March 15, Congressman Ruben Gallego (D-AZ) sent a letter to the Small Business Administration (SBA) calling for vigilant oversight as $696 billion of the total $789 billion lent through the Paycheck Protection Program (PPP) phase has already been forgiven.
On March 16, UNITE HERE Local 11 submitted testimony at a House Small Business Administration’s Small Business Oversight, Investigations and Regulations Committee hearing titled “An Empirical Review of the Paycheck Protection Program.”
The letter (available here) follows President Biden’s March 1 announcement that the Department of Justice will appoint a Chief Prosecutor to focus on the most egregious forms of pandemic fraud. Gallego was joined by Representatives Linda Sanchez (D-CA), Adam Schiff (D-CA), Ted Lieu (D-CA), Nanette Diaz Barragan (D-CA), Grace Flores Napolitano (D-CA), Julia Brownley (D-CA), Norma Torres (D-CA), Alan Lowenthal (D-CA), Katie Porter (D-CA), Jimmy Gomez (D-CA), Raul Grijalva (D-AZ), Ann Kirkpatrick (D-AZ), Kweisi Mfume (D-MD), Anthony Brown (D-MD), Ayanna Pressley (D-MA) and Darren Soto (D-FL).
The letter highlights Westmont Hospitality Group, an international hotel company that owns and operates over 400 hotels around the world, as an example of the need for “vigilant oversight” and improved transparency. According to data provided by the SBA, Westmont affiliates received $48 million through 44 PPP loans that were tied to approximately 5,300 jobs. Despite this, the letter states, a lack of transparency by the SBA has made it “impossible” to determine whether those 5,300 jobs were actually retained, yet over $28 million of the Westmont-connected loans have already been forgiven.
The Paycheck Protection Program (PPP) was passed by Congress as part of the CARES Act of 2020 in an effort to support small businesses and save jobs in the midst of the COVID-19 pandemic. PPP borrowers must spend at least 60% of their loans on payroll costs in order to receive full loan forgiveness.
UNITE HERE Local 11, the labor union that represents hospitality workers in California and Arizona, presented evidence to Congress Members regarding one hotel connected to Westmont that received a PPP loan but issued WARN Act notices that it had permanently separated 122 workers, raising the question whether PPP had really served its purpose of protecting jobs.
As of January 3, 2022, SBA had forgiven $9.7 billion of the $13.9 billion in PPP loans to hotels. With the support of PPP funds, the hotel industry has not only weathered the pandemic but has grown on the backs of its workers, with fewer workers forced to do more work than before this unprecedented crisis. While the number of U.S. private industry accommodations establishments increased by 1,375 from the first quarter of 2020 to the second quarter of 2021, the industry employed 443,600 fewer workers in February 2022 than in February 2020 before the pandemic.
Congressman Ruben Gallego said, “When the COVID-19 pandemic first began, the Paycheck Protection Program served as a critical lifeline to keep our businesses open and hardworking Americans employed. In the years since, we have seen companies recover, but it hasn’t been clear whether some businesses upheld their end of the bargain to keep workers employed. As SBA continues to monitor the program, it is important companies are fully transparent in justifying PPP loan forgiveness. That’s why I am leading this call for SBA to update Congress on what it’s doing to protect hospitality workers’ jobs.”
Elba Hernandez, a housekeeper at the Westmont-operated Hilton Santa Monica Hotel & Suites, said, “For the many months that I was laid off during the pandemic, I didn’t get a cent from Westmont. I am very upset that Westmont got $48 million and still hasn’t told us how they spent the money.” Hernandez’s employer is a limited liability company that has as its manager or member a Westmont affiliate that received PPP funds.
Groups supporting the letter include the Covid Oversight Coalition, Public Citizen, American Oversight, Americans for Financial Reform and United Steelworkers and UNITE HERE Local 11.
Lisa Gilbert, Executive Vice President of Public Citizen, said “The Paycheck Protection Program was intended to provide funds to small businesses as a lifeline to regular Americans in a time of crisis. Ensuring that the funds were not abused and that they were used to keep Americans at work is a key duty of Congress. Public Citizen vigorously applauds Rep. Gallego for pushing for more transparency and accountability of the PPP funds.”
Aliya Sabharwal, Covid Oversight Campaign Manager at Americans for Financial Reform, said, “The Paycheck Protection Program was not intended to be a bailout for billionaire corporations. Small businesses are still struggling to stay open while big companies seem to have made a profit. That’s not right. We need to know where that taxpayer money went and to whom. And if companies got it but didn’t follow the rules, there must be consequences.”
Congressman Gallego’s letter follows prior letters urging SBA to improve transparency and oversight of PPP loans that highlighted hotel chains: an October 2020 letter led by Congresswoman Porter, a July 2021 letter led by Congresswoman Barragan and a February 2022 letter from Congresswoman Judy Chu asking the SBA to improve transparency around PPP loan forgiveness.
UNITE HERE Local 11 is a labor union representing over 32,000 hospitality workers in Southern California and Arizona who work in hotels, restaurants, universities, convention centers, and airports.
Congressional letter available here