The Paycheck Protection Program was supposed to help small businesses with under 500 employees. Instead, we are learning more about the large corporations with thousands of workers that benefited. Now, according to the White House, there may be consequences for those companies. The Associated Press reports:
At least 75 companies that received the aid were publicly traded, the AP found, and some had market values well over $100 million. And 25% of the companies had warned investors months ago — while the economy was humming along — that their ability to remain viable was in question.
By combing through thousands of regulatory filings, the AP identified the 75 companies as recipients of a combined $300 million in low-interest, taxpayer-backed loans.
CNBC has a list of the companies. It includes the parent company of Pollo Tropical restaurants, J. Alexander restaurants, and Wave Life Sciences USA Inc., a pharmaceutical company. The restaurant chain that has arguably been scrutinized the most for its loan is Ruth’s Chris because it was able to work the system in a way that helped it receive two $10 million loans. News & Guts received a statement from the company saying:
Ruth’s Hospitality Group took the necessary step to secure a $20 million SBA loan to provide additional liquidity during these challenging times. As a franchised organization, it is our responsibility to our nearly 30 small business owners, team members, customers and shareholders, to do everything we can to ensure Ruth’s Hospitality Group is well positioned to emerge from this situation a strong and viable entity. We will be following all guidelines set forth by the SBA in how the funds are being leveraged including payroll assurance for our team members in individual locations running our takeout and delivery business.
But according to the website Popular Information, it appears virtually almost all of its 5,195 hourly restaurant staffers have been furloughed. Reporter Judd Legum says “The cash infusion has not been used to save the jobs of rank-and-file workers… This suggests that only managers remain employed by the company.” News & Guts asked Ruth’s Chris whether any of the SBA loans will go toward lining executives’ pockets, and while they sent us the statement above, they didn’t answer this specific question. Meanwhile, Legum points out, “Cheryl J. Henry, the CEO of Ruth’s Hospitality Group, was paid $6.1 million in total compensation in fiscal year 2018.”
While Shake Shack returned the loan they initially received, Ruth’s Chris hasn’t indicated any plans to return the money.
— Judd Legum (@JuddLegum) April 20, 2020
A petition on change.org demanding Ruth’s Chris return the $20 million already has about 150,000 signatures. And as the outcry from the public grows, there is also growing pressure from politicians. The Hill says Sen. Chuck Grassley (R-IA), the chairman of the Senate Finance Committee remarked:
“They should not have gotten it because they had more than 500 employees. They could have legitimately got some help from another government program. … They should have gone to the Federal Reserve to get it, and not got it from the small-business program.”
"Public companies with $100M, $200M, $300M dollars on their balance sheet –they don't need the loan. The independent businesses who are trying to make it month to month is what PPP was designed for," says @HowardSchultz. "We can't let these independent restaurants fail." pic.twitter.com/YYAtffoiG0
— Squawk Box (@SquawkCNBC) April 21, 2020
And a big development at Tuesday’s White House briefing. Both Donald Trump and Treasury Secretary Steven Mnuchin said that the loans weren’t meant for large public companies with capital and they will be asking those companies to return the money. The president remarked, “We’ll look at individual things, and some people will have to return it if we think it’s inappropriate.”
President Trump: "Harvard's going to pay back the money."
— CSPAN (@cspan) April 21, 2020
Mnuchin says that big companies with access to capital will face "consequences" if they took PPP money and don't pay it back.
— Alan Rappeport (@arappeport) April 21, 2020
As for how some small business owners are reacting, take a look at the report above from the CBS affiliate in Los Angeles.