SOME PAYCHECK borrowers not keeping staff.
If the name of the Paycheck Protection Program didn’t make its purpose clear, its key architects spelled it out.
Sen. Marco Rubio, R-Fla., explained that the program “was designed as an alternative for unemployment and to prevent unemployment.”
Treasury Secretary Steven Mnuchin and the director of the Small Business Administration announced that the “overarching focus” of the effort was “keeping workers paid and employed.”
But a closer look at three large companies that received millions from the $517 billion Paycheck Protection
Program shows that some companies have declined so far to retain most of their staff on the payrolls.
The Fairmont Grand Del Mar in San Diego, a luxury hotel owned by a group led by Richard Blum, a private equity chief and the husband of U.S. Sen. Dianne Feinstein, D-Calif., received $6.4 million from the program. The hotel has been closed and most of its hundreds of workers are unemployed and unpaid, union officials said. To maintain their health insurance, workers send money back to the company.
A large group of restaurant companies operating under the umbrella of Orlando, Fla.based Earl Enterprises — including Planet Hollywood International, Bertucci’s and Buca di Beppo — similarly received loans of between $26 million and $54 million, according to the federal data, but in the places most affected by the pandemic, the restaurants employ only limited crews. The rest of the staff is unemployed and unpaid, employees said.
And the Omni Hotels & Resorts, owned by Texas billionaire Robert Rowling, were approved for multiple loans from the program — one for each of 15 hotels — totaling between $30 and $71 million. But seven remain closed, and at those, most workers are on unpaid furloughs, union officials said. The company also has declined union requests to continue to pay health insurance for furloughed workers, union officials said.
The companies say that they can’t rehire many people because they can’t fully reopen properties when a government pandemic order limits guests. But their decisions to withhold the money from payroll have left employees to rely on government unemployment checks, which in some states have been difficult to obtain, and for many, will soon come to a halt when the benefit expires. Other furloughed employees are getting kicked off company health insurance because employers are not funding their premiums.
“It makes me mad that the company got the money but we are still out of a job,” said Tomas Garcia, 26, formerly a server at Buca di Beppo in Albuquerque.
JOBS ‘RETAINED’ IN QUESTION
What portion of the Paycheck Protection Program billions has gone to affected employees is unknown. The Trump administration has asserted that 51 million jobs were “supported” by the program, but a Washington Post analysis of data on 4.9 million loans shows that the Small Business Administration reported many companies had “retained” more workers than the companies said they employed. Academic efforts to examine whether the program bolstered employment have shown mixed results.
The hotel and restaurant companies that have received the loans but have yet to rehire say they are operating within the rules of the Paycheck Protection Program. Eventually, the companies say, they could use the money to pay employees. If they don’t, the companies will be required to pay the money back to the government in what amounts to a low-interest loan. The interest rate on the loans is 1%.
Earl Enterprises, the Orlando-based umbrella for Buca di Beppo and Bertucci’s restaurants, said it is trying to hire people. So far, about 5,000 restaurant employees have returned to work out of more than 9,000 who were employed before the pandemic.
Treasury officials did not respond to requests for comment.
The program issued money to businesses as loans, but to encourage employers to keep workers, the loan would be “forgiven” — it did not have to be repaid — if a company retained most of its employees and spent most of the money on payroll. The size of the loan, according to the legislation, was to be based on the size of the company’s payroll.
To direct the loans to small businesses, the program set limits on the size of those that could apply — generally, none could have more than 500 employees.
TWEAKS EASED RESTRICTIONS
But after pressure from businesses — particularly hotel and restaurant lobbyists — the program was altered in key ways.
The first key move came late in the drafting of the bill, when a clause was added that allowed some big firms — mainly hotel and restaurant chains — to apply. The added language said that big hotel and restaurant companies would be eligible as long as their individual locations had fewer than 500 employees.
The change opened the program to big operations, according to federal figures: The Omni hotels got 15 separate loans; 11 loans were approved for Silver Cloud Inns; the Benihana restaurants were approved for 19 loans valued at between $6 million and $16 million, though the company said it ultimately did not accept the money. The largest request may have come from the Ashford Group, an outfit whose companies used more than 100 filings to seek $126 million total and received $76 million, according to a Washington Post review of securities filings, though it later returned the money.
The next critical set of changes came in May, with another round of legislation that also responded to requests from business groups. Three tweaks in the program made it easier for companies to get the loans forgiven — that is, to transform the government loan into a gift.
While the original legislation had limited loan forgiveness if companies did not rehire to pre-pandemic staffing levels, the new legislation weakened that rule. Now companies that make what the bill says are “good faith” efforts to bring employees back could have their loans forgiven.