White Collar Defense and Investigations Partner Megan Jeschke was quoted in a ProPublica article about a number of large companies that received over half a billion dollars in Paycheck Protection Program (PPP) loans using the same technique, applying for and sending them to smaller entities under their ownership. The PPP was launched to rescue the little guy, the millions of small businesses without the deep pockets needed to survive the COVID-19 shock. But among the restaurants, dentists and mom-and-pops was Vibra Healthcare, a chain of hospitals and therapy centers spread across 19 states with over 9,000 employees. The biggest PPP loan was supposed to be $10 million, but Vibra found a way to land as much as $97 million by counting each of their LLCs as separate businesses.
Generally, the SBA looks at “the entirety of the organization” in determining whether businesses should be considered affiliates or separate businesses, which means taking into account “common ownership, intertwined management and economic dependence between entities,” said Ms. Jeschke. In her experience defending companies accused of violating the affiliation rules, the SBA has tended to be “rigid” in interpreting the rules and frequently finds that apparently related companies are in fact affiliates, she said.
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