Addressing the other COVID crisis: Corruption

Introduction

The need for oversight of Trump administration coronavirus spending has reached an inflection point.¹ Over the past few weeks, there have been reports that 27 clients of Trump-connected lobbyists have received up to $10.5 billion of that spending;² that beneficiaries have also included multiple entities linked to the family of Jared Kushner and other Trump associates and political allies;³ that up to $273 million was awarded to more than 100 companies that are owned or operated by major donors to Trump’s election efforts;⁴ that unnecessary blanket ethics waivers have been applied to potential administration conflicts of interest;⁵ and that many other transactions meriting further investigation have occurred.⁶

All this comes in a climate of Trump administration hostility to oversight. During negotiations on the CARES Act, the president claimed that he personally would “be the oversight.”⁷ He backed up that assertion with a signing statement after passage of the CARES Act stating that he would not treat some of the inspector general reporting requirements as mandatory.⁸ The Treasury Department followed his lead by initially refusing to disclose the recipients of Paycheck Protection Program (PPP) funds.⁹ They only relented in the face of crushing public and congressional pressure, resulting in a bevy of startling disclosures that call out for oversight.¹⁰

In this paper, we offer an assessment of how newly established congressional and executive branch COVID-19 oversight authorities should proceed in the face of these developments. In part one, we outline the four principal new oversight structures, assess the largely nascent state of their work, and point to strengths and weaknesses in their overall structure. We note that the two executive branch authorities appear already to have been threatened or adversely affected by President Trump, putting more pressure on the two congressional structures to achieve high functioning.¹¹

“The existence of vigorous oversight will ensure that the money disbursed by the CARES Act gets to the people who need and are entitled to those funds.”

In part two of the paper, we outline what these new oversight authorities can—and must—do to meet the urgency of the moment. That includes moving (more) rapidly, coordinating their operations and providing complete data. The existence of vigorous oversight will ensure that the money disbursed by the CARES Act gets to the people who need and are entitled to those funds. Conversely, inadequate oversight will mean favorable treatment for friends of the president and less relief for struggling small business owners and other American firms and individuals. The former is essential and the latter, abhorrent.

Part 1. The new oversight mechanisms: Strengths and weaknesses

There are four new oversight bodies concerned with Trump administration coronavirus spending. The CARES Act established three of them that have different ambits and powers to oversee disbursement of the funds and their impact on the economy: The Congressional Oversight Commission (COC),¹² Pandemic Response Accountability Committee (PRAC),¹³ and the Special Inspector General for Pandemic Recovery (SIGPR).¹⁴ Additionally, the U.S. House of Representatives established a Select Subcommittee on the Coronavirus Crisis, meant to provide its own oversight of spending and other matters.¹⁵

A. The Congressional Oversight Commission (COC)

The COC is composed of five members, including one chair, each selected by a Congressional leader.¹⁶ The four current members are Pat Toomey (R-Pa.), Bharat Ramamurti, Donna Shalala (D-Fla.), and French Hill (R-Ark.).¹⁷ The chair is meant to be selected jointly by House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Mitch McConnell (R-Ky.); the position is still vacant even though the other members had all been named by April 17.¹⁸ Press reports had indicated that Gen. (ret.) Joseph Dunford, was being vetted for the role of chair, but he has recently withdrawn from consideration, seemingly putting the search back to square one.¹⁹

The COC’s purpose is to submit monthly reports that assess the impacts of the CARES Act funds on the economy as a whole.²⁰ To do this, they can hire staff, hold hearings, and obtain official federal government data, but do not have subpoena power.²¹ Of the trillions of dollars appropriated to deal with the crisis, the COC is meant to assess a $500 billion slice allocated to Treasury to lend to businesses and state and local governments to support and stabilize the economy.²²

Without a chair, the COC has had a slow start. It has published three reports as of this writing.²³ The first, on May 18, was mostly comprised of background information on the coronavirus crisis and the ensuing legislation, as well as questions that the commission would seek to answer in its later work.²⁴ The second report, published on June 18, found that while the Federal Reserve had established five lending facilities in which Treasury could disburse the money, less than $100 billion of that $500 billion had actually been disbursed thus far, and only two of the five facilities had made any loans.²⁵ The $500 billion invested in the facilities is ultimately intended to support nearly $2 trillion in lending, but as of the report date, the facilities had lent just $6.7 billion.²⁶ The majority of that money—$5.5 billion—was spent by the Secondary Market Corporate Credit Facility, meant to support businesses by purchasing corporate debt and ETFs to instill liquidity in the credit market.²⁷ On June 2, the Fed made its first loan through the Municipal Liquidity Facility, a $1.2 billion disbursement to Illinois.²⁸ The other facilities, meant to support businesses by purchasing majority stakes in their loans, have not yet made any loans.²⁹ The Main Street Lending Facility has begun accepting registrants but has not yet announced any disbursements, and the Primary Market Corporate Credit Facility and Term Auction Loan Facility are not operating at all.³⁰

“[B]ecause of possible gaps in other oversight, a high-functioning Congressional Oversight Commission is critical to the overall oversight structure.”

While COC awaits full functionality, journalists have attempted to fill some of the void, and their work only highlights the urgency of getting the COC up and running. A recent investigative report found that the Treasury official running the coronavirus bailout maintains financial ties to a firm—founded by his father—that primarily trades in corporate debt, including junk bonds.³¹ This conflict of interest is made more concerning by the facts that the Fed has never before bought corporate debt, and that the facility buying corporate debt was the first Fed facility to be capitalized.³² COC member Bharat Ramamurti addressed the story on his personal Twitter account: “In the nine weeks since Congress gave the Treasury and the Fed $500 billion for economic ‘stabilization,’ they’ve used less than 10% of the money to create a single program that has serious conflicts of interest and, at best, a weak connection to stopping ongoing job losses.”³³ This comment is important, but means less coming from a single member of the Commission on his Twitter account than it would from a full Commission, with adequate staffing, publishing regular reports, and holding regular public hearings. Indeed, upon publication of the COC’s second report, Ramamurti opined that the lack of an appointed Chair and staff posed “serious obstacles to performing robust oversight.”³⁴

It is urgent that the COC gets a chair and a full staff so it will be able to fully undertake its work on the impact of the CARES Act on the economy. Until that happens, we cannot judge its effectiveness. As we shall see, because of possible gaps in other oversight, a high-functioning COC is critical to the overall oversight structure.

B. The Pandemic Response Accountability Committee (PRAC)

The PRAC is currently made up of 20 inspectors general from across the federal government (and will expand to 21 when the Special Inspector General for Pandemic Recovery eventually joins). Nine members were specified by the CARES Act, and 11 others have come from various agencies.³⁵ The PRAC chair—appointed by the Chairperson for the Council of the Inspectors General on Integrity and Efficiency (CIGIE)—is currently Michael Horowitz, who is also the inspector general (IG) for the DOJ.³⁶ Horowitz, who is also the chair of CIGIE, had appointed Glenn Fine to be chair of PRAC on March 30. However, President Trump replaced Fine as acting IG of the Department of Defense, making him ineligible to serve as PRAC chair.³⁷ Horowitz appointed Robert Westbrooks to the position of Executive Director on April 27, and personally stepped in to serve as Acting Chair of the PRAC.³⁸

Unlike the COC, the PRAC is designed to prevent and detect fraud, waste, and abuse in disbursement of CARES Act funds by auditing and reviewing those funds and contracts made under them.³⁹ The PRAC also has a public-facing role, as the legislation requires it to set up a public website to promote transparency in CARES Act funding, providing detailed information on any disbursement over $150,000.⁴⁰

The PRAC has a wider array of powers than the COC. In addition to the ability to commission audits, studies, and analyses, the PRAC has several ways of gathering information.⁴¹ The CARES Act provides a muscular subpoena power.⁴² The PRAC’s subpoena power allows it to compel both documents and testimony from non-federal employees, unlike the standard IG power that only allows for documents.⁴³ From federal sources, the statute allows the PRAC to request and obtain information directly from the federal government, and “immediately” report the circumstances to Congress if the information is not provided.⁴⁴ The PRAC also shall report to the Attorney General if it has any reasonable concern that federal criminal law has been violated.⁴⁵

Other agencies are also required to report monthly to the PRAC on disbursements over $150,000. Each recipient of funds over $150,000 from any agency is required to provide quarterly reports to the disbursing agency and the PRAC on the total amount of funds received, and detail how disbursements over $150,000 were used, including the name and description of project, and the estimated number of jobs created or retained by the project.⁴⁶

The PRAC set up its website on April 27, per the legislation.⁴⁷ The website contains a high-level overview of what industries and bodies funds were appropriated for, as well as several spreadsheets outlining the disposition of the funds in somewhat more detail. One spreadsheet depicts how much each federal agency has spent, totaling over $17 billion, and describes to what type of institutions the money went.⁴⁸ Website users can also look through contracts at the state and county level, with each individual contract broken out with identifying information, including agency, amount, and a (very) brief description of the good or service contracted for.⁴⁹

It is too soon to tell whether the PRAC will provide the robust oversight hoped for from it, and the president’s assault on Fine was a blow. Acting Chair Horowitz is capable and dedicated, but already has two major jobs at DOJ and CIGIE. There is no telling if the president will also interfere with or remove the next permanent chair. Because of the president’s power over IG’s, and his demonstrated proclivity for abusing it, this pillar of oversight remains at risk despite its broad powers and the many hard-working and talented IG’s associated with it.

C. The Special Inspector General for Pandemic Recovery (SIGPR)

The SIGPR is nominated by the president and confirmed by the Senate.⁵⁰ This IG takes a fine-grained look at the loans and investments made by the Treasury Department under the CARES Act, auditing them to determine whether each business was eligible for each sort of funding; explain why it was appropriate to make each transaction; describe each person made to manage each loan; and calculate the amount of loans made, and the government’s loss or gain on each one.⁵¹ Quarterly, the SIGPR is to issue reports summarizing the above information.⁵²

To accomplish these goals, the SIGPR can hire experts and commission studies, and request information from the federal government.⁵³ If requested information is not provided, the SIPGR too can report the circumstances to Congress.⁵⁴

The SIGPR’s subpoena power is limited to that of other federal agency IGs.⁵⁵ Thus, the SIGPR can only subpoena documents and records from non-federal government entities but cannot compel testimony.⁵⁶ Further, the IG statute does not allow IGs to subpoena even records from federal government agencies, instead providing that “procedures other than subpoenas shall be used by the Inspector General to obtain documents and information from federal agencies.”⁵⁷

Brian D. Miller was nominated to be SIGPR on April 6. He had previously worked as a White House lawyer for the president, and there were profound questions about whether he could provide the type of rigorous oversight that is required. As a result, he spent some time making his way through the confirmation process.⁵⁸ He was confirmed by the Senate on June 2 on a mostly party-line vote, with just one Democratic senator voting to confirm.⁵⁹ This record does not inspire confidence that the SIGPR will do the job that is needed. This puts more pressure on the other entities in the oversight structure to function at a high level.

D. The U.S. House Select Subcommittee on the Coronavirus Crisis

One final oversight body was created independently of the CARES Act. The United States House Select Subcommittee on the Coronavirus Crisis was voted into existence on party lines on April 23.⁶⁰ The Subcommittee is chaired by James Clyburn (D-S.C.) and its members include six other Democrats and five Republicans. This body was given a broad remit: reporting on the efficacy, equity, and transparency of taxpayer funds used during any aspect of the crisis, from preparedness and response, to executive branch policies, to the economic impact of the crisis, to the executive branch’s response to oversight.⁶¹ The Subcommittee can use subpoena power and hold public hearings.⁶² While they have access to House records, they do not have direct access to federal government data, with the instruction to report to Congress if it is not freely given, as the other, CARES Act-created oversight bodies, do. The subpoena power should allow them to access this information, but the Trump administration has shown itself willing to reject subpoenas and attempt to drag out court fights on a number of occasions and may be willing to do so with respect to the Subcommittee as well.⁶³

“The U.S. House Select Subcommittee on the Coronavirus Crisis has used its oversight authority and gotten results.”

The Subcommittee has used its oversight authority and gotten results. The day after the Republican appointees were announced, the Subcommittee sent public letters to five companies asking that they return PPP small business loans, and if not, to produce all PPP-related communications between the company and various banks and government entities.⁶⁴ Each of the companies had market capitalizations of over $25 million, over 600 employees, and had received PPP loans of $10 million. Unfortunately, only the Democratic members of the Subcommittee signed on to the letters and Steve Scalise (R-La.), the Republican leader of the Subcommittee, released a statement calling the action “outrageous” and “harassing.”⁶⁵

Despite that, the Subcommittee scored a quick win. One company, MiMedx, quickly returned their $10 million loan.⁶⁶ The four others have not, either stating that they qualify for, and need, the funds due to unique circumstances, or simply keeping quiet.⁶⁷ In one case, a bipartisan group of congressmembers sent an open letter to the Subcommittee expressing their support for allowing Universal Stainless and Alloy Products to keep the funds, likely bolstering the company’s decision not to return the loan and undermining the effectiveness of the initial letter from the Subcommittee.⁶⁸

Aside from the PPP dustup, the Subcommittee has taken additional and effective actions, including successfully applying pressure to increase transparency for PPP recipients.⁶⁹ Congressional urging was an important part of reversing the administration’s initial refusal to provide that information. The Subcommittee has also held hearings on a range of issues, including protections for essential workers, aid to cities, and racial disparities in the impact of coronavirus.⁷⁰ There was both Democratic and Republican participation in these hearings, though not necessarily consensus. On June 2, the Subcommittee sent a letter to the secretary of the Department of Health and Human Services requesting copies of the contracts that the federal government had made with private companies to manufacture coronavirus vaccines to ensure that they would be affordable when completed.⁷¹ This letter was signed by two Democratic members of the Subcommittee: James Clyburn and Carolyn Maloney, with their Republican counterparts cc’d.⁷²

The Subcommittee has an absolutely critical role to play given the doubts about the SIGPR, the presidential danger to the PRAC, and the limited remit of the COC, not to mention the COC’s failure so far to achieve full functionality. The Subcommittee should continue to ramp up its work rapidly and impactfully. We now turn to how it, and the other oversight authorities, should do that.

Section 2. Three main strategies for oversight

As the new oversight bodies seek to gain momentum, they would do well to take lessons from what did and did not work in past oversight efforts, including of the funds spent in the aftermath of the 2008 financial crisis. Three principal points stand out: providing fast disclosure, making complete disclosure, and deconflicting oversight.

1. Fast disclosure

The speed of disclosure is crucial not only for spotting trends and adjusting on the fly, but so that funds can be disbursed before too many small businesses collapse and industries unduly consolidate. One immediate outcome of the Treasury Department’s decision in the 2008 financial crisis to rescue large banks while letting smaller ones collapse was consolidation among the biggest and healthiest banks; “America’s largest banks today manage an even greater fraction of the nation’s wealth than before the crisis.”⁷³ Further out into the future, there was potential for even greater consolidation; bigger banks were considered safer by investors because they had more assets to fall back on and were more likely to be bailed out by the government in a future crisis.⁷⁴

“The speed of disclosure is crucial not only for spotting trends and adjusting on the fly, but so that funds can be disbursed before too many small businesses collapse and industries unduly consolidate.”

These concerns are no less important in the current crisis, including because the coronavirus crisis if anything affects a broader range of businesses and sectors of the economy. If CARES Act funds are not spent quickly enough, smaller businesses without sufficient financial cushion will either fail, or will be bought out by larger ones, increasing consolidation across the board. This is particularly troubling given the already-high levels of both product and labor market consolidation across a wide variety of industries.⁷⁵ Excessive consolidation is not necessarily a danger for every industry the way it was for banks after the 2008 crisis. For some industries, such as non-chain restaurants and mom-and-pop small businesses, the greatest economic concern is not industry consolidation, but outright failure due to an inability to pay their bills. Fast disclosure is crucial for these types of businesses as well, since systemic errors in disbursement that take too long to catch can result in failure of these businesses.

Fast disclosure can prevent these dramatic shifts in the economy by allowing oversight bodies to stay on top of the range of government agencies disbursing money across industries, ensuring that the money gets to the appropriate parties as quickly as possible, and making recommendations as needed to enable small businesses to survive beyond the crisis. For example, when the Federal Reserve initially announced the terms of its Municipal Liquidity Facility (MLF), the parameters would have excluded the 35 most African-American cities, whose residents were already disproportionately affected by the pandemic.⁷⁶ In response to this problem, the Fed expanded the standards to include some of those previously left-out cities.⁷⁷ This correction only occurred because the Fed was fully transparent with its terms early in the process and journalists, politicians, and academics were able to identify the issue and raise the problem. Had the terms been secret, the disparity would only have been discovered much later, after the impacts of denying loans to those cities had occurred.

Each of the oversight bodies has the power to obtain data from the federal government and should use this power frequently to fully obtain the information necessary for analyzing the efficacy of the program. It should be noted that the speed of the disclosure has already been hindered from multiple quarters. President Trump fired the first PRAC Chair, leading to replacement with an acting chair and a 20-day delay until a new executive director could be appointed. The COC still does not have a chair. The SIGPR was just confirmed on June 2. All told, it is crucial that these bodies begin their work as quickly as possible to prevent unfortunate knock-on effects resulting from delayed action.

2. Complete disclosure

Just as important as the speed of disclosure is completeness. Especially in an unprecedented situation like this, complete disclosure allows for the government, the oversight bodies, and watchdog groups to fully analyze the data and adopt to unexpected trends. The initial release of PPP data this week was welcome but represents just a small fraction of spending to date. Full disclosure is urgently needed.

History offers a guide to the difference this can make. To take one example, during the 2008 financial crisis, the Treasury Department made the logical assumption that providing funds to banks through the Capital Purchase Program (CPP) would spur them to lend to businesses. In reality, a retrospective analysis by the Congressional Oversight Panel (COP) found that there was no correlation between provision of CPP funds and new lending by banks.⁷⁸ Because Treasury did not gather the data to assess this at the time, they undoubtedly wasted vast amounts of money on this program that could have been better spent elsewhere. Better collection and analysis of data could have directed the funds in a more effective manner.

The oversight bodies should use the most cutting-edge technology available to build on the model established by the Recovery Accountability and Transparency (RAT) Board to anticipate problems and assess disbursement of the funds.⁷⁹ By tracking the funds and using data analytics to highlight suspicious activity, the oversight bodies can better focus their resources on problematic areas and ensure that accuracy is not sacrificed in the name of speed. Federal government transparency of TARP funds improved over time, and the coronavirus oversight bodies should push the agencies to begin from where TARP was at its most transparent and go even further.⁸⁰ At a minimum, Treasury should offer information as to where every dollar is going, and what it will be used for, disclosing every step in the process. As was done by the end of TARP, Treasury should post contracts online and disclose the identity of subcontractors.⁸¹

“Comprehensive disclosure has already been hampered by the administration.”

Comprehensive disclosure has already been hampered by the administration. The IG of the Treasury Department reported that “Treasury has not provided user-friendly means for recipients [of CARES Act funds] to meet reporting requirements.”⁸² When the IG raised this issue with Treasury, the department initially asserted that the reporting requirements only applied to part of the CARES Act (Division B, and not Division A), which would exclude much of the Act from oversight.⁸³ Relying on this reasoning, the reporting requirements would have excluded the vast majority of the CARES Act, including the $349 billion PPP, the nearly $500 billion for the Fed facilities, and the $150 billion directed toward states, territories, and tribes.⁸⁴

Under pressure from all sides, Treasury relented and released PPP data this week, but even that disclosure included less than 75% of the total PPP money and 15% of the borrowers.⁸⁵ Treasury also backed down from their overall claim that only Division B was subject to reporting requirements in a recent letter.⁸⁶ Nevertheless, there is much more information, about the PPP and other programs, that the government can and should provide.

3. Deconflicting oversight

The four bodies have separate but overlapping powers and areas of responsibility. It is paramount that they liaise with each other and share information to effectively coordinate, reduce redundancy, and improve the efficacy of each of the other bodies.

With its mandate to detect systemic waste, fraud, and abuse in disbursement of CARES Act funds, the PRAC should focus on gathering and analyzing data. That will ensure the public knows where every dollar is going and what it is being used for, and allow the PRAC to spot trends in order to adjust the legislation and priorities as needed. This requires a far more detailed public analysis than is currently available on the website. The PRAC should publicize its existing website to encourage and empower citizens to find out information relevant to their zip codes and report suspicious activity they are aware of.⁸⁷

SIGPR should take a closer look at that information to drill down on bad actors to recover misused funds and, where necessary, turn over fraudsters to the DOJ for prosecution. To date, the SIGTARP has recovered $11 billion, a return on investment of over 3,000%, and convicted 384 people with a 97% conviction rate.⁸⁸ Importantly, the SIGPR should be staffed with industry and CARES Act-specific expertise to catch fraudsters, especially those who will use the new law to commit fraud in novel ways.

Standard law enforcement personnel will investigate and prosecute frauds as they come upon them as well; this has already happened even in the program’s infancy.⁸⁹ Nevertheless, with trillions of dollars going out the door, there is simply too much activity to rely on traditional law enforcement personnel alone to police every fraud. It will be essential to have dedicated and expert staff to investigate the sophisticated frauds that will undoubtedly occur.

“[W]ith trillions of dollars going out the door, there is simply too much activity to rely on traditional law enforcement personnel alone to police every fraud.”

Within its ambit, the COC has a broad mandate (though no subpoena power). It should continue its efforts on assessing the holistic effects of the CARES Act on the overall financial system, including any racial or economic disparities. The COC’s first reports were effective in bringing new information to light on disbursement of funds and getting some initial questions answered by Treasury and the Fed, but there is far more work to be done.

The House Subcommittee has subpoena power and the most media-ready platform. It should use these elements to publicize the most important findings of the other bodies, or pursue them further in public hearings. Working in a bipartisan fashion will be crucial to its effectiveness. The Subcommittee’s first action was undermined by the Republicans on the Subcommittee stating that the letters sent by their Democratic counterparts were ill-conceived. Given the urgency of the crisis, hopefully more responsible bipartisanship will be forthcoming. Targets of oversight are going to be far less likely to comply with Subcommittee requests if their every action is followed with a criticism of that action from the minority members of the same Subcommittee.

The four oversight bodies will, and should, overlap to an extent; some redundancy will be useful to make sure that all ground has been covered. Nevertheless, the oversight bodies should communicate with each other to ensure that their redundancy is purposeful and meaningful, rather than accidental and extraneous.

Conclusion

“Extraordinary government programs can benefit from, and indeed may require, extraordinary oversight.”⁹⁰ There may be no situation more extraordinary than the coronavirus crisis, which saw Congress near-unanimously appropriate trillions of dollars to rescue the economy. With that amount of money flowing, and with the recent warning signs of possible abuses, it is crucial for the economy as a whole and for individual businesses that oversight bodies do that work and do it well.

Appendix 1: Matters for further investigation—Selected excerpts from press reports as of July 22, 2020

• “Transportation Secretary Elaine Chao’s family’s business, Foremost Maritime, got a loan valued at between $350,000 and $1 million. Chao is the wife of Senate Majority Leader Mitch McConnell, R-Ky.”⁹¹
• “Perdue Inc., a trucking company co-founded by Agriculture Secretary Sonny Perdue, was approved for $150,000 to $350,000 in loan money. A spokesperson for the Agriculture Department said Perdue Inc., a trucking service, said the loan was for about $182,000 and supported 27 jobs. Perdue’s adult children are 99% stakeholders in a trust that indirectly owns the company, and the secretary did not have any influence on the SBA’s loan decisions or the company’s decision to apply for aid, the spokesperson said.”⁹²
• “Irongate Azrep Bw LLC, a Trump Organization partner in a hotel and residential tower in Waikiki, Hawaii, received a loan from the Paycheck Protection Program in the range of $2 million to $5 million, according to the data released on Monday, which shows loan ranges. Calls to Trump Waikiki weren’t returned. Trump International Hotel & Tower at Waikiki isn’t owned by Trump or his company, according to its website. Irongate uses the Trump name under license from Trump Marks Waikiki LLC, which is owned by Trump.”⁹³
• “Companies owned by the family of Jared Kushner, the White House senior adviser and Trump son-in-law, also received several PPP loans. Princeton Forrestal LLC, a Kushner Cos. affiliate that bought the Princeton Marriott Hotel in 2018, received a loan of between $1 million and $2 million, according to the SBA data.”⁹⁴
• “The law firm of one of Trump’s top lawyers, Marc Kasowitz, also appears to have received a PPP loan, according to the SBA data. Kasowitz Benson Torres LLP received between $5 million and $10 million to retain 402 jobs, the data show.”⁹⁵
• “A company with a name matching one listed on the 2017 financial disclosure of Education Secretary Betsy DeVos received at least $6 million, the data show. The loans were made to Renaissance Acquisition Company LLC, which operates Indianapolis-based RenPSG a provider of services to nonprofits.”⁹⁶
• “Forgivable loans financed by the federal government also benefited a media company run by Trump’s longtime friend David Pecker. American Media, the publisher of the National Enquirer, received a loan in April from Bank of America Corp. of between $2 million and $5 million, records show.”⁹⁷
• “The New York Observer, the news website that Kushner ran before entering the White House and is still owned by his brother-in-law’s investment firm, was approved for between $350,000 and $1 million.”⁹⁸
• “Esplanade Livingston LLC, whose address is the same as that of the Kushner Companies real estate development business, was approved for $350,000 to $1 million.”⁹⁹
• “In April, a bank approved a loan of between $150,000 and $350,000 for the Pennsylvania dental practice of Albert Hazzouri, who golfs with Trump and frequents Mar-a-Lago, the president’s private club in Palm Beach, Florida.”¹⁰⁰
• “A small indoor lettuce farming business applied for funds between $150,000 and $350,000 SBA data show. Trump Jr. had invested in Eden Green Technology, a vertical farming company just south of Dallas, whose co-chair, Gentry Beach, was a Trump campaign fundraiser.”¹⁰¹
• “Cottage Hospital, a 25-bed critical access facility in Woodsville, New Hampshire, received between $2 million and $5 million in PPP loans. The hospital’s CEO, Maria Ryan, is a longtime close associate of Giuliani’s.”¹⁰²
• “G.H. Palmer Associates, a real estate firm run by longtime Trump backer Geoffrey Palmer, was approved for a loan. The company is listed as ‘G.H. Palmer Inc.’ on the list of loans that were distributed, but the address of the company matches that of Palmer’s real estate firm in Beverly Hills, California. The company was approved for a loan worth $350,000 to $1 million.”¹⁰³
• “Dezer Development, a real estate company founded by Michael Dezer, says on its website that it has the same address as Trump International Beach Resort in Miami, Florida. The Dezer website says that its ‘branded real estate portfolio includes six-Trump branded towers.’ Dezer got between $350,000 and $1 million from PPP.”¹⁰⁴
• “Then there’s White Stallion Energy, a coal mining company out of Indiana, which is owned by Steven Chancellor. The coal executive reportedly met with former EPA chief Scott Pruitt to discuss the softening of a pollution law. White Stallion gave $175,000 to Trump’s inaugural committee. Below, he is shown shaking Trump’s hand, along with Indiana Sen. Mike Braun, when the president visited the state in 2018. White Stallion saw between $5 million and $10 million in PPP loans.”¹⁰⁵
• “As much as $273 million in federal coronavirus aid was awarded to more than 100 companies that are owned or operated by major donors to President Donald Trump’s election efforts, according to an Associated Press analysis of federal data.”¹⁰⁶
• “Among the recipients named Monday was the conservative website NewsMax, which was approved for a loan up to $5 million on April 13, the data shows. NewsMax CEO Christopher Ruddy has donated $525,000 to political committees supporting Trump, records show. He did not respond to a request for comment.”¹⁰⁷
• “Muy Brands, a San Antonio, Texas-based company that operates Taco Bell, Pizza Hut and Wendy’s franchises, was approved for a loan worth between $5 million and $10 million. Its owner, James Bodenstedt, has donated $672,570 to Trump since 2016, records show. The company did not respond to a request for comment.”¹⁰⁸
• “Irving, Texas-based M Crowd Restaurant Group, which owns 27 Texas restaurants including the Mi Cocina chain, was approved for between $5 million and $10 million. Ray Washburne, one of the company’s founders, was vice chairman of the Trump Victory Committee in 2016 and donated $100,000 to the PAC last August. The company did not respond to a request for comment.”¹⁰⁹
• “Broadcasting company Patrick Broadcasting, which is owned by Texas Lt. Gov. Dan Patrick, a firebrand conservative and former talk radio host, received a loan of $179,000, according to Patrick’s senior adviser Sherry Sylvester. Patrick is the Texas chairman of Trump’s presidential campaign.”¹¹⁰
• “Churches connected to President Donald Trump and other organizations linked to current or former Trump evangelical advisers received at least $17.3 million in loans from a federal rescue package designed to aid small businesses during the coronavirus pandemic.”¹¹¹
• “Those receiving loans include City of Destiny, the Florida church that Trump’s personal pastor and White House faith adviser Paula White-Cain calls home, and First Baptist Dallas, led by Trump ally and senior pastor Robert Jeffress. City of Destiny got between $150,000 and $350,000 from the Paycheck Protection Program, or PPP, and First Baptist Dallas got between $2 million and $5 million, according to data released by the Treasury Department on Monday.”¹¹²
• “Other program beneficiaries connected to veteran evangelical Trump allies include The Faith & Freedom Coalition, founded by conservative strategist Ralph Reed, which got a loan of between $150,000 and $350,000. That group reported retaining 24 jobs with its loan, according to government data.”¹¹³
• “King Jesus International Ministry, the Miami megachurch where Trump launched his evangelical outreach push ahead of November’s election, received a loan of between $2 million and $5 million according to the data. That church’s pastor, Guillermo Maldonado, was also among a group of faith leaders who met and prayed with Trump at the White House last fall.”¹¹⁴
• “An energy drink company that donated six figures in corporate money to President Donald Trump’s preferred super PAC got an emergency small business loan worth between $5 million and $10 million, according to government data released this week. Vital Pharmaceuticals, the maker of Bang Energy, gave $250,000 last year to America First Action, the only super PAC with the president’s official endorsement. The company’s CEO, Jack Owoc, is an ardent Trump supporter who has been pictured socializing with members of Trump’s family.”¹¹⁵

Appendix 2: Additional matters for further investigation—Selected excerpts from press reports as of Aug. 2, 2020

PPP

• “At least 1,322 companies backed by private equity investors received Paycheck Protection Program loans from the Small Business Administration, according to a review by the Project On Government Oversight (POGO) and the Anti-Corruption Data Collective.”¹¹⁶
• “At least $273 million [in PPP loans] went to more than 100 companies owned or operated by Trump major donors. Grand total in donations distributed among them: $11.1 million, with each donor having given at least $20,000.”¹¹⁷
• “Businesses tied to President Donald Trump’s family and associates stand to receive as much as $21 million in government loans designed to shore up payroll expenses for companies struggling amid the coronavirus pandemic, according to federal data… up to $2 million was approved for the Joseph Kushner Hebrew Academy, a nonprofit religious school in Livingston, N.J., that’s named for Jared Kushner’s grandfather and supported by the family.”¹¹⁸
• “At least 32 companies paying CEOs more than $1 million received funds from the Paycheck Protection Program, according to an investigation by Popular Information…You can find the full list of businesses and CEO compensation over at Popular Information.”¹¹⁹
• “Two tech companies owned by Chinese state-controlled private equity firms received Small Business Administration Paycheck Protection Program loans worth, in total, between $2.4 million and $6 million…One of the Chinese state-owned companies was featured in a March 2018 Trump White House report on how China has been acquiring U.S. technological know-how to better compete with the U.S. The administration used the report’s findings to justify tariffs against Chinese imports.”¹²⁰
• “Only 12 percent of black and Hispanic business owners polled between April 30 and May 12 received the funding they had requested. About one quarter received some funding. By contrast, half of all small businesses reported receiving [funding] from a single part of the stimulus packages — the Paycheck Protection Program — according to a census survey.”¹²¹
• “Up to 90% of minority and women owners [are] shut out of Paycheck Protection Program.” partly because “when the application process for PPP loans opened in April, large banks like Bank of America prioritized customers who already had lending relationships, according to Bank of America officials. Those decisions left the smallest small businesses in America essentially shut out, unable to access the funds before they ran out.”¹²²
• “More than 11,000 [temp staffing] companies took in a total of between $3.6 billion and $7.9 billion [in PPP funds], with about 4,600 of those getting more than $150,000 each… Many were counting workers contracted by other companies as saved jobs…That means many temp companies were able to double dip, getting paid twice for the same worker, once by the client and then again by taxpayers.”¹²³
• “White House Press Secretary Kayleigh McEnany’s parents received millions of dollars in Paycheck Protection Program (PPP) loans, according to data released by the Small Business Administration this week…McEnany Roofing, a commercial roofing company in Florida owned by McEnany’s parents, Michael and Leanne McEnany, received somewhere between $1–2 million dollars from PPP.”¹²⁴

Public Health Spending

• During a roundtable with Trump that CNN describes as “almost like an episode of ‘Shark Tank’,” Moderna told Trump that within the next few months they “would be able to have a vaccine ready to be tested. This piqued Trump’s interest and the day after the roundtable, “the FDA green-litModerna’s product for trial, making it the first vaccine candidate to advance to the first phase of a clinical study, in which an as-yet unapproved vaccine is injected into the arms of a small group of 45 human volunteers. Established in 2010, Moderna has never brought a product to market, or gotten any of its nine or so vaccine candidates approved for use by the FDA. It has also never brought a product to the third and final phase of a clinical trial.”¹²⁵
• “The Trump Administration is weakening taxpayer safeguards in its agreements with companies working on coronavirus drugs, which could prevent regulators from curbing prices for future vaccines and treatment…It is employing a looser standard of federal contracting — called ‘other transaction authority’ — that avoids some contracting rules that protect taxpayer investments.”¹²⁶
• “The co-director of the White House’s ‘Operation Warp Speed’ will not be required to divest his investments in pharmaceutical companies and will not be subject to federal disclosure rules, according to a decision by a government watchdog. Advocacy groups Public Citizen and Lower Drug Prices Now filed the complaint with the Department of Health and Human Services Office of Inspector General (OIG) because Moncef Slaoui, who leads Operation Warp Speed, has extensive ties to the pharmaceutical industry. However, his position in the administration is on a contract and he is not considered a government employee. As such, he is not subject to the same federal disclosure rules that would require him to list his stock holdings.”¹²⁷
• “Blue Flame Medical, founded in March by two political consultants, took in hundreds of millions of dollars in orders from state and local governments for personal protective equipment like masks and surgical gowns. Then, it allegedly failed to fulfill many of the orders—from a $5,000 PPE contract with a local police department to a $12.5 million dollar one with Maryland.”¹²⁸
• “A company created by a former Pentagon official who describes himself as a White House volunteer for Vice President Mike Pence won a $2.4 million dollar contract in May — its first federal award — to supply the Bureau of Prisons with surgical gowns… Matthew J. Konkler, who worked in the Department of Defense during the George W. Bush administration, formed BlackPoint Distribution Company LLC in August 2019 in Indiana, state records show, but had won no federal work until May 26. The Bureau of Prisons chose the company with limited competition for a contract to supply surgical gowns to its facilities.”¹²⁹
• “A company formed by Zach Fuentes, a former White House deputy chief of staff, won a $3 million contract just days after forming to supply face masks to the Indian Health Service. The masks did not meet FDA standards for use in health care settings.”¹³⁰
• Following the Trump administration’s shift in control of coronavirus data from the Centers for Disease Control and Prevention to the Health and Human Services Department, the data “has become highly erratic,” according to The COVID Tracking Project, a volunteer organization from The Atlantic. “Two weeks after the [new] rules began, it’s clear that technical requirements associated with the new guidelines have caused major problems,” said the report. “Some of the states facing the largest COVID-19 outbreaks—such as California, Texas, and South Carolina—have warned that they are not reporting accurate hospital information due to the switchover.¹³¹
• Congress is “looking into irregularities in the contract process and the decision to shift the [COVID-19] data gathering from CDC to HHS.” The contract eventually went to TeleTrackings, whose “CEO Michael Zamagias had links to the New York real estate world — and in particular, a firm that financed billions of dollars in projects with the Trump Organization.”¹³²
• “The Trump administration failed to enforce an existing contract with a major medical manufacturer, delayed negotiations for more than a month and subsequently overpaid as much as $500 million for tens of thousands of [ventilators]… While Navarro served as chief negotiator, the deal was formalized by Adam Boehler, CEO of the U.S. International Development Finance Corporation, who is a former college roommate of Jared Kushner, Trump’s senior adviser and son-in-law. Christopher Abbott, an aide to Navarro who graduated from college just last year, oversaw a majority of the communications between Philips and the White House.”¹³³
• “Kodak plans to make ingredients for generic drugs, aided by a $765 million U.S. government loan… Kodak filed for bankruptcy in 2012 after getting lapped by rivals in digital photography and failing to make good on an earlier multibillion-dollar acquisition of a pharmaceutical company… One of the drugs Kodak would manufacture materials for is hydroxychloroquine, the controversial antimalarial drug touted by President Donald Trump in the treatment of the coronavirus… Navarro said in the Fox Business interview that one of his staff, Christopher Abbott, a recent graduate of American University, identified Kodak as a prospect. Navarro’s office then brought Kodak to the attention of Adam Boehler, a former health care entrepreneur who heads the International Development Finance Corporation, Boehler said in an interview.”¹³⁴
• “The VA gave [Robert] Stewart [Jr.]’s fledgling business — which had no experience selling medical equipment, no supply chain expertise and very little credit — an important contract [to supply 6 million N95 masks to VA hospitals]… [and] agreed to pay nearly $5.75 per mask, a 350% markup from the manufacturer’s list price…the VA ended up with precisely zero additional N95 masks from its deal with Stewart.”¹³⁵
• Government Accountability Office published a report that summarizes the federal government’s contracting practices during the pandemic thus far. “As of June 11, spending totaled $17.8 billion and the Health and Human Services, Defense, Homeland Security and Veterans Affairs departments accounted for 85% of contract obligations. About 62% of obligations have been for ventilators, gowns, N95 respirators and other protective gear for health care workers and coronavirus patients. Fifty-three percent of contracts were not competitively awarded.”¹³⁶

Lobbying

• “A high-level staffer managing legislative affairs for President Donald Trump who left government earlier this year is listed in official filings as lobbying Congress on the $2.2 trillion coronavirus relief bill for an array of mammoth corporate and industry clients, such as the drug industry trade group PhRMA, an association representing private equity firms, Duke Energy, Major League Baseball, and the Children’s Hospital Association. Despite Benjamin R. Howard’s recent turn through the revolving door, he may turn through it yet again: Politico recently reported that the Oval Office is considering bringing him back for an even more senior White House job.”¹³⁷
• “At least 40 lobbyists who are connected to President Donald J. Trump through his campaigns, inaugural committee, presidential transition team, or his administration [hereinafter Trump-connected lobbyists] have thus far lobbied on COVID-19 issues or indicated that they have signed up clients to do so….Twenty-seven clients of Trump-connected lobbyists have received federal COVID aid, totaling more than $10.5 billion. This consists of $6.3 billion in grants, $4.2 billion in loans and $67 million worth of support in the form of corporate bond purchases by the Federal Reserve. These numbers are likely a gross undercount due to lagging disclosure by the Trump administration. The Trump-connected lobbyists include at least 20 people who worked in the administration or provided special services for the administration; 11 alumni of the Trump presidential transition team; eight members of Trump’s campaigns; six people who raise money for Trump; and three vice chairs of Trump’s scandal-ridden inaugural committee.”¹³⁸
• “Trump-connected lobbyists collectively have represented at least 150 clients on COVID matters. Trump-connected lobbyists from a single firm (Brownstein Hyatt Faber Schreck) have represented at least 45 clients on COVID issues.”¹³⁹
• “At least 14 clients represented by Trump-connected lobbyists are working on COVID vaccines, therapeutics, or tests.”¹⁴⁰
• “At Least Five Covid Lobbyists May Have Violated a Trump Executive Order That Restricts Lobbying Activities by Former Officials. The executive order prohibited Trump appointees who leave the administration from engaging in any lobbying activities, including behind the scenes lobbying work, that involved their former agencies for five years after leaving the government. The executive order also prohibited those leaving the Trump administration from engaging in any lobbying activities, including work on behalf of their colleagues, that involved contact with most high-ranking executive branch officials for the duration of the administration. Lobbying disclosure forms are not sufficiently precise, in most cases, to determine if violations have occurred. However, at least five Trump-appointees have appeared on forms indicating that they and their peers lobbied the executive branch on COVID issues. In many cases, the forms indicate that the former officials’ agencies were directly lobbied.”¹⁴¹
• “Newly filed disclosures show [former New Jersey Governor Chris] Christie’s firm pulled in $240,000 in less than three months for lobbying the Trump administration on coronavirus aid on behalf of three New Jersey hospital systems and a Tennessee-based chain of addiction treatment centers….RWJ Barnabas, which operates dozens of hospitals and medical centers throughout New Jersey, secured tens of millions of dollars from the Provider Relief Fund through its affiliates — including nearly $87 million for Saint Barnabas Medical Center and another $16.7 million for Robert Wood Johnson University Hospital at Rahway, according to federal data. Another sprawling hospital system that hired Christie, Hackensack Meridian Health, had gotten at least $146 million for three of its locations by May, according to lists put out by Rep. Frank Pallone (D-N.J.) of hospitals in his district that received coronavirus relief funds. Five hospitals owned by Atlantic Health, which also hired Christie, got at least $160 million, according to Pallone. It’s not clear exactly what role Christie — who started lobbying for the hospitals on May 4, according to disclosure filings — played in helping them secure the funds.”¹⁴²

Federal Reserve Emergency Lending

• “Deputy Treasury Secretary Justin Muzinich has an increasingly prominent role. He still has ties to his family’s investment firm, which is a major beneficiary of the Treasury’s bailout…[The] firm…primarily trades in corporate debt, including junk bonds. This conflict of interest is made more concerning by the facts that the Fed has never before bought corporate debt, and that the facility buying corporate debt was the first Fed facility to be capitalized.”¹⁴³
• “YRC apparently did not meet either of the two national security eligibility criteria [to receive its $700 million loan Federal Reserve loan]. However, YRC qualified for the program under a catch-all provision created by the Treasury allowing it to determine if a business is critical to maintaining national security based solely on a recommendation and certification from the Secretary of Defense or the Director of National Intelligence…YRC has been rated non-investment grade for over a decade, struggled financially for years before the COVID-19 crisis, and was at risk of bankruptcy before it obtained a loan from the Treasury.”¹⁴⁴
• “The Federal Reserve opened a highly anticipated emergency lending program in June… and the rules stipulate that only American companies can participate as borrowers. For Pimco’s offshore fund, there was an easy way to still benefit. The offshore fund is invested in an entity registered in Delaware and tied to the larger firm, which is based in Newport Beach, Calif. That entity, which investment managers can use to make transactions, also has backing from the U.S.-based versions of the Pimco hedge fund. It turned around and borrowed $13.1 million from the Fed program by pledging a bundle of debt as collateral. Investors in the Pimco hedge fund ultimately stand to profit from the transaction. The Pimco example is not unique — other foreign investors have put money into U.S.-based funds that are tapping the Fed program. That they found a way to participate in a program restricted to American borrowers highlights that financial firms are looking to make money from the Fed’s market rescue programs, even if doing so means maneuvering around congressional limitations on eligibility.”¹⁴⁵

Disclosure, Conflicts of Interest & Personnel Issues

• “Marc Short, the chief of staff to Vice President Pence, owns between $506,043 and $1.64 million worth of individual stocks in companies doing work related to the Trump administration’s pandemic response – holdings that could run afoul of conflict of interest laws. Many of the medical, pharmaceutical and manufacturing companies…in which Short and his wife hold stock have been directly affected by or involved in the work of the coronavirus task force chaired by Pence.”¹⁴⁶
• “In a signing statement released hours after Mr. Trump signed the bill in a televised ceremony in the Oval Office, the president suggested he had the power to decide what information a newly created inspector general intended to monitor the fund could share with Congress…The signing statement also challenged several other provisions in the bill, including one requiring consultation with Congress about who should be the staff leaders of a newly formed executive branch committee charged with conducting oversight of the government’s response to the pandemic.”¹⁴⁷
• “In a recent guidance memo to federal agencies on how to report on allocation of relief funds, the Office of Management and Budget defied Congress by ignoring a number of clear reporting requirements in the CARES Act.”¹⁴⁸
• “In a letter to four congressional committee chairs Thursday, two officials in charge of a new government watchdog entity revealed that the Trump administration had issued legal rulings curtailing independent oversight of Cares Act funding… According to the previously undisclosed letter, Treasury Department attorneys concluded that the administration is not required to provide the watchdogs with information about the beneficiaries of programs created by the Cares Act’s “Division A.” That section includes some of the most controversial and expensive programs in the coronavirus response efforts, including the administration’s massive bailout for small businesses and nearly $500 billion in loans for corporations.”¹⁴⁹
• “The White House refused to disclose all the members of Kushner’s task force, which included members (include Kushner’s former roommate) drawn from private industries that had keen interests (and perhaps conflicts of interest) related to the policies being considered. The task force operated in secrecy, using private phones and personal email accounts in possible violation of federal transparency laws, and without any oversight. Kushner’s off-the-books effort included a collection of volunteers from investment and consulting firms recruited to hand out government contracts for desperately needed equipment for the pandemic.”¹⁵⁰
• “President Trump has removed the head of a group charged with overseeing the $2 trillion coronavirus package passed by Congress last month. The coronavirus recovery law requires that an existing inspector general be selected by a council of inspector generals to oversee the response to the pandemic. That council picked Glenn Fine, the acting inspector general at the Department of Defense, to lead the newly formed Pandemic Response Accountability Committee. But on April 6, the president designated Sean W. O’Donnell, the inspector general at the Environmental Protection Agency, to be the new acting inspector general at the Department of Defense, thus voiding Fine’s eligibility to lead coronavirus oversight.”¹⁵¹
• “Linda Miller [who] began work this week as the deputy executive director of the Pandemic Response Accountability Committee, or PRAC…[said she] can’t speak negatively about the president or any of the decisions he’s made, particularly when it comes to the IG community… The IG community is obviously under a lot of stress and scrutiny…I can speak real broadly. I just won’t say anything that’s in any way derogatory about the president because, obviously in my role, I need to stay as neutral as possible in order to basically stay in my role, frankly.”¹⁵²
• “Three weeks [after Trump removed Glenn Fine from his acting role], Trump replaced Christi Grimm, the acting IG for Health and Human Services Department, who he said was biased in reporting that hospitals were short on vital supplies.”¹⁵³

Miscellaneous

• “The Agriculture Department has awarded multimillion-dollar contracts to companies that appear to have little experience working with food banks or farmers, spurning several big produce companies with extensive expertise in food distribution. An event planning company in San Antonio, Texas, known for throwing lavish weddings and high-end conferences, was awarded more than $39 million — one of the largest contracts handed out by USDA under a new program aimed at matching up food banks with surplus produce, meat and dairy.”¹⁵⁴
• “[Secretary] DeVos has used $180 million of [the $30 billion for education institutions under the Coronavirus Aid, Relief and Economic Security Act] to encourage the creation of ‘microgrants’ to pay for educational services, including private school tuition. And she has nearly depleted the 2.5 percent of higher education funding, about $350 million, set aside for struggling colleges to bolster small colleges – many of them private, religious or on the margins of higher education – regardless of need.”¹⁵⁵
• “The [GAO] noted among other shortfalls that the U.S. government had sent nearly $1.4 billion worth of stimulus checks to dead Americans as of the end of April…Some of its harshest criticism was reserved for the Small Business Administration (SBA), which oversees a $670 billion emergency loan program to help companies survive the pandemic, and the lack of a plan from the Department of Transportation to improve the aviation sector’s response to outbreaks…It criticized the SBA for failing to give detailed descriptions of loans made in its data.”¹⁵⁶
• “Three airline industry companies slated to receive $338 million in public money designed to preserve jobs in the hard-hit industry have laid off thousands of workers anyway, according to Treasury disclosure filings and public layoff data.”¹⁵⁷

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