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Coronavirus contractors double, even triple dip into relief funds

The coronavirus brought a $10.5 million windfall for Noble Sales Co. in orders from the federal government for plastic bags, cleaning supplies, hand sanitizer and gloves. Citing the economic strain of the pandemic, the company also was approved for a federal Paycheck Protection Program check worth at least $2 million.

It’s the kind of double-dipping federal auditors fear could be rampant, a collision between the overnight need for supplies and a separate hastily created program aimed at keeping small businesses afloat. 

A USA TODAY analysis of $522 billion PPP spending data matched with $19.5 billion in federal coronavirus response shows that at least 700 vendors that scored lucrative federal coronavirus contracts also received emergency aid. Together those vendors received hundreds of millions of dollars in contracts – and at least $618 million in PPP loans through the Small Business Administration.

The loan program does not preclude those with federal contracts from receiving or keeping the relief money, which has a low interest rate and a liberal loan forgiveness clause: if you use it to pay employees, you don’t have to repay it. Applicants need only certify their need based on self-reported “economic uncertainty.” 

“There’s some nuance and space for some type of post-audit recovery where the government could claw back the money,” said Eric Crusius, a Virginia attorney and expert in government contracting regulations. “But it comes down to the smell test and it’s really not a good look when you’re getting millions in government contracts on top of PPP money.”

does not preclude a vendor from receiving new contracts.

More in this series: Hundreds of millions of dollars goes to COVID-19 contractors accused of prior fraud

The SBA released data on loans over $150,000 in June, in ranges rather than precise figures, following negotiations with Congress and lawsuits from media organizations. Treasury Secretary Steven Mnuchin said the limited release was a compromise to prevent exposing business information that could be calculated with loan values.

“We are striking the appropriate balance of providing public transparency, while protecting the payroll and personal income information of small businesses, sole proprietors, and independent contractors,” Mnuchin said in a prepared statement.

Virginia-based GovSmart Inc. is another frequent federal government contractor. It provides technology services and products to agencies, along with firearms and tactical equipment such as riot-control gas masks. 

From mid-March through July, GovSmart was awarded $6.7 million in federal contracts related to COVID-19, for IT software, components and storage devices. 

In the midst of getting those contracts – in April – the company took out a PPP loan of between $350,000 and $1 million, which the company said would help it retain 52 jobs. 

GovSmart CEO Brent Lillard said that he hopes the loan will be forgiven and that he won’t have to pay any of the money back. Despite the government contracts, Lillard said business has not been booming.

“If it weren’t for COVID, we probably would have doubled our sales,” Lillard said. “We’re definitely not going backwards, but it’s been more challenging.”

Government contractors have turned to attorneys and federal acquisition regulations for clarity on the questions surrounding such double-dipping. Concerns over double-dipping complications have led some federal contractors to repay their loans this summer, with interest, to avoid the headache, The Wall Street Journal reported last week.

Dallas white-collar criminal defense attorney Nick Oberheiden said the government could view the PPP loans as a discount against future contract work.

the Detroit Free Press the listing includes amounts approved, not necessarily distributed. Even so, the owner of the shop said the figures were wildly inaccurate, and the company received less than $20,000.

“My thing has always been if you see one mouse, there’s a hundred,” she told the newspaper. “This is the same thing. I’m one mouse, but there’s a hundred more or a thousand more or 10,000 more out there. If this isn’t exposed or uncovered to the public, is our government going to be held accountable?”

At Brian Miller’s first congressional hearing since being confirmed as the federal special investigator general for pandemic recovery, Miller said there are several examples of overlap in coronavirus relief that he considers “multiple dipping.”

He pointed to the scenario where average Americans received $1,200 economic impact payments and the $600-a-week enhanced unemployment benefit. Or where hospitals received Department of Health and Human Services relief money and huge PPP loans while also taking money from another relief program, the Federal Reserve Main Street Lending Program.

“Creating multiple programs resulting in multiple forms of financial support to a single individual or entity may well be sound policy,” Miller testified in early August. “But in such circumstances, the risk of fraud and abuse increases and questions arise.”

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