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Justice Department Fights Effort to More Broadly Reveal PPP Borrowers

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US treasury U.S. Treasury Department in Washington, D.C. Photo: Mike Scarcella / ALM

The U.S. Justice Department is resisting an effort in court that would force the U.S. Treasury Department and Small Business Administration to reveal the names of millions of companies and individuals who received federally backed coronavirus relief loans valued at less than $150,000.

Under pressure from news organizations and others, the SBA and Treasury last month released the identities of companies that sought and received Paycheck Protection Program loans valued at between $150,000 and $10 million, the maximum under the relief program helping companies cover certain workforce costs associated with the pandemic. For each company name, the government only released a loan range — for instance, $5 million to $10 million.

The Justice Department, representing the SBA and Treasury, told a Washington federal trial judge Wednesday that the government should not be forced to release the names of PPP borrowers whose loans were under $150,000. As of Aug. 8, more than 4.5 million loans under $150,000 had gone out to individuals and companies, according to SBA data. Many major U.S. law firms obtained millions of dollars in PPP loans.

In a new court filing, the Justice Department and SBA argued that the release of names and address of the “smallest of small businesses” — those that received $150,000 or less in loans — would overly infringe on their privacy. The government said it was protecting confidential payroll information that could be deduced if the names of PPP loan borrowers under $150,000 were released.

“Most obviously — and most centrally — everyone would know that these individuals have (or at least recently had) money in the bank. Any landlord, for example, whose tenant received a PPP or EIDL loan would know that the tenant either had the money to pay the rent or else had paid some other creditor instead of the landlord,” Justice Department lawyers wrote.

The SBA had received open-records requests from landlords “seeking to know whether their tenants received PPP funds,” Justice Department lawyers said.

Alleged fraud associated with the PPP loan process has been widespread. The Justice Department has brought myriad cases against individuals and small businesses alleging misuse of funds.

“Nearly 440 financial institutions ranging from small, local credit unions to major national institutions have contacted us to express serious concerns. Our law enforcement partners report similar calls from financial institutions,” the SBA’s inspector general said in a recent report.

Lawyers from Ballard Spahr represent the plaintiffs — including The Washington Post, The New York Times and other media outlets — in the public records suit.

“The SBA’s argument contradicts the Freedom of Information Act, the SBA’s past practices and its own advice to these loan recipients that this information will be public record,” Ballard Spahr partner Charles Tobin said Thursday. “The public must be able to monitor whether the relief money Congress has allocated goes to the businesses that need it the most.”

Former Justice Department lawyer Matthew Collette, writing at The National Law Journal recently, questioned the SBA’s decision to limit public disclosure to only those loans worth more than $150,000.

“While the effort to foster transparency is laudable, the decision to limit disclosure to borrowers receiving loans over $150,000 leaves a large amount of information undisclosed,” wrote Collette, a Massey & Gail partner who was previously deputy director of the DOJ civil division’s appellate staff.

“While the Treasury noted that its disclosure covers nearly 75% of the total funds loaned under the program, it neglected to point out that it reveals only about 25% of the borrowers. The public will remain in the dark as to three-quarters of the entities who received PPP loans.”

Mike Scarcella contributed reporting from Washington.

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