Lawmakers are demanding that five public companies immediately return the low-interest loans they received from an emergency relief fund for small businesses. It was the first public action taken by the House panel set up to oversee the $660 billion Paycheck Protection Program run by the U.S. Small Business Adminsitration.
In letters sent to the businesses on Friday, the Select Subcommittee on the Coronavirus Crisis gave the companies until May 11 to return the funds. If not, the subcommittee said the companies would have to explain in writing why they are eligible for the small business program, as well as produce related documents, by May 15.
The lawmakers said in a statement that none of the five companies appeared to qualify for PPP funding, in part because they have substantial stock market value and more than 600 employees each.
"Unfortunately, many large companies were able to utilize this program and obtained loans that were intended for small businesses," the panel said. "Some of these companies have returned these funds amid widespread public outrage, but others have refused."
The Paycheck loans carry an ultra-low 1% interest rate, while interest on the loans does not have to be paid for the first six months. The loans will be forgiven, including interest, if a small business uses most of the funds to retain and pay employees. The program is geared to businesses with 500 or fewer employees.
One of the companies being told to repay their PPP funds is biopharmaceuticals developer MiMedx, which announced last month it had been approved for a $10 million loan. That was nearly 50 times larger than the average loan disbursed in the first phase of the loan program.
In the letter to MiMedx, which in early April paid the Justice Department $6.5 million to settle federal fraud allegations, the subcommittee noted that the company has a stock market value of $385 million as well as a "substantial investor base and access to capital markets."
The U.S. Treasury Department said last month that public companies with "significant" market value do not qualify for PPP money. The Treasury also gave companies until May 15 to return the funds without penalty.
MiMedx could not be reach for comment.
Hours after receiving the letter from the House subcommittee, MiMedx late Friday announced that it would repay its PPP loan. In a statement, the company reiterated that its business had slowed because of the coronavirus and that, because its shares had recently been delisted, it was unable to raise money through public markets. MiMedx didn't explain why it decided to return the loan.
"As announced previously, the funds enabled the company to maintain full employment during a time of widespread uncertainty, producing skin-graft products for patients with serious wounds and burns," the company said.
The other four companies under pressure by the House subcommittee to return their PPP loans are Quantum, EVO Transportation & Energy Services, Gulf Island Fabrication and Universal Stainless and Alloy Products.
The loan to software maker Quantumin an April article on larger companies getting loans from the small business relief fund. The company, with 800 employees, had $400 million in sales last year. It has remained open for business during the coronavirus outbreak, with employees working from home.
A Quantum spokesperson said at the time that the company qualified for the money under the SBA's definition of a small business. "The PPP loan is saving jobs at Quantum," the spokesperson said. "Without it we would most certainly be forced to reduce headcount."
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