Labor Unions Received $36.7M in PPP Loan Fraud

Labor Unions Received $36.7M in PPP Loan Fraud Uncut $20 bills. Uncut $20 bills. (Paul J. Richards/AFP via Getty Images)

By Nicole Wells | Wednesday, 02 February 2022 02:24 PM

Labor unions that were deemed ineligible for the Paycheck Protection Program (PPP) received $36.7 million in fraudulent loans, according to the Washington Free Beacon.

The program launched in March 2020 to provide relief to small businesses and charities during the coronavirus pandemic.

For the first wave of PPP loans, only 501(c)(3) registered nonprofits were eligible for the loans, according to Small Business Administration (SBA) rules, and it is unclear how the 226 labor unions were able to collect.

Maxford Nelsen, who wrote a report on the situation for the Freedom Foundation, told the Free Beacon the disbursement of loans to organizations that don't meet the qualifications "represents a failure on so many levels" from the SBA and its lenders.

Documents obtained through a Freedom of Information Act request reveal that Trump administration officials alerted the SBA in July 2020 that ineligible labor unions received loans through the forgivable loans program, the Free Beacon reported.

When President Joe Biden signed the American Rescue Plan in March 2021, the unions then qualified for the loans, and applications closed two months later.

According to the Free Beacon, the Freedom Foundation identified the labor unions' tax statuses by tracking down financial records for each union based on their listed name and address.

The SBA declined a Free Beacon public information request for the unions' employer identification numbers.

About 80% of the unions that received the loans in 2020 were registered as a 501(c)(5), which is the typical tax status of labor unions. Union-affiliated organizations registered with other ineligible tax statuses, or those without a public tax status also were able to collect the fraudulent loans.

When asked about his organization's tax status, Keith Williams, the executive director of the Memphis-Shelby County Education Association, told the Free Beacon that his union does not have a 501(c)(3) tax status and that he "assumed they applied as a 501(c)(5)" for the PPP loan. The union received $107,525.

Coming in behind the National Education Association (NEA), the International Brotherhood of Teamsters received the second-largest loan of any union membership organization, totaling $3,354,946 according to the report.

Taking 11 loans in total, government unions raked in $1,517,811 in PPP funds.

Those who knowingly submit a false statement to obtain an SBA-guaranteed loan face a five-year prison term and a $250,000 fine. If the loan was distributed through a federally insured institution, the penalty jumps to 30 years imprisonment and a $1 million fine.

Some of the unions that improperly received loans also publicly backed shutdowns as they sought PPP funds.

The Michigan Education Association, an NEA chapter that received $6,420,500 supported Democratic Michigan Gov. Gretchen Whitmer's decision to shutter in-person K-12 learning in April 2020.

"It only adds insult to injury to know that teachers' unions were getting federal funds all while trying to keep schools closed, and that labor groups that engage primarily in political advocacy received taxpayer dollars to do so," Nelsen told the Free Beacon.

Original Article