According to a new Freedom Foundation report issued today, hundreds of labor unions and related organizations received $36.7 million in federal funds through the federal Paycheck Protection Program (PPP) for which they were legally ineligible.
The Small Business Administration administered the loans through the Paycheck Protection Program, which was established by Congress in March 2020 to assist businesses in retaining employees during the COVID-19 pandemic.
Under the Paycheck Protection Program, loans were limited to “certain eligible small businesses, individuals and non-profit organizations.”
However, most tax-exempt organizations other than 501(c)(3) nonprofits were ineligible for PPP funds from March 2020 until the passage of the American Rescue Plan in March 2021.
The Freedom Foundation report, “Profiting From a Pandemic: How Ineligible Unions Collected Millions in Federal Covid Relief Funds,” says the union fraud “diverted resources away from the purpose of the PPP”; namely, helping small businesses.
The report states, “While a variety of business enterprises with fewer than 500 employees qualified for the forgivable loans, nonprofit eligibility was primarily limited to tax-exempt organizations operating under 26 U.S.C. § 501(c)(3), which covers most traditional charitable nonprofits, as labor unions are generally registered with the Internal Revenue Service (IRS) under 26 U.S.C. § 501(c)(5), most were not initially eligible for PPP loans.”
Among the apparently ineligible recipients were at least a dozen teachers’ unions and advocacy groups that received $6.8 million in PPP loans. Nearly a dozen other unions representing government employees also received $1.5 million in PPP funds, including several affiliates of the American Federation of State, County, and Municipal Employees (AFSCME).
According to the report, “Not only were the unions ineligible for these funds, but they had little need for them, The federal government allocated nearly $200 billion to public schools to help them weather the pandemic and keep staff on payroll—and paying union dues.”
Maxford Nelsen, the Freedom Foundation’s director of labor policy and the report’s author said:
“That hundreds of labor unions received tens of millions of dollars in federal COVID relief for which they were legally ineligible represents failure on so many levels,”
“Unions shouldn’t have applied for — likely fraudulently — aid for which they weren’t eligible, the lenders, themselves affiliated with unions in some cases, should have done their homework or not looked the other way when approving the unions’ applications. And the Small Business Administration should have had better controls in place to ensure that only eligible organizations were being approved for loans,” he continued.
“It only adds insult to injury to know that teachers’ unions were getting federal funds all while trying to keep schools closed,” Nelsen added, “and that labor groups that engage primarily in political advocacy received taxpayer dollars to do so.”
Sources: Thepoliticalinsider, Freedomfoundation, Realclearpolicy