The Washington Free Beacon recently provided a report indicating that 226 American labor unions improperly received $36.7 million in taxpayer funds as forgivable federal loans under the Paycheck Protection Program (PPP). Maxford Nelsen with the Freedom Foundation drafted the report.
The federal government launched PPP in March 2020 as a COVID relief measure to help small businesses and charities adversely affected by the pandemic.
The Small Business Administration (SBA) manages the program, and initially, only nonprofits that were adequately registered as 501(c)(3) charities were eligible for the loans. It remains unclear when labor unions became considered eligible. While unions are nonprofits, they are not registered under the same tax statute as charities. Nelsen described the release of loan funds to improperly qualified organizations as a “failure on so many levels” by the SBA.
Submitting a knowingly false statement to the SBA to secure a loan is a felony punishable by up to five years in federal prison and a fine of $250,000. If a loan is obtained fraudulently through a federally insured lending institution, the potential penalties are 30 years in jail and a $1 million fine.
The SBA has forgiven more than $790 billion in PPP loans for recipients who demonstrated that the funding was used to retain employees. Even as some unions improperly obtained PPP loans, they openly called for increased business shutdowns. The Michigan Education Association teachers’ union received a PPP loan of over $6.4 million while it was cheering the decision of Democratic Governor Gretchen Whitmer to suspend in-school education in April 2020.
Nelsen said that knowing teachers’ unions were accepting federal funds improperly while working to keep schools closed “only adds insult to injury.”
Officials from the Trump Administration notified the SBA in July 2020 that labor unions were improperly receiving PPP loans. Joe Biden then made unions qualified for the loans in March 2021 as part of the “American Rescue Plan.” The program stopped issuing new loans in May 2021.
The Freedom Foundation tracked the improper loans by researching the public records of the unions accepting loans. Around 80 percent of the unions that took loan proceeds in 2020 were not 501(c)(3) qualified organizations. The other loans were distributed to other institutions affiliated with unions that are not adequately qualified for the loans.
There has been no public evidence that the Biden Administration is doing anything to remedy the inappropriately dispersed loans.