There’s now added hope those who misspent Covid funds could be brought to justice. President Biden signed two bills last week giving federal prosecutors more time to fight pandemic fraud.
The two pieces of legislation, the PPP and Bank Fraud Enforcement Harmonization Act of 2022 and the COVID-19 EIDL Fraud Statute of Limitations of 2022, extend the statute of limitations to investigate fraud by borrowers under the Paycheck Protection Program (PPP) and the Economic Injury Disaster Relief Loan (EIDL) from five to 10 years.
“My message to the cheaters out there is this: You can’t hide. We will find you. We will make you pay back what you stole and hold you accountable under the law,” Biden said during the signing.
Both programs were meant to help small business recover from the economic impact of the pandemic. The PPP in particular was meant to keep workers on the job, but one of the most comprehensive analyses found that only around 34% of the funds from the $800 billion program went directly to employees. Despite this and similar findings, more than 90% of loans have been forgiven.
One business whose spending has been repeatedly criticized was the Chateau Marmont, a Hollywood hotel and hangout spot for the rich and famous. The Chateau let go of virtually its entire staff in March 2020, and despite getting nearly $2 million in PPP money, only a small amount of its workforce – some of whom had worked there 30 years or more – were brought back on, according to UNITE HERE Local 11, the union representing Chateau employees. The hotel’s loan was forgiven in April.
UNITE HERE Local 11 has been pushing hard for the Small Business Administration (SBA) to investigate the hotel, alleging the loan should be clawed back because it was mis-used. They have filed multiple complaints with the SBA Office of the Inspector General about the Chateau and other prominent hotels.
“SBA has forgiven loans connected to these borrowers but has not yet answered questions related to borrowers' eligibility for funds and whether funds went to payroll costs,” says Jordan Fein, a research analyst with UNITE HERE and one of the leaders of the campaign.
The new legislation could help ensure such situations – and there are many – receive proper scrutiny and help ensure wrong-doers are tracked down and charged.
Fein sees the bills as “a positive development, but we are hopeful it is followed by meaningful enforcement."
Let’s hope prosecutors actually use the bills to crack down on culprits, and lawmakers, along with the administration, provide enough resources to ensure the job can be done right.