PPP funds granted to excluded companies

Scattered among the brick industrial buildings of St. Joseph, Missouri – once the home of the Pony Express – is the story of government spending in a pandemic gone bad. Among nearly half a dozen ruined structures, some with signs warning of conditions that “may present an imminent and substantial danger to human health or the environment” are persistent recalls on HPI Products Inc. the local pesticide company that still hasn’t cleaned up a mess it made over ten years ago

St. Joseph endured 25 years of HPI workers dumping industrial wastewater into the city’s sewer system. In 2007, the US Environmental Protection Agency ordered HPI to stop illegally storing hazardous waste in corroded drums and leak into its warehouse. In 2009, the Department of Justice obtained a guilty plea from HPI owner William Garvey in federal court for violating the Clean Water Act and hazardous waste storage laws. Garvey was sent to jail. The following year, the EPA obtained a consent decree against the company to pay the cleanup costs. After the EPA violations, HPI Products Inc. was banned – meaning it cannot solicit federal contracts or financial assistance from the federal government – on January 1, 2010.

Despite its long history of mismanagement and possible exclusion, HPI was approved this spring for a loan of $ 441,580 through the U.S. Small Business Administration’s Paycheck Protection Program, which is part of the The federal government’s massive economic relief program in the event of a pandemic, according to an NBC News review.

Businesses banned by the federal government are not expected to receive these federally guaranteed low interest loans as per the P3 program requirements. But the House selection subcommittee on the coronavirus crisis reported in September that it had discovered that more than 600 loans totaling more than $ 96 million went to companies that were not authorized to make loans. business with the government. Then on Jan. 11, the SBA Inspector General reported that the number of loans to excluded businesses appeared to be over 950. But neither report named those businesses.

NBC News, which obtained the Freedom of Information Act loan data after a federal court ruling, was able to identify at least 60 excluded companies worth $ 32.4 million that have been approved for PPP loans. NBC News was one of a dozen news organizations that collectively sued the SBA over FOIA disclosure. Home staff were able to find more companies as they were given additional identifying information not provided by the SBA to news outlets.

The SBA Inspector General’s latest report said he found “serious concerns about irregular payments” in the PPP program, including money for excluded businesses. He said the SBA still hasn’t done enough to stop these companies from getting loans and prevent their loans from being canceled.

U.S. Representative James E. Clyburn, DS.C., chairman of the House Selection Subcommittee, said in a statement to NBC News: “The troubling findings of the SBA’s Office of the Inspector General are unfortunately consistent with the report of the selection sub-committee in September. that the SBA has approved hundreds of PPP loans to ineligible borrowers who had been excluded or suspended from federal procurement. “

“The Treasury and the SBA must immediately improve oversight and accountability to ensure that taxpayers’ money is not wasted,” he added. “I hope the new administration will implement timely measures to improve surveillance.”

Dodge the demands

Since the launch of the PPP program, he has demanded that companies applying for loans confirm that they have not been excluded. A spokesperson for the SBA said the onus is on businesses to provide accurate information, not on banks or the agency to verify that information.

The agency may consider federal criminal or civil suits for misrepresenting government loan application forms, such as not disclosing to be excluded. But Justice Department records do not yet show such cases, and the SBA has been unable to report actions which cited exclusion as grounds for legal action.

But the SBA said it is reviewing requests for loan forgiveness and will reject requests from any excluded business it finds. “Write-off is one of those things that makes a borrower ineligible” for forgiveness, and they would need to repay the loan, an SBA spokesperson said.

With the latest round of PPP loans, approved on Dec. 27 as part of a $ 900 billion economic program, SBA officials say they are doing more to stamp out fraud. This time, the SBA carries out a computerized control of each company requesting a loan. Applications will be reviewed by the agency through Treasury Department data systems to confirm the identity of the companies. These computer checks which are expected to take less than a day would include confirmation of tax identification numbers and other information, according to an agency official.

Following the release of the Inspector General’s report this week, the SBA said its efforts to better track fraud include working with the Treasury Department’s Do Not Pay team to report excluded businesses. Although the Inspector General reported that these steps are not yet fully in place, an SBA representative disagreed and said, “The guardrails are in place.”

Exclusion triggers

Many companies identified by NBC News have been excluded by the EPA for violating clean air or clean water laws. Others were excluded by the Department of Homeland Security, the Department of Labor and the General Service Administration.

In Missouri, HPI continued to cause various violations for the small town of St. Joseph. According to a lawsuit filed by the city on November 30, 2020, separate from the EPA’s actions, HPI failed to come into compliance with the city code and continues to mix and store pesticides at its “growing facilities.” more abandoned ”.

“He was so successful in not complying,” said Janet Storts, a local activist. Regarding the HPI PPP loan, she noted that the company “just received an additional $ 400,000 for not doing it right.”

The EPA has confirmed that HPI is excluded following the criminal conviction under the Clean Water Act. In the case of HPI, the exclusion is specific to the location of Saint-Joseph where the violation took place, the same location indicated for the approved PPP loan.

HPI did not respond to requests for comment.

Pollutant issues

Other companies identified by NBC News as receiving PPP loans and banned for EPA violations include Nupro Industries Corporation, a Philadelphia-based oil and lubricant maker whose Neatsfoot Oil products are used to service items. such as baseball gloves and riding saddles. He was approved for a $ 300,000 PPP loan, although he has been ruled out since 2012.

The company is required to monitor pollutants in its industrial wastewater by taking samples and testing for pollutants like pH and ethylbenzene, which can cause breathing problems and dizziness in acute exposure. From 2006 to 2007, Nupro watered down its test samples to appear in compliance with pollutant limits, according to EPA records. Nupro was prosecuted and pleaded guilty and paid a fine of $ 200,000.

AJ Berg, director of operations at Neatsfoot Oil Refineries Corporation, a subsidiary of Nupro, told NBC News the issue has been resolved. But he did not specify which question and did not answer follow-up questions.

Continuous headaches

In the meantime, the town of Saint-Joseph is still struggling to clean up the mess HPI left behind. Garvey still owns at least 11 buildings in Saint-Joseph. A third building the company previously owned was in disrepair, and the city spent two years trying to get the company to fix the roof to no avail. After a storm in 2017, the facade of the building collapsed.

HPI did not pay for the building’s demolition, and the city instead dug its own funds, spending $ 390,000. The money was drawn from three funds, including the State Casino Gambling Initiative, which goes towards Save Our Heritage grants. These grants help owners of historic buildings in the city carry out structural and exterior repairs.

But the city still hopes for some justice. Aimee Davenport, the lawyer representing St. Joseph in its current lawsuit against HPI, said in the lawsuit that the city is seeking past damages and costs associated with the city’s compliance violations.

“It’s an economic damage, a public safety problem and an environmental problem. All of this, ”Davenport said. “We’re trying to bring them back into compliance for the protection of all of this as soon as possible.”