Report claims unions circumvented rules to receive PPP loans
The Paycheck Protection Program administered by the Small Business Administration has paid out millions of dollars to ineligible unions, according to a new report published by the Freedom Foundation.
The Freedom Foundation investigated the SBA’s PPP loan database and found that approximately 226 loans totaling $36.7 million were distributed to unions and affiliated organizations. The first round of PPP loans explicitly states that these entities were not eligible for public funds before March 11, 2021.
“The Small Business Administration was aware as early as July 2020 that Paycheck Protection Program loans were approved for unions that were ineligible to receive the funds,” said Maxford Nelsen, director of labor policy at Freedom. Fund, at The Center Square.
Nelsen, author of the report, titled “Profiting from a Pandemic: How Ineligible Unions Collected Millions in Federal Covid Relief Funds,” continued: “As far as I know, the SBA has simply neglected to do anything about it. . It continued to provide loans to unions, including second loans in some cases, and to cancel loans previously granted to ineligible unions. Hopefully the Inspector General investigates what went wrong and the agency takes action to recover the funds.
The FF report also discovered:
• 181 loans totaling $32.6 million to labor organizations under § 501(c)(5) whose applications were approved before March 11, 2021;
• 23 501(c)(9) loans totaling $2.9 million to union-operated voluntary employee beneficiary associations whose applications were approved before March 11 2021;
• 3 loans totaling $208,000 to union-run construction companies under § 501(c)(2) whose applications were approved before March 11, 2021;
• 3 loans totaling $179,000 to public employee advocacy organizations operating under § 501(c)(4) that never qualified;
• A loan of $76,400 to a syndicate registered under § 501(c)(6) whose application was approved before December 27, 2020; and,
• 15 loans totaling $749,000 to unions and affiliated organizations whose eligibility is questionable due to an apparent lack of filings with the IRS indicating nonprofit status, lack of filings income with the IRS for several years, using a residential address not associated with a union or organization on the PPP loan application, or obtaining tax status unsuitable for a union.
According to Nelsen, SBA records currently show that at least $24.2 million of the $36.7 million in union-related loans identified by the Freedom Foundation have now been forgiven.
Among the unions that applied for a PPP loan before March 2021 was the Michigan Education Association, a state-based teachers’ union affiliated with the National Education Association. The MEA applied for and received more than $6.4 million in PPP loans, the highest amount discovered by the Freedom Foundation.
As reported by Lansing State Journal last June, the MEA returned the funds.
“When the MEA applied for the Paycheck Protection Program, there was tremendous uncertainty as to whether public school educators would continue to be paid during the pandemic,” spokesman David Crim said in a statement. press release quoted by the LSJ. “Had payment to educators been halted, they would have been unable to pay the necessary dues to MEA to support our educators and help them provide a world-class education to our students.
“Once it was clear that educators would continue to be paid, MEA repaid the loan in full because it was the right thing to do,” Crim added.
Nelsen said the MEA was right to return the money, but noted that it should not have applied for the loan because SBA guidelines made it clear the union was not eligible to receive the money.
“It’s quite troubling that politically active unions have received taxpayer subsidies for which they were not legally eligible,” Nelsen said. “But it gets worse when you realize that some eligible small businesses, which were being crushed by government shutdowns advocated by government unions, have been unable to access the tens of millions of dollars in aid that unions have inappropriately received. .”
Nelsen noted that at least a dozen other teachers’ unions and advocacy groups have received PPP loans totaling $6.8 million. Another dozen unions representing government employees — including the American Federation of State, County and Municipal Employees (AFSCME) — received $1.5 million.
“It only adds insult to injury to know that teachers’ unions were receiving federal funds while trying to keep schools closed and that labor groups who primarily engage in political advocacy were receiving taxpayers’ money to do it,” Nelsen said in a press release. “The fact that hundreds of unions have received tens of millions of dollars in federal COVID relief for which they were legally ineligible represents a failure on so many levels.”
|Beneficiaries of Teachers Union PPP Loans/Advocacy|
|union||Amount of the loan|
|Michigan Education Association/NEA||$6,420,500|
|Memphis-Shelby County Educational Association/NEA||$107,525|
|California Retired Teachers Association||$72,617|
|American Federation of Teachers, Local 1796||$38,765|
|Ohio Retired Teachers Association||$36,665|
|American Federation of Local Teachers 1904||$32,612|
|American Federation of Teachers, Local 6025||$20,872|
|American Federation of Teachers, Local 2274||$20,054|
|Kean Federation of Teachers/AFT Local 2187||$19,297|
|American Federation of Teachers, Local 2275||$17,736|
|Virginia Beach Educational Association/NEA||$10,877|
|Westminster Education Association/NEA||$8,355|
“The unions should not have asked for – probably fraudulently – aid for which they were not eligible,” Nelsen said. “Lenders, themselves affiliated with unions in some cases, should have done their homework or not looked the other way when approving union applications. And the Small Business Administration should have put in place better controls to ensure that only eligible organizations were approved for loans.
In his report, Nelsen blames the loan applicants, the lenders who processed the loans, and the SBA. He said the Freedom Foundation submitted its findings to the SBA’s Office of Inspector General and the Department of Justice’s National Disaster Fraud Center for further investigation.
This article was published orally on TheCenterSquare.com.