Who knew Steve Mnuchin had the chops to dunk on the Los Angeles Lakers? Of course, no one could have predicted that an NBA franchise would pull a bush-league move like taking $4.6 million out of an emergency relief fund for small business, either. The Treasury Secretary called that “outrageous” and warned that the Small Business Administration would now audit all loans of $2 million or more under the Paycheck Protection Program. Non-qualifying businesses will pay a lot more, Mnuchin warned in this CNBC interview, if they don’t voluntarily return the money:
“I’m going to be putting out an announcement later this morning that for any loan over $2 million, the Small Business Administration will be doing a full review of that loan before there is loan forgiveness,” Mnuchin said on “Squawk Box.”
“This was a program designed for small businesses. It was not a program that was designed for public companies that had liquidity.’” …
“I think that’s outrageous,” he said of the loan to the Lakers, which announced Monday it has repaid it.
“We don’t think they ever should have been allowed to,” Mnuchin said. “We put out an FAQ clarifying the certification.”
According to guidance posted by the Small Business Association on April 23, borrowers must “certify in good faith” their loan request is “necessary.”
The Lakers did commit to repay the loan, as did Ruth’s Chris Steak House, Shake Shack, and a handful of others. Others, however, have been less embarrassed about raiding PPP. The Washington Post contacted some of the publicly traded companies that got seven-figure loans through the program, and they’re reluctant to part with the windfall — for now, anyway:
A handful of publicly traded companies say they aren’t planning to return loans received from a small-business rescue program, despite pressure from the Trump administration to repay the funds.
Companies in the hotel, cruise ship and medical-device sectors said they are qualified to receive the money under the Paycheck Protection Program and need the funds to stay in business.
Their resistance comes days after the Small Business Administration suggested that dozens of publicly held companies should give back money received from the Paycheck Protection Program by May 7.
Not coincidentally, those are the same industries that lobbied Congress to keep more restrictive language out of the bill. They don’t want to return the money because they worked hard to put themselves in position to keep smaller businesses from getting their hands on it. Congress obliged by leaving the terms ambiguous enough that the Los Angeles Lakers — one of the most lucrative franchises in all of major league sports! — could dip into the trough.
Mnuchin suggested that criminal penalties might apply for those who do not return the cash. At the very least, those who got $2 million or more will have to now pay attorneys to deal with the audit if they don’t surrender the cash first. In the meantime, perhaps some naming and shaming will suffice — and if that doesn’t work, perhaps a concerted effort to shun them in favor of smaller businesses might do the trick.