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Federal coronavirus aid marred by mismanagement, lack of transparency

Joseph Niehaus Follow Jul 27, 2020 · 5 mins read
Federal coronavirus aid marred by mismanagement, lack of transparency
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Federal economic relief programs included in the CARES Act last March have come under growing scrutiny from watchdog groups and elected officials amid concerns that federal funding is not going where it is needed most.

Under the CARES (Coronavirus Aid, Relief, and Economic Security) Act, three oversight bodies and various interagency panels were authorized to oversee more than $2 trillion in federal expenditures included in the law. Of this total, some $659 billion was allocated to the Paycheck Protection Program (PPP), a program in which the Small Business Administration (SBA) insured loans made by lending institutions to coronavirus-afflicted businesses in an effort to keep employees on company payrolls.

The oversight bodies have since been met with a number of obstacles that have undermined their statutory powers. In many cases, stonewalling from the Trump administration and federal agencies has left government watchdogs without the data necessary to perform their oversight functions.

Though Secretary of the Treasury Steven Mnuchin reneged on his earlier position not to release any PPP loan data, the reports published by the SBA since May reflect only a fraction of the loans distributed through the program. Eleven media organizations, including Bloomberg News and the New York Times, have since filed FOIA lawsuits demanding that the federal government disclose the names of all PPP loan recipients and the value of their loans.

Of the data that is publicly available, pervasive discrepancies raise questions about its reliability. Investigations conducted by The Washington Post this month found that many companies included in the SBA’s published datasets are listed as receiving significantly more money than they were actually lent. Others remain listed despite returning the funds or having not received them at all.

Adding to the disarray, the Justice Department and the FBI are currently investigating numerous allegations of fraud related to the PPP loan program. The FBI’s PPP working-group alone is pursuing over $40 million of fraudulent loan awards.

President Donald Trump has sought to further undercut the efficacy of the oversight institutions by removing several high-profile inspectors general from their posts, raising concerns that the administration is seeking to stack federal oversight bodies with loyalists. Trump has fired three inspectors general sitting on the Pandemic Response Accountability Committee, including Glenn Fine - who had been tapped to chair the response committee - from his post as acting Pentagon inspector general, killing his eligibility for the chairmanship. . In a signing statement which accompanied the CARES act, the administration also argued that the Special Inspector General for the Pandemic Response (SIGPR) could not report to Congress without presidential oversight, further neutering the IG’s independence.

Staffing problems have also plagued the federal oversight bodies tasked with overseeing CARES programs. SIGPR, for instance, does not have the authority to speed up the tedious federal hiring process, leaving its offices to grapple with delays propagated by personnel shortages. Partisan disputes over who should head the Congressional Oversight Commission have similarly delayed the hiring process after a compromise pick, former Chairman of the Joint Chiefs of Staff Joseph Dunford, withdrew himself from consideration.

Critics of the PPP’s implementation have argued that the program has disproportionately benefited large, well-capitalized corporations over the small businesses the program was intended to assist, with some firms exploiting corporate organizational structures to receive multiple loans.

An SBA internal watchdog released a report in early May outlining how the agency failed to provide adequate guidelines to lending institutions for prioritizing vulnerable firms, such as those in poor or rural areas. Likewise, a slew of class action lawsuits filed across the country contend that large lending institutions prioritized high-value clients at the expense of vulnerable businesses. Financial giants like Bank of America, JPMorgan Chase, and Wells Fargo are among those being targeted by the suits, each being among the top five PPP lenders.

Public ire has also been directed at public officials who have apparently benefitted from PPP loans, including those who helped shape the legislation and implementation of the program. Seven members of congress and their spouses have received PPP loans through their private business dealings.

Representative Kevin Hern (R-OK) pushed for franchisees to have greater access to PPP loans in a letter to House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Mitch McConnell (R-KY). Hern is the owner of KTAK Corporation, a company which operates a number of McDonalds franchises in Oklahoma. The company received between $1 million and $2 million in aid through the program.

Officials close to President Trump also benefited from loans allocated by the PPP. Foremost Maritime, a shipping company owned by the family of Transportation Secretary Elaine Chao, received between $350,000 and $1 million in PPP aid. A spokesperson from the Department of Transportation later claimed that Chao had no prior knowledge of the loan.

Princeton Forestal LLC, a company owned by the president’s son-in-law and senior White House advisor, Jared Kushner, also received between $1 million and $2 million.

Sustained criticism over transparency and conflicts of interest reflect a legislative process that was rushed to meet the urgent fiscal demands of the COVID-19 pandemic, one in which the provision of holistic guidelines and ethical considerations took a back seat to providing timely economic assistance.

“What did folks expect when we spent $2 trillion of taxpayer money in three months? Of course there’s going to be massive waste, fraud and abuse,” Representative Thomas Massie (R-KY) told The Hill earlier this week.

The widespread concerns over accountability now loom heavily over ongoing congressional debates as elected officials mull the next round of federal economic relief. House Democrats and Senate Republicans are expected to begin negotiations on a new coronavirus relief bill on Monday.

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Written by Joseph Niehaus
National Political Correspondent