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Wealthy homeowners who tapped government-backed loans intended to help small businesses weather the coronavirus pandemic could reportedly face a criminal investigation by the Treasury Department.
Some rich owners of enclaves in New York and the Hamptons with a large staff, who previously registered their household under an independent company or LLC, applied for forgivable loans through the Paycheck Protection Program, according to Page Six.
Congress established the $349 billion program at the end of March to provide low-interest loans of up to $10 million to businesses with fewer than 500 workers. If at least 75 percent of the cash goes toward maintaining payroll during the virus outbreak, the federal government will forgive it.
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The program exhausted its initial $349 billion in funding within 13 days and was heavily criticized for granting multimillion-dollar loans to big, publicly traded companies — even as small businesses languished financially. On Friday, President Trump signed into law a fourth stimulus bill, injecting the program with an additional $310 billion in funding. The program relaunched Monday morning.
The Treasury Department did not respond to a request for comment.
A senior Treasury official told Page Six, however, that household employers are ineligible to apply for loans through the program. According to guidelines released by the Small Business Administration, the agency “determined that household employers are ineligible because they are not businesses.”
“Household employers who apply and receive these funds — meant for small businesses suffering demonstrable harm due to the coronavirus outbreak — could face investigation and possible prosecution,” the official said.
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The Treasury and SBA tightened the rules of the loan program last week, including announcing that hedge funds and private equity firms are ineligible for the federal assistance.
The agencies also urged publicly traded companies that had secured loans to explore other sources of funding and to return any money that they had already received. If borrowers accessed the aid before the Treasury issued the new guidance and repay the entire loan before May 7, 2020, it “will be deemed by SBA to have made the required certification in good faith.”
Treasury Secretary Steven Mnuchin told FOX Business on Wednesday that if businesses that don’t meet the necessary certifications received loans and do not repay it, they could be subject to investigation.
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