A new report from three government watchdog groups reveals a stunning figure: companies controlled by private equity firms received approximately $5.3 billion in federal CARES Act funding. The same private equity firms collectively hold $908 billion in cash reserves.
The report, by Americans for Financial Reform Education Fund, the Anti-Corruption Data Collective and Public Citizen, found that most of this money came from programs that were meant to help small businesses survive pandemic shutdowns, not large companies with billions in holdings.
Some of the PE-owned companies have track records of questionable practices. Ramaco Resources, a coal mining company owned by Energy Capital partners, was given an $8.4 million Paycheck Protection Program (PPP) loan despite having been guilty of several workplace safety violations in the past, including $43,000 in penalty fees since 2020.
On top of that, Ramaco reduced its workforce after getting the loan and last year paid its top three executive $6.35 million, according to the report.
But track records and outcomes are apparently irrelevant when it comes to deciding which recovery loans will be forgiven. In fact, 69.5% of PPP loans, including those to Ramaco, won’t be paying even a nickel back.
The troubling exposé brings to light yet another of the CARES Act’s deficiencies.
Sadly, PE portfolios are not the only CARES Act beneficiaries with a history of misconduct or that are well-positioned to withstand economic pressures. In September 2020, we found that more than 43,000 businesses and non-profit organizations that were guilty of some sort of workplace or operating violation – together racking up more than $10 billion in penalties, fees and settlements – had nonetheless received almost $150 billion in CARES Act money.
More than half of the penalty fees were imposed on healthcare providers that cheated programs such as Medicare and Medicaid. The most common misconduct involved cases brought under the False Claims Act, a federal law to fight fraud by government contractors. Such violations were common across all 43,000 companies, making up almost half of all penalty fees.
Good Jobs First also previously reported that 1,900 companies were given PPP loans that were meant to support their employees – instead, they laid off 76% of them. The majority of workers were only given a Worker Adjustment and Retraining Notification (WARN) Act notice after they were laid off, and most recipient companies got their money even after the layoffs occurred.
With all these instances of taxpayer dollars going to companies backed by deep pockets or with regulatory violations, it’s clear we need much stronger guardrails for loan forgiveness that have yet to be put into place. This new exposé piles on to the mounting evidence that companies need to show what they did with the money, including how many jobs they saved, before any more debt is forgiven.
Until we start preventing these recipients from using federal funds or implementing serious repercussions for them, we’re sending the message that it’s OK our system rewards large and wealthy companies, some of which soared to record profits during the pandemic, at the expense of everyday residents still struggling to get safely back to work.