Officials at big companies could be sent to the slammer for taking loans meant to help small businesses amid the coronavirus crisis.
Amid growing scrutiny of its $349 billion Paycheck Protection Program, the US Treasury Department on Thursday urged the dozens of publicly traded companies that got millions of dollars in government-backed loans to return the money within two weeks.
The warning came in new guidance saying public companies with “substantial market value and access to capital markets” would be unlikely to qualify for the program because they could not say “in good faith” that they needed the loans to keep operating amid the pandemic.
The feds said they’ll consider such companies to have acted in good faith if they repay their loans by May 7. But firms that keep the money could face steep consequences if officials find they broke the “good faith” rule.
Company reps could face up to 30 years in prison or a $1 million fine if they make false statements to a federally insured bank to get a guaranteed loan from the US Small Business Administration, which is administering the program, according to a federal rule published last week. The Treasury Department has also said the government will pursue criminal charges against borrowers who use their loans for “fraudulent purposes.”
The feds’ Thursday guidance came after revelations that large rescue loans targeted to Main Street merchants went to some big publicly traded companies with thousands of employees. They included restaurant chains like Shake Shack and Ruth’s Chris Steak House as well as Ashford Hospitality Trust, a hotel firm whose subsidiaries got more than $30 million.
But many small merchants were left waiting for help after the program ran out of money last week. Congress approved another $310 billion in funding this week.
Shake Shack and Ruth’s Chris have already said they would return the combined $30 million in loans they were granted. They’ve been joined by privately held companies including salad restaurant chain Sweetgreen and direct-sales firm It Works!, which were approved for $10 million and $2.7 million, respectively.
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