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07/27/2020

Los Angeles Times | Feds begin prosecuting coronavirus PPP loan fraud. Some companies may fight back — and win

Ever since the public backlash last April against some large, well-off or nationwide companies that helped themselves to emergency government funds intended to rescue small businesses during the pandemic, federal officials have vowed to crack down on any abuses of the popular program, also known as PPP.

The Paycheck Protection Program was quickly cobbled together when the economy was suddenly ground to a halt in mid-March. In an effort to get as much money out the door to prop up small businesses, commercial banks were tasked with accepting and reviewing the four-page applications on which companies had to self-certify that they needed the money.

It was a chaotic launch. The bulk of the loans went out within three weeks of the loan program’s creation. But the rules governing who should apply, the limits on using the money and the conditions for forgiveness continued to change, at times even daily.

The changing rules mean Children’s Bureau, a Los Angeles nonprofit focused on adoption, foster care and mental health services, might end up having to repay some of the $5.3 million it was loaned in April to continue paying nearly all of its 465 employees. In June, SBA issued new guidance that the loan cannot be used to cover work done under a federal contract. The nonprofit, like many others, is funded by a mix of federal contracts and private philanthropy.

“We’re all just scratching our heads and basically waiting for guidance to come out [about] just how the heck we’re going to document this,” said Gayle Whittemore, the group’s chief financial officer. “It’s just going to be a documentation hell for us.”

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