Members of Congress Profited from COVID Bailout While Small Businesses Were Shut Out - Sludge

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As members of Congress pat themselves on the back for passing a new coronavirus relief package after a nine-month impasse, Americans can count on less money in the form of stimulus checks and unemployment insurance than they did in the spring, when Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)—and took advantage of it themselves.

A Sludge analysis of COVID bailout data found that companies at which 28 members of Congress or their spouses hold positions received at least $27 million in loans likely to be forgiven under the CARES Act.

The revelation that so many members of Congress personally benefited from the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) authorized by the CARES Act comes as Congress must consider how to address President Trump’s Tuesday night demand that all Americans be given $2,000 stimulus checks, after their Monday night bill cut in half unemployment insurance and stimulus checks for Americans compared to an earlier House proposal. President Trump criticized the bill but fell short of saying he’ll veto it; Congress appears to have enough votes to override a veto. On Thursday morning, House Republicans blocked Democrats’ attempt to increase stimulus check payments from $600 to $2,000.

Sludge found that 18 congressional Republicans and one Libertarian have received $21.7 million for 38 businesses with which they are associated. Nine Democrats received $6.1 million for 11 of their own businesses. An additional roughly $54 million went to nonprofits, think tanks and policy institutes, congressional caucuses, and higher education institutions tied to members of both parties.

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While the majority of Democrats and Republicans voted to pass Monday’s COVID relief package, two Democrats and 57 Republicans voted against it. Among the Republicans who voted to not fund a second round of PPP, among other provisions, are 10 who received $15.3 million in PPP loans from the CARES Act.

“The opportunities for corruption and scandal are particularly ripe when the business interests of members of Congress and other government officials go to the trough for public funds from programs they helped design,” said Craig Holman of Public Citizen, a non-partisan government watchdog. “Like the larger business that…reaped the greatest rewards from the PPP program, government officials themselves have inside knowledge of how the application process works and who to contact for the public assistance. Even if no deliberate favoritism is involved, the optics of potential self-dealing alone undermines public confidence in these programs.”

Rep. Brett Guthrie (R-Ky.) was one of the members who voted nay on Monday night. He also benefited from PPP funding when his family’s business received $4.3 million in loans that most likely will not have to be repaid.

Along with many other Republicans, Guthrie had decried stimulus spending aimed at ordinary workers and individuals who do not earn six digit salaries. In July, Guthrie, PPP recipient Rep. Ralph Norman (R-S.C.) and 33 other GOP representatives wrote to President Trump and implored him to stop extended unemployment benefits from reaching jobless Americans in the spring and summer. Extending the additional $600 in weekly unemployment checks would “only slow our economic recovery,” the lawmakers wrote.

It is not illegal or against House and Senate ethics rules for members to hold positions outside their duties in Congress—and many do, while simultaneously crafting legislation that will help those companies, Sludge found in July.

While the loans to lawmakers certainly are helpful for their businesses, some of the biggest financial assistance from the CARES Act likely comes in the form of tax relief for so-called “pass through” business entities, such as LLCs. It is common for members of Congress to be affiliated with or invested in such companies, Sludge’s analysis shows. Provisions in the CARES Act allow for such companies to receive an immediate refund on losses from prior years and other lucrative tax deductions that amount to a windfall. The biggest winners will be “the roughly 43,000 taxpayers with $1 million or more in annual income [that] will reap 82 percent of the benefits and get an average tax cut of more than $1.6 million,” according to tax expert Steve Rosenthal, writing in Forbes.

Congress could have targeted relief to the small businesses who need it most rather than millionaires and large businesses, Rosenthal argued. Of all the private companies members of Congress are associated with, the majority—205 of 347—are LLCs, according to Sludge’s analysis.

Wealthiest Members and Their Loans

Dean Phillips (D-Minn.), net worth $77 million, received a $135,800 loan for his Geniecast, LLC.
Vern Buchanan (R-Fla.), net worth $73.9 million and the fourth-richest member of Congress, received $2.8 million in loans for four of his 27 companies.
Kevin Hern (R-Okla.), net worth $60.9 million, received a loan of $1,070,000 for his KTAK Corporation. Hern, who owns 97 percent of the company, estimated its value at between $5 and $25 million last year.
Norman, net worth $43.4 million, received $306,520 for four of his 20 companies.
Mitch McConnell and wife Elaine Chao, with a combined net worth of $34.4 million, are tied to a loan for the Chao-family owned Foremost Maritime Inc. of $417,700.
Roger Williams (R-Texas), net worth $27.7, received $1,430,000 for his JRW Corporation. Last year, he valued the company at more than $50 million.
Greg Pence, net worth $12.6 million, received a loan of $79,441 for his Pence Group, LLC, which he valued on his financial disclosure as worth between $5 and $25 million.
T.J. Cox (D-Calif.), net worth $11.8 million, received $609,825 for two of his 26 businesses.
Nita Lowey (D-N.Y.), net worth $10.9 million, is tied to a loan of $1,100,000.00 that went to her husband’s law firm, Lowey Dannenberg P.C.
Mike Kelly (R-Pa.), net worth $10.4 million, received $974,100 for four of his car dealerships.
Ralph Abraham (R-La.), net worth $4.8 million, received loans of $38,300 for two of his four companies.
Earl Blumenaeur (D-Ore.), net worth $4.5 million, received $432,734 for his two companies.
Vicki Hartzler (R-Mo.), net worth $3.8 million, is tied to $451,200 for her husband’s Heartland Tractor Company, which she valued at between $1 and $5 million and from which he claimed as much as $1 million in income last year.
Markwayne Mullin (R-Okla.), net worth $3.7 million, received $988,700 for his two family plumbing businesses.

Just as the majority of PPP money went to large companies and not the mom-and-pop small businesses the funds were intended for, Congress’ PPP haul went to some of its richest members. Fourteen members who rank in the top 100 wealthiest in Congress, with a combined net worth of $354.7 million, received or are tied to entities that received $11.4 millions in loans. Among them are car dealerships owned by Vern Buchanan (R-Fla.), which have been open since March as Florida pursued an aggressive re-opening strategy. The 12th-richest member of Congress, Roger Williams (R-Texas), received more than $1 million for a company he values at more than $50 million and where he is the sole director and president, according to his annual financial disclosure. Kevin Hern (R-Okla.) received more than $1 million for the five McDonald’s restaurants he owns a 97 percent stake in, even though dine-in service resumed in May. But these wealthy members who received PPP money don’t make up the largest loans granted to lawmakers.

Largest Loan Recipients

Carol Miller (R-W.V.) is the legal secretary of four of five of her husband’s car dealerships, which received loans totaling $3.1 million.
Two wineries and two farms tied to Devin Nunes (R-CA) received a total $2.95 million in bailout money.
Buchanan’s car dealership loans topping $2.8 million.
Businesses owned by T.J. Cox received more than $600,000 in PPP and EIDL loans.
A hospitality company owned by Ed Case (D-HI) received $1.9 million thanks to the CARES Act. Two economic development organizations with which he is associated received a combined $670,030.
Markwayne Mullin’s $988,700 in loans.
Mike Kelly’s $974,100 in loans for his car dealerships. (Unlike his auto dealer colleagues in West Virginia and Florida, Pennsylvania did not deem the businesses essential and only allowed car sales online.)
Ralph Norman’s hospitality and real estate companies took in a combined $306,520 in loans.

Eight Republicans and two Democrats comprise the ten highest loan amounts tied to or received by individual members. Atop the list is Carol Miller (R-W.V.), the legal secretary for her husband’s car dealerships, which received more than $3.1 million in loans despite the fact that auto dealers were deemed essential businesses by Gov. Jim Justice in March. Two wineries and two farms tied to Devin Nunes (R-Calif.) received a total $2.95 million in bailout money.

The biggest single loan to a member’s private company went to Trace Die Cast Inc., a family-run auto parts manufacturing operation based in Bowling Spring where Guthrie is a board member.

“Americans should never have to wonder how their elected officials are influenced by their personal businesses,” said Jordan Libowitz of Citizens for Responsibility and Ethics in Washington (CREW). “Unfortunately, we now have to question that as a default.”

Hundreds of members of Congress hold positions at private companies, which they’re allowed to do under federal law and House and Senate ethics rules. (Members are barred from holding positions at publicly-traded companies.) Those positions are listed on their annual financial disclosures, which provide insight into their finances and business interests. Sludge combed all 535 members of Congress’ most recent annual disclosures and compiled positions held at private companies and nonprofits. Once those positions were identified, Sludge entered the entities into a database created by Accountable.US, a nonpartisan watchdog group that compiled PPP and Economic Injury Disaster Loan (EIDL) data obtained from the Small Business Administration. Sludge used that data to find previously unreported loans, combining it with reports about wealthy members bailing out their or their spouse’s companies with COVID relief funds.

The result is the first publicly-searchable database of COVID bailout money for members of Congress. Sludge is making this one-of-a-kind database available to the public to promote transparency about the loans, which have been scrutinized from the beginning as mostly benefiting wealthy Americans.

Guthrie counts among those Americans. Worth an estimated $7.6 million, the Kentucky Republican cracks the top 40 richest members of Congress and maintains a position at Trace Die Cast. Listing himself as a board member of the company on his financial disclosure, Guthrie notes that the position is “uncompensated” as many members of Congress do for their own positions with private companies — House and Senate ethics rules prevent them from being paid for positions held outside their duties as lawmakers. Still, his ownership stake is worth between $500,001 and $1 million, according to his financial disclosure, and he has an additional up to $5 million invested in the company through a family trust.

Trace Die Cast in Bowling Green got more than $4 million in PPP support. Rep. Guthrie is a board member and has millions invested in the company.

The PPP loans have been credited for injecting billions of dollars into the economy quickly but criticized for a scattershot approach that has benefited mostly wealthy, well-connected companies. No one has suggested that members of Congress are breaking the law by taking advantage of the Small Business Administration loans, but it also isn’t known whether entities tied to members of Congress received special treatment, as many large and well-connected businesses apparently did.

At least five Republicans were the recipients of campaign contributions from individuals and PACs affiliated with the financial institutions that approved their companies’ PPP loans. Guthrie has received $3,000 since 2008 from Gary Broady, director of Franklin Bank. Guthrie’s car part business’ $4.37 million PPP loan was approved by Franklin Bank. Kevin Hern has received $5,400 in contributions since 2017 from Frank X Henke, president & CEO at American Bank & Trust Co, which approved a $1.07 million loan to Hern’s KTAK Corporation, a S corporation in the food and beverage industry. Vicky Hartzler has received $1,500 from Hawthorn Bank CEO and President David Turner. Hawthorn Bank approved Hartzler Farm’s $26,900 PPP loan. Finally, Vern Buchanan has taken in $5,000 from the PAC of BMO Harris Bank since 2007. BMO Harris Bank approved $2.23 million in PPP funds for Buchanan’s Sarasota 500 LLC and $384,000 for his Nissan of Elizabeth City car dealership.

Rep. Vern Buchanan’s Nissan dealership got $384,000 in PPP loans.

Ten Republicans who received loans for their private companies voted against the TRUTH Act, which would have required loan recipients to be publicly identified by the SBA—Ralph Norman, Brett Guthrie, Vicki Hartzler, Kevin Hern, Rick Allen, Greg Pence, Devin Nunes, Markwayne Mullin, Roger Williams, and Mike Kelly. An 11th Republican recipient of COVID bailout money, Vern Buchanan, did not vote.

“It’s no surprise that there are members of Congress who benefited from PPP loans and would not want their constituents to know about it,” CREW’s Libowitz said.

The number of loans and members who benefited speaks to the private entanglements and financial conflicts of interest that have long dogged Congress. While Congress was able to secure loans for their own companies and nonprofits, Black- and minority-owned businesses have struggled to get access to the money.

The discovery of the substantial loans obtained by members of Congress comes as lawmakers passed only the second package with direct relief for many Americans since the pandemic began. Included in that package is an additional $284 billion in PPP funding but significantly reduced stimulus checks and unemployment benefits compared to the first round of COVID relief. Additionally, some members, including Guthrie and Norman, have been pushing for Congress to make a surplus of $130 billion in PPP money that was left behind from the spring bailout round available to businesses for a second loan application.

Guthrie and Norman were also among 37 Republicans who wrote to President Trump in July, urging him to halt extended unemployment benefits for millions of out-of-work Americans. The extra $600 that unemployed Americans received each week under the CARES Act caused some workers to earn more money from unemployment than when they had been employed, a common complaint among Republican politicians about the bill’s extended unemployment benefits.

“Small businesses are facing unprecedented challenges caused by COVID-19 and the resulting lockdowns enacted by state and local governments,” the authors of the letter, including Guthrie and Norman, wrote. “There could not be a worse time for the federal government to create disincentives for returning to work.”

Norman voted for the CARES Act but against this month’s COVID relief bill. Norman’s communications director, Austin Livingston, responded to Sludge in an email: “Surely it cannot be lost on you that a Member of Congress could be very much in favor of targeted, specific COVID relief to help those who desperately need it, while opposed to recklessly spending hundreds of billions of dollars elsewhere when our nation is over $27 trillion in the hole.”

Sludge provided links that show Norman’s three affiliated companies received more than $300,000 in PPP loans, according to Accountable.US and the congressman’s financial disclosures. Asked why providing loans to companies associated with a member of Congress whose net worth is more than $43 million qualified as “targeted, specific COVID relief,” Livingston did not respond.

Office plaza in Myrtle Beach where Ralph Norman’s LLCs FM Hotel and GBC Rock Hill are located. FM Hotel got $120,800 in PPP loans, while GBC Rock Hill got $164,900.

PPP loans are mostly forgivable and likely won’t ever have to be paid back. That’s because the loan forgiveness rules only required businesses to use 75 percent of the money for payroll costs and do not require them to prove that they lost income. Monday night’s relief package requires second-time loan recipients to prove they lost up to 25 percent business to have their loans forgiven.

Whether Guthrie’s and Norman’s companies even needed the loans—or whether any of the nonprofits or companies tied to members of both parties needed them, for that matter—is one of the vexing and unanswered questions plaguing the Paycheck Protection Program. Many small, struggling businesses were left out in the cold for a variety of technical or access reasons, and closed for good. Many others received much-needed loans that saved them or helped them retain their workers.

Scores of Democrats and some Republicans are also tied to some $54 million in PPP and EIDL loans to nonprofits, think tanks and policy institutes, higher education institutions and congressional caucus organizations.

One of the Democrats associated with the largest amount of loans among members of his party is Bennie Thompson, of Mississippi. The longest-serving Black representative of the state, Thompson is a board member and trustee, respectively, of the Housing Assistance Council, a nonprofit that helps with housing in rural communities, and Tougaloo College, a Black liberal arts college in his home state. Combined, the two entities received $2,874,000 in PPP and EIDL loans.

This report and database were produced with support from the Fund for Investigative Journalism.

Disclosure: Both authors of this story received PPP loans.