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.

The Paycheck Protection Program and Wage Theft

The Trump Administration’s reluctant disclosure of the names of more than 600,000 recipients of Paycheck Protection Program aid has shown that many of the loans went to firms that are well-connected and that otherwise don’t fit the image of mom-and-pop businesses we were led to believe would be the main beneficiaries.

There is another problem: many of the recipients previously engaged in behavior that amounts to paycheck endangerment. They failed to comply with minimum wage and/or overtime requirements and thus paid their workers less than what they were owed. In other words, they engaged in wage theft.

This comes from an analysis of data my colleagues and I have collected for the Covid Stimulus Watch and Violation Tracker databases. That includes the big PPP dataset and information on penalties imposed by the Labor Department’s Wage and Hour Division, one of the many agencies whose enforcement data can be found in Violation Tracker.

We are in the process of determining which PPP recipients are on the list of wage and hour violators, so we can highlight that in Covid Stimulus Watch along with other corporate accountability data.

As a first step, I looked at the 4,800 companies identified as receiving the largest PPP loans–$5 million to $10 million. So far, I have found 88 of those recipients that paid wage theft penalties since 2010. Their penalties averaged about $100,000—which is roughly double the amount paid in back pay and fines in a typical wage and hour case.

The largest wage theft penalty I’ve found for a PPP recipient is the $1.9 million paid by Hutco Inc., a marine and shipyard staffing agency based in Louisiana. In announcing the penalty, the U.S. Department of Labor said the company had utilized improper pay and record-keeping practices, resulting in “systemic overtime violations” affecting more than 2,000 workers.

PPP recipient National Food Corporation, a major egg producer, paid $435,000 in penalties for wage and hour violations at its operations in Washington State. The company also paid $650,000 to settle a sexual harassment lawsuit filed by the Equal Employment Opportunity Commission.

Hearth Management, a PPP recipient that manages assisted living facilities in four states, paid a total of $383,000 in wage theft penalties at several locations. At a facility in Tennessee, the Labor Department reported that the company made deductions from timecards for meal breaks even when employees worked through those breaks, and it failed to include on-call and other non-discretionary supplements when calculating overtime rates.

Other PPP recipients with substantial wage theft penalties include the publisher O’Reilly Media, the electronics company Sierra Circuits, the restaurant chain Legal Sea Foods, and Erie County Medical Center in Buffalo, New York, which has also been penalized for overbilling Medicaid.  Apart from the PPP money, the Erie County Medical Center has received more than $75 million in grants and loans from other federal programs related to covid relief.

We will undoubtedly find many more companies with similar track records as we analyze the other hundreds of thousands of PPP recipients.

It was not illegal for employers with a history of wage theft penalties to apply for and receive PPP assistance, yet the presence of these companies in the recipient list points to dual risks.

First, there is the possibility that these firms will “cook the books” when it comes to reporting on their use of PPP funds and submitting their requests to have the loans forgiven. Second, these firms may feel that the current economic crisis will give them cover for returning to their old practices of wage theft. At a time of massive unemployment, these firms may assume that workers will not dare to complain about being shortchanged on their pay.

For these reasons, PPP employers with a history of wage theft penalties should be subject to additional scrutiny both by the Wage and Hour Division and the Small Business Administration. Paycheck protection must mean not only the preservation of jobs but also the defense of fair labor standards.