Corona Daily 367: Paycheck Protection Program (PPP)

CARES (Coronavirus Aid, Relief and Economic Security) Act is a fantastically generous act passed by the USA on 29 March. It is designed to provide relief to individuals and businesses economically affected by the pandemic. PPP (Paycheck protection program) is one key measure that has set aside $349 billion in forgivable loans to small businesses so they can retain their employees and keep the business running. In April, another $300 billion was added to PPP. Though the loan is given at 1% per annum, both the loan and the interest will be waived if the small business spends the money within the agreed time, mainly towards payroll expenses.

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In April, David Hines, 29, had minus $30,000 in his account thanks to an overdraft facility. The energetic young man submitted applications for seven businesses, requesting PPP loans worth $14 million. The money would be spent on 70 employees, with a monthly payroll of $4 million. The bank approved three applications with incredible speed sanctioning $3.99 million, and began sending the money on 11 May.

As efficient as the bank, a week later David Hines was seen driving around Miami Beach in a new blue Lamborghini Huracan Evo. For the lovely car registered in his own name, he had paid $318,497. This was merely the beginning. As the investigator’s affidavit later revealed, he spent $8530 on Graff diamonds, $4700 on Saks Fifth avenue, $7300 at a luxury Miami Beach hotel, $30,000 to Mom, and $40,000 to three people whose names are not disclosed. Thousands were spent on dating websites, delivery services, and other luxury places. In an understatement, the investigator adds “there does not appear to be any business purpose for these expenses”.

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In reality, Hines’s Miami companies had an average monthly expense of $200,000. Most of the 70 employees didn’t exist, and those who did had salaries a fraction of what was written in the application.

It would have taken less than two minutes to check the monthly payroll tax Hines’ companies paid. That would have disqualified his application immediately. But the federal agency didn’t bother to check any claims in the applications.

Hines was charged last week, his Lamborghini confiscated. Until the court hearing in October, he is allowed to live with his mother (to whom he presumably paid $30,000) with a GPS monitor. It is possible he misunderstood the term ‘forgivable’ loan. If the charges are proven, he faces up to 70 years in jail.

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At least 30 such cases have come to light. A Detroit resident received $600,000 for a defunct business. Reality TV star Maurice Fayne (Mo) spent $1.5 million in a buying spree comprising of Rolex watches, a diamond bracelet, a 5.73 carat diamond ring for himself, and $40,000 for child support. Among other things, agents seized $80,000 in cash, including $9,400 from his pockets.

Lee Price III, was arrested this week. His PPP funds were spent at liquor stores, a strip club, two Houston nightclubs, and the leasing of a luxury apartment in midtown Houston. More importantly, he had bought a $14,000 Rolex watch and a $240,000 Lamborghini Urus.

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Whether the Paycheck Protection Program succeeded in helping small businesses will be known in the future. It has certainly helped the business of Lamborghini.

Ravi