealing with corrupt business owners should be applied to businesses themselves, especially when the firms involved are larger entities. Doing so would protect taxpayer funds and serve as a deterrent against future corporate criminality.

Small Companies, Big Misdeeds

More than 1 million companies have received financial assistance from the CARES Act. My colleagues and I at Good Jobs First have been seeking to determine how many of those recipients have a track record of misconduct, and we will soon be releasing a report summarizing what we have found.

One conclusion I can share now is that the misbehavior can be found among small companies as well as large ones. While many of the smaller firms and non-profits paid penalties for commonplace offenses, some were involved in more serious cases. Here are some examples:

Coast Produce Company has received a Paycheck Protection Program loan worth between $2 and $5 million (the data was disclosed in ranges). In 2015 it paid $4 million to resolve civil allegations that it fraudulently overcharged the federal government for fresh fruits and vegetables it supplied to military dining facilities and Navy ships in Southern California. As part of a second agreement with criminal prosecutors, it agreed to implement various measures to ensure the company complies with its legal obligations.

The Academy of Art University has received a grant of $1.9 million from the Higher Education Emergency Relief Fund. In 2016 it paid the San Francisco City Attorney $60 million ($20 million in penalties and fees, and units of affordable housing valued at $40 million) in settlement of allegations it had ignored city land use rules, with multiple violations of zoning, signage, environmental, historical preservation and building code requirements.

American Refining Group in Pennsylvania has received a PPP loan worth between $5 and $10 million. In 2019 it had to pay $4.85 million ($350,000 in penalties and $4.5 million in equipment improvements) to resolve allegations by the Environmental Protection Agency that it was violating the Clean Air Act.

Meadows Regional Medical Center in Georgia has received a $9.3 million grant from the Provider Relief Fund. In 2017 it paid more than $12 million to resolve federal and state allegations of violating anti-kickback laws through its financial arrangements with physicians.

The Gagosian Gallery in New York has received a PPP loan worth between $2 and $5 million. In 2016 it paid $4.28 million to the New York Attorney General to resolve allegations that one of its affiliates engaged in sales tax evasion for a decade.

Williamson and McKevie LLC has received an Economic Injury Disaster Loan of $150,000. In a 2018 settlement with the Georgia Attorney General it agreed to give up accounts worth $8.8 million and pay a $20,000 civil penalty to resolve allegations it committed multiple violations of the federal Fair Debt Collection Practices Act and the Georgia Fair Business Practices Act when it repeatedly harassed and deceived consumers.

Adams Thermal Systems has received a PPP loan worth between $2 and $5 million. In 2013 it entered into a deferred prosecution agreement with the U.S. Attorney’s Office and the Occupational Safety and Health Administration to pay more than $1.33 million in criminal penalties and OSHA fines levied as a result of the 2011 death of a worker at the company’s plant in Canton, South Dakota.

These are just a few of the thousands of examples of companies that have gone from being defendants to recipients of federal largesse.

The Corporate Marauder Undermining the Postal Service

Donald Trump got elected in part by selling the idea that his business experience would enable him to do a great job of running the government. We see how that turned out. And now we have another veteran of the private sector wreaking havoc on the United States Postal Service.

Louis DeJoy was named postmaster general after spending four decades in the trucking and logistics business, becoming wealthy enough in the process to join the ranks of Republican megadonors. He made his name and his fortune through the creation of a company called New Breed Logistics, which grew to prominence by securing contracts with large corporations such as Boeing as well as the Postal Service.

In 2014 he sold New Breed to the Fortune 500 company XPO Logistics, staying on to run the New Breed operation and serve as a director of XPO until 2018. If we want to get a sense of the management approach DeJoy is bringing to the USPS, we can look at the track record of New Breed and XPO.

As shown in Violation Tracker, XPO and its subsidiaries have racked up a total of $65 million in fines and settlements in more than 70 misconduct cases over the past two decades. Nearly two-thirds of that total comes from wage theft. Last year XPO paid $16.5 million to resolve allegations that for years it misclassified drivers as independent contractors to deny them overtime pay and paid breaks.

This year XPO paid another $5.5 million for wage and hour violations relating to workers at its Last Mile operations. Altogether, XPO and its subsidiaries have had to pay out some $40 million in wage theft lawsuits. Another $3.5 million settlement in a misclassification case brought against an XPO unit and the retailer Macy’s is awaiting final court approval.

Another problem area for XPO is employment discrimination. Two of the cases in this category relate to New Breed Logistics. In 2015 a federal appeals court upheld a $1.5 million jury verdict in a sexual harassment and retaliation case originally filed by the Equal Employment Opportunity Commission in 2010. Also in 2015, New Breed had to pay $90,000 to resolve allegations by the Office of Federal Contract Compliance Programs that it engaged in discriminatory practices at a facility in Texas.

XPO has also been called out for workplace safety and health deficiencies. It has been cited more than 20 times by OSHA for serious, willful and repeated violations.

Along with the mistreatment of workers, the rap sheet of XPO and its businesses includes allegations of cheating the federal government. This comes by way of Emery Worldwide, an air freight company that became part of Con-Way Inc., which was purchased by XPO in 2015.

In 2006 Emery paid $10 million to settle a False Claims Act lawsuit brought by the Justice Department concerning the submission of inflated bills to the Postal Service for the handling of Priority Mail at mail processing facilities during a multi-year contract.

Leave it to the Trump Administration to choose someone to head the Postal Service who was associated with a company linked to fraud committed against that same agency.

XPO continues to do business with the Postal Service, and DeJoy has continued to receive income from the company through leasing agreements at buildings he owns. Even if XPO had a spotless record, DeJoy’s ongoing dealings with it create a glaring conflict of interest.

DeJoy claims to be retreating, at least through the election, from the measures that threatened to create chaos for mail-in ballots.  Nonetheless, his corporate marauder’s approach to the management of the Postal Service still poses a grave threat to the future of a vital American institution.

The Corporate Culprits Receiving Covid Bailouts

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.

Who Is Hogging Covid Stimulus Funds?

The main cause for the stalemate in Congress over a new round of covid stimulus funding is a belief by numerous Republicans that the federal government has been too generous to the unemployed. The enhanced jobless benefits created by the CARES Act need to be curtailed, they argue, to push people to return to work.

Those worrying about disincentives to work do not express similar concerns when it comes to assistance for businesses. Yet there are glaring examples of corporations that have exploited a variety of covid programs to the hilt.

Take the example of the aviation sector. As shown in Covid Stimulus Watch, the Payroll Support Program (PSP) has provided about $20 billion in grants and $7 billion in loans not only to the major airlines but also to smaller passenger carriers, air cargo companies, airport service providers and others.

Despite the generosity of this program, about 170 recipients also turned up on the list released in early July of companies that received awards under the Paycheck Protection Program. The PPP provided these firms more than $200 million in potentially forgivable loans on top of the $500 million in grants they got from the PSP. (The $200 million is calculated by using the midpoint of the ranges in which the PPP awards were disclosed.)

That double-dipping is not the end of the story. The Small Business Administration recently disclosed the names of companies that have gotten Economic Injury Disaster Loans (EIDL), a program that has been greatly expanded to provide another form of covid aid.

More than 70 of the companies that got PSP and PPP awards also show up among the EIDL recipients, making them triple-dippers. The largest total haul, $33 million, went to Ohio-based Champlain Enterprises, which operates CommutAir. The group as a whole received $130 million in grants and loans.

The use of multiple programs by the aviation sector is more troubling in light of evidence that some of the companies have engaged in large-scale layoffs at the same time they were receiving federal assistance. Recently, Rep. James Clyburn, who chairs the Select Committee on the Coronavirus Crisis, Rep. Peter DeFazio, chair of the House Committee on Transportation and Infrastructure, and Rep. Maxine Waters, chair of the House Committee on Financial Services, sent a letter to Treasury Secretary Steven Mnuchin about this situation.

The letter cited a dozen aviation contractors that had accepted PSP aid after engaging in layoffs. One of the firms was Constant Aviation, which in addition to a PSP grant of $23 million, received a PPP loan worth between $5 million and $10 million.

Another sector that is making use of multiple covid programs is healthcare. Hospitals, nursing homes and other medical practices have received tens of billions of dollars under the Provider Relief Fund and the Medicare Accelerated and Advance Payment Program. This assistance was certainly needed, yet dozens of the providers also got assistance from the PPP.

For example, Bronxcare Health System in New York, got more than $100 million from the Provider Relief Fund and then received two PPP loans worth between $4 million and $10 million. MidMichigan Health got $60 million from the Provider Relief Fund and then between $1 million and $2 million from PPP.

The nursing home chain SavaSeniorCare received a total of $35 million from more than 50 separate grants through the Provider Relief Fund as well as PPP loans worth $9.5 million to $21 million. This is on top of $24 million in accelerated Medicare payments.

Where is the hand-wringing over the possibility that all these payments are creating a disincentive for corporations to operate efficiently? These companies may argue that the funds are necessary for their survival, but so is expanded unemployment pay for the millions of people still left jobless by the pandemic.

Big Business and the PPP

By now it is clear that the recipients of Paycheck Protection Program loans were often companies larger than the mom-and-pop operations we were led to believe would be the main beneficiaries. A closer examination of the data shows assistance going not just to mid-sized companies but also to portions of Big Business.

This finding comes from a comparison of the PPP data released in early July to the 1.1 million entries my colleagues and I at Good Jobs First have assembled in our Violation Tracker and Subsidy Tracker databases. The Trackers link the individual penalty or subsidy records to a universe of nearly 4,000 parent companies.

We have now been looking for matches between Tracker data and the more than 1 million entries we have assembled in our newer database Covid Stimulus Watch, which contains data on loans and grants to companies and large non-profits from 19 programs created by the CARES Act.

So far, we have found 775 Tracker parents that have also received covid-related financial assistance, either directly or through a subsidiary. Not all of these are surprises. Some CARES Act programs were designed to help larger companies. For example, the Payroll Support Program is providing massive grants and loans to the major airlines (as well as smaller carriers, air cargo companies and others).

The healthcare systems receiving assistance from the Provider Relief Fund include the large for-profit hospital chains HCA and Tenet as well as both large and small non-profits. The Federal Reserve’s Secondary Market Corporate Credit Facility has been buying the bonds of Fortune 500 companies.

The larger corporations participating in those programs account for about two-thirds of the Tracker-Covid Stimulus Watch parent overlaps. That leaves about 220 that show up in connection with the PPP. Of these, about 150 are privately held. That means, of course, that precise information on their size is not readily available.

We chose to include these firms in the Tracker universe because of indications they are sizeable businesses. Some, in fact, are sizeable enough to be included in the Forbes list of the largest privately held companies in the United Sates.

One example is Ashley Furniture Industries, a manufacturer and retailer that Forbes estimated has $5.8 billion in revenue and 31,000 employees. Two of Ashley’s stores received PPP loans worth between $500,000 and $1.4 million (the loan amounts were disclosed in ranges).

Ma Labs, a computer components producer which Forbes puts at $2.1 billion in revenue and 1,200 employees, received a PPP loan worth between $2 million and $5 million. A more complicated example is Tauber Oil, which Forbes says has revenue of $7.4 billion but only 168 employees. It received a PPP loan of at least $2 million.

Some very large publicly traded companies can also be linked to PPP loan awards. Garden Fresh Gourmet, a salsa company in Michigan owned by Campbell Soup, got a PPP loan in the $2 million-$5 million range. Campbell Soup, with revenues of $9.9 billion, is No. 322 on the Fortune 500.

Marion Resource Recovery Facility LLC, which operates a waste management facility in Oregon, got a PPP loan of up to $250,000. The company is owned by Republic Services, No. 305 on the Fortune 500 with $10.2 billion in revenue.

Large foreign corporations also have PPP connections. For example: Hanwha Advanced Materials America LLC, which received a PPP loan in the $2 million-$5 million range, is owned by South Korea’s Hanwha Group, which ranks No. 261 on the Fortune Global 500 with revenue of $44 billion.

Welspun Pipes, a subsidiary of India’s large Welspun Group conglomerate, received a PPP loan between $5 and $10 million.

These are but a few examples of how some of the world’s largest corporations have managed to benefit from a program advertised as a lifeline for small business.

CORRECTION: I have been told by Campbell Soup that it has sold Garden Fresh Gourmet, even though the latter’s website still refers to an ownership relationship.

Foreign-Owned Regulatory Violators Found Among PPP Recipients

The massive Paycheck Protection Program was depicted as a necessary measure to save American small businesses, yet the list of recipients of the forgivable loans released by the Treasury Department contains numerous companies that are neither small nor American.

These include firms such as Jindal Saw USA LLC and JSW Steel (US) Inc., two affiliates of the Jindal Group, a multi-billion-dollar conglomerate owned by one of India’s wealthiest families. JSW Steel’s investments in the United States have been touted by Donald Trump, though the company later sued the U.S. Commerce Department when it was denied permission to import steel from India without paying a steep tariff.

Continental Carbon Company, owned by Taiwan’s International CSRC Investment Holdings Company (formerly China Synthetic Rubber Corporation), received a PPP loan worth between $5 million and $10 million.

These are two examples that have emerged from an examination of the PPP recipient list my colleagues and I have been doing as part of the integration of the data into our Covid Stimulus Watch website. Here are some others:

Giti Tire Manufacturing (USA) Ltd and Giti Tire (USA) Ltd, subsidiaries of Singapore’s Giti Tire.

Sekisui Voltek, LLC, a subsidiary of Japan’s Sekisui Chemical.

The U.S. subsidiary of Korean Air Lines (owned by the Hanjin Group).

Asahi Forge of America Corporation, a subsidiary of Japan’s Asahi Forge.

It does not come as a complete surprise that foreign-owned companies appeared on the PPP list. There was discussion of this possibility at the time the program was debated and enacted.

The issue then was whether such entities would be eligible for the loans if they were part of foreign companies with a workforce that surpassed the PPP employee limits. The muddled guidance provided by the Trump Administration has apparently allowed funds to go to firms linked to foreign corporations that are far from small businesses.

Another concern has come to light as we match PPP recipients to the data my colleagues and I have assembled for our other database, Violation Tracker: some of these foreign companies getting PPP loans have a history of misconduct.

The U.S. operations of Jindal Group have paid more than $1.4 million in penalties, mostly resulting from workplace safety and health violations.

Continental Carbon has paid over $2 million in penalties, nearly all of which involved Clean Air Act violations. Giti Tire, Sekisui, and Asahi Forge have also paid penalties to OSHA and/or the EPA.

In 2007 Korean Air Lines had to pay a $300 million criminal fine to the U.S. Justice Department after pleading guilty to conspiring to fix the prices of passenger and cargo flights. In 2018 Hanjin Transportation Co. Ltd., also part of the Hanjin Group, paid more than $6 million to the Justice Department to resolve allegations relating to a bid-rigging conspiracy that targeted contracts to supply fuel to United States Army, Navy, Marine Corps, and Air Force bases in South Korea.

In creating the Paycheck Protection Program, Congress probably did not intend to provide assistance to entities that are owned by large foreign companies and that had a track record of repeated regulatory violations and other serious misconduct.

Now that there is consideration of extending and expanding PPP, the question is whether such companies will continue to benefit from the largesse of American taxpayers.

Double-Dipping by PPP Healthcare Loan Recipients

Healthcare providers have faced significant challenges during the pandemic, but it was still surprising to see that sector show up as the largest recipient of assistance under the Paycheck Protection Program. That’s because hospitals and other providers were already receiving tens of billions of dollars in federal aid from other CARES Act programs.

To the growing list of PPP defects we can add: double-dipping by healthcare recipients.

Take the case of Bronxcare, which operates a number of health facilities in New York City. Two of its units were revealed to have gotten PPP loans worth $2 to $5 million each (the amounts were disclosed as ranges). Previously, it received more than $100 million from the HHS Provider Relief Fund.

The Great Plains Health Alliance, a health system headquartered in Kansas, received seven PPP loans worth up to $11 million. Previously, it received more than $24 million in grants under the Provider Relief Fund as well as $16 million in expedited funds through the Medicare Accelerated and Advance Payment Program.  

The Erie County Medical Center in Buffalo, New York received a PPP loan worth between $5 million and $10 million after having received more than $40 million from the Provider Relief Fund and over $35 million in accelerated Medicare payments.

Bronxcare, Great Plains and Erie County Medical are all non-profits, but double-dipping can also be found among for-profit healthcare providers. Vibra Healthcare, which operates hospitals in 18 states, received at least 16 PPP loans worth between $24 million and $56 million. As ProPublica pointed out in its investigation of the company, Vibra applied for the loans in the names of numerous subsidiary LLCs rather than the parent company.

Zwanger-Pesiri Radiology, which operates imaging facilities in New York City and Long Island and received a PPP loan worth $2-$5 million, also received $4 million from the Provider Relief Fund and $9 million in accelerated Medicare payments.

Altogether, Covid Stimulus Watch contains data on more than 40 healthcare companies that got PPP loans as well as assistance from other CARES Act programs.

These overlaps are made more controversial by the fact that some of the double-dippers have checkered records when it comes to regulatory compliance, including issues relating to billing irregularities. For example, in 2016 Vibra Healthcare had to pay $32.7 million to resolve a federal False Claims Act case alleging that it billed Medicare for medically unnecessary services. In 2019 it paid $6.2 million to settle a Medicare fraud case.

In 2016 Zwanger-Pesiri paid $10.5 million to settle allegations that it billed Medicare and Medicaid for procedures that had not been ordered by physicians. Along with the usual civil allegations, the company pled guilty to two counts of criminal fraud.

In 2013 Erie County Medical Center paid $268,000 to the New York State Attorney General to resolve allegations of excessive Medicaid billing, and it paid $335,000 to the U.S. Labor Department for wage and hour violations.

The healthcare providers may have broken no rules in applying for PPP loans while also receiving assistance from other covid-related programs, but their ability to do so points to the need for the federal government to take a more coordinated approach to CARES Act assistance.

The fact that some of the double-dippers also have a history of misconduct—including cheating the same federal government now awarding them grants and loans—highlights the need for even greater scrutiny of recipients.