SEC investigating hotels criticized for taking Paycheck Protection Program loans

Dallas — A group of hotels that took, and later returned, tens of millions of dollars in federal virus-bailout money are under investigation by securities regulators for related-party transactions going back to 2018.

The Ashford companies were among the biggest recipients of funding from the Paycheck Protection Program, which was intended to help small businesses survive the coronavirus pandemic.

The companies disclosed in a regulatory filing this week that they received subpoenas from the Securities and Exchange Commission for transactions that go back long before the pandemic hit. The subpoenas went to Ashford Hospitality Trust, Ashford Inc. and Braemar Hotels & Resorts. 

All three companies were founded and are run by Dallas hotelier Monty J. Bennett. The companies own upscale hotels including some under the Marriott and Ritz Carlton brands. 

Ashford said the companies are responding to the SEC's request for documents and other information and can't predict the outcome. However, it said the investigation could harm its business, and if the SEC determines violations occurred, it could mean "significant" civil penalties, criminal penalties, or both.

The Ashford companies came under public scrutiny after applying for up to $126 million in forgivable low-interest loans from a federal fund designed to help small businesses survive this year. The three companies received at least $74 million, according to an Associated Press analysis. Bennett's companies initially said they would keep the money, but eventually relented and returned it. 

The hospitality industry has been under severe strain as the pandemic chokes off both personal and business travel. Bennett told CBS MoneyWatchh that his company, which was started by his father, had been forced to lay off or furlough more than 6,000 workers.

The hotel industry employs about 6 million workers in the U.S. and generates some $650 billion in annual sales. 

Bennett and dozens of other companies have blamed confusing federal guidance about the small business relief program. A month after it launched, the U.S. Department of Treasury this spring issued guidance discouraging public companies from applying for funding under the initiative. 

News of the SEC subpoenas was reported earlier by The Wall Street Journal.