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Sunday, July 12, 2020

Only 10 Charlestown businesses received major federal pandemic aid

Disappointing results from federal Payroll Protection Program
By Will Collette

Shelter Harbor golf course, one of the largest recipients of federal
pandemic aid to small businesses in Charlestown
The Paycheck Protection Program (PPP) was a popular part of the CARES Act, the only major legislation to come out of Trump’s Washington to address the economic crisis caused by the coronavirus pandemic.

Largely written by the Democratic-controlled House of Representatives and grudgingly accepted by Senate Republicans, the CARES Act was designed to provide desperately needed relief to individuals and small businesses imperiled by the economic crash caused by the pandemic.

Over 600,000 PPP loan-grants were issued. Borrowers were assured the loans would be forgiven if they met the terms of the loan, mainly by retaining workers and jobs the PPP money was supposed to help.

Nationally, PPP was a mess – there wasn’t enough money and ran out quickly. A lot of that money went to big companies, businesses with shady records or connections to the Trump family as my Washington friend and colleague Phil Mattera of Good Jobs First details in the article below my local reporting on PPP in Charlestown.

It took a while to get the Trump administration to release the names of the recipients of PPP funding. In fact, that fight is on-going since Trump only reluctantly agreed to release the names of businesses that received $150,000 or more.

In Rhode Island, 2,453 companies were on that list. Among the biggest employers in the state to receive major PPP funding are Brown University, Taco Inc., KVH Industries, Moses Brown School, the Pawtucket Red Sox who are leaving Rhode Island to go to Worcester, the Foxy Lady strip club and Rhode Island Public Radio.

Only 10 employers in Charlestown received PPP funds. These include:

In the range of $150,000 to 350,000:
  • Construction contractor C & C Investments with 14 employees;
  • Larlham Landscape with 18 employees;
  • Ocean House Marina with 25 employees;
  • Stedman and Kazounis plumbers with 23 employees;
  • H.D. Randall real estate with 23 employees;
  • RMJC LLC, the legal name for Ray Mott’s Mott Chace Sotherbys Realty, with 17 employees;
  • Charlestown Rathskeller with 65 employees and
  • The Nordic Lodge with 54 employees.
Only two Charlestown employers received funds in the PPP’s next category, the $350,000 to $1 million range:
  • Arrowhead Dental with 71 employees and
  • Shelter Harbor golf course with 60 employees.
Many of these Charlestown businesses are well-known and for the most part well-respected. I hope they have been able to use the funding to keep going and of course, to “protect paychecks” for their workers.

But I wonder why there aren’t more Charlestown recipients. Yes, Charlestown is small, but only 10 PPP payouts out of almost 2500 statewide is ridiculous.

I suggest Charlestown’s Town Council or at least its Economic Improvement Commission should look into why such a low participation rate and what steps the town should undertake to save jobs and small businesses in Charlestown. 

Charlestown's unemployment rate for May, the latest numbers available, show 16% unemployment. In addition to an unprecedented high unemployment rate, the state's data also shows that around 10% of Charlestown's work force has dropped out of the labor market since March. 

Now here is Phil Matera’s review of PPP at the national level.

The Paycheck Protection Program and Wage Theft
The Trump Administration’s reluctant disclosure of the names of more than 600,000 recipients of Paycheck Protection Program aid has shown that many of the loans went to firms that are well-connected and that otherwise don’t fit the image of mom-and-pop businesses we were led to believe would be the main beneficiaries.

There is another problem: many of the recipients previously engaged in behavior that amounts to paycheck endangerment. They failed to comply with minimum wage and/or overtime requirements and thus paid their workers less than what they were owed. In other words, they engaged in wage theft.

This comes from an analysis of data my colleagues and I have collected for the Covid Stimulus Watch and Violation Tracker databases. That includes the big PPP dataset and information on penalties imposed by the Labor Department’s Wage and Hour Division, one of the many agencies whose enforcement data can be found in Violation Tracker.

We are in the process of determining which PPP recipients are on the list of wage and hour violators, so we can highlight that in Covid Stimulus Watch along with other corporate accountability data.

As a first step, I looked at the 4,800 companies identified as receiving the largest PPP loans–$5 million to $10 million. So far, I have found 88 of those recipients that paid wage theft penalties since 2010. Their penalties averaged about $100,000—which is roughly double the amount paid in back pay and fines in a typical wage and hour case.

The largest wage theft penalty I’ve found for a PPP recipient is the $1.9 million paid by Hutco Inc., a marine and shipyard staffing agency based in Louisiana. In announcing the penalty, the U.S. Department of Labor said the company had utilized improper pay and record-keeping practices, resulting in “systemic overtime violations” affecting more than 2,000 workers.

PPP recipient National Food Corporation, a major egg producer, paid $435,000 in penalties for wage and hour violations at its operations in Washington State. The company also paid $650,000 to settle a sexual harassment lawsuit filed by the Equal Employment Opportunity Commission.

Hearth Management, a PPP recipient that manages assisted living facilities in four states, paid a total of $383,000 in wage theft penalties at several locations. At a facility in Tennessee, the Labor Department reported that the company made deductions from timecards for meal breaks even when employees worked through those breaks, and it failed to include on-call and other non-discretionary supplements when calculating overtime rates.

Other PPP recipients with substantial wage theft penalties include the publisher O’Reilly Media, the electronics company Sierra Circuits, the restaurant chain Legal Sea Foods, and Erie County Medical Center in Buffalo, New York, which has also been penalized for overbilling Medicaid.  Apart from the PPP money, the Erie County Medical Center has received more than $75 million in grants and loans from other federal programs related to covid relief.

We will undoubtedly find many more companies with similar track records as we analyze the other hundreds of thousands of PPP recipients.

It was not illegal for employers with a history of wage theft penalties to apply for and receive PPP assistance, yet the presence of these companies in the recipient list points to dual risks.

First, there is the possibility that these firms will “cook the books” when it comes to reporting on their use of PPP funds and submitting their requests to have the loans forgiven. 

Second, these firms may feel that the current economic crisis will give them cover for returning to their old practices of wage theft. At a time of massive unemployment, these firms may assume that workers will not dare to complain about being shortchanged on their pay.

For these reasons, PPP employers with a history of wage theft penalties should be subject to additional scrutiny both by the Wage and Hour Division and the Small Business Administration. 

Paycheck protection must mean not only the preservation of jobs but also the defense of fair labor standards.