Earlier this month, the Office of the Special Inspector General for Pandemic Recovery, a new government watchdog, questioned the practice of letting companies benefit from both programs, saying that it “was not obvious” why airlines in particular would need help twice over and that it planned to monitor the issue.
“Creating multiple programs resulting in multiple forms of financial support to a single individual or entity may well be sound policy,” the inspector general’s office wrote. “But in such circumstances, the risk of fraud and abuse increases and questions arise.”
In March, Congress created the Paycheck Protection Program, which provided forgivable loans to small businesses of all kinds. But lawmakers also singled out the aviation industry for special help through grants known as the Payroll Support Program.
All told, companies are in line for $700 million under the aviation program, receiving grants based on their payroll for a six-month period last year. The loans in the small-business program are worth at least $186 million.
The programs have drawn scrutiny from watchdogs inside and outside the government, focusing on which companies received the money and whether the dollars are getting to those who need it most. Money from the small-business program went to chains backed by private equity firms and to members of Congress. The aviation program, meanwhile, is on the verge of expiring before the industry recovers, putting tens of thousands of jobs on the line.
Rosalind Wiggins, director of Yale University’s Global Financial Crisis Project, said policymakers have had to balance getting money into the economy quickly and fine-tuning program rules.
“When you have this much money going out with this much speed, there are bound to be issues like this that arise that will be evaluated on the back end,” Wiggins said.
The Post compared records disclosed by the Small Business Administration and the Treasury Department to determine whether companies had benefited from both programs. It is not possible to determine the precise value of the small-business loans because the SBA released only ranges of amounts.
There also could be more companies that benefited because the aviation records do not list street addresses for recipients, which would help determine whether different legal entities that are in fact the same business received money, and because the SBA released records only on companies receiving loans of at least $150,000.
Constant Aviation, an aircraft services company based in Cleveland, quickly secured a loan under the small-business program, getting approved for at least $5 million on April 14, according to the SBA records.
But on April 24, the company wrote to officials in Ohio saying it would be closing an office at Cuyahoga County Airport and permanently laying off 52 employees.
“This facility closure and the resulting layoffs are a necessary response to the unprecedented and unforeseeable business circumstances created by the COVID-19 pandemic,” wrote Constant’s president, David Davies.
Companies are supposed to give workers at least 60 days’ notice of such layoffs, but Davies wrote that Constant was unable to do so because of “the sudden nature of the virus outbreak and its dramatic adverse effect on our business operations.”
John Price, a manager on the company’s avionics team, led a tightknit crew of 10 people that he said was like a family.
The news that he was losing his job came out of nowhere. He recalled getting a call on a Friday afternoon letting him know what was happening.
“There was no warning signs that led up to it,” Price said. “We’d come out of a pretty bad year, and we were starting to turn things around at the facility I was at.”
Another employee, who spoke on the condition of anonymity so as not to hurt their prospects of finding work, said Constant had assured people their jobs would be safe because the company had qualified for loans.
“They said there was no need to worry,” the employee said.
The layoffs took effect in early May.
Many of those who lost their jobs have yet to find work. Price took a position with another company at a 25 percent pay cut and had to move in with his brother in Illinois to be close enough to commute, leaving his wife back in Ohio.
On May 22, Constant was approved for $23 million in aid under the aviation grant program, which prohibited the company from laying off or furloughing any workers until Oct. 1.
Price said the details of the financial aid the company received were kept from employees like him. After learning about the amount of help it received, he said, he felt betrayed.
“It makes me feel like for a company that asked us for our loyalty, they had none to give back,” he said. “To find out they received that kind of money and still threw us out, it kind of blows my mind. To be quite blunt, it pisses me off to know I could have had my job kept and saved and still be at home with my wife.”
“They destroyed a family,” Price said. “Not just a bunch of co-workers.”
Constant, in a statement, said the company had “once again reviewed its guidelines and determined that all layoffs were done in advance of the availability of its PSP grant, and in accordance with the PPP program.”
The company said that it has “adhered to the guidelines of both programs,” and that they have “allowed Constant to weather the storm brought on by the pandemic and return to a state of stability, and actual employment growth, much faster than would have been possible without it.”
Reps. James E. Clyburn (D-S.C.), Peter A. DeFazio (D-Ore.) and Maxine Waters (D-Calif.) have been scrutinizing aviation companies that have laid off workers despite being in line for aid. The lawmakers chair panels on pandemic relief, transportation and financial services.
They found that four companies slated to get more than $500 million in government support under the aviation program have laid off more than 7,500 workers. Among them are Constant and catering company Flying Food Fare, which also both received small-business loans.
Last month, the lawmakers wrote to the head of Flying Food Fare, which disclosed 894 layoffs in early April before being approved for $85 million in grants from the aviation program. The lawmakers urged the company to rehire the workers.
“Giving payroll support to companies that engaged in mass layoffs is not only contrary to congressional intent, but also wastes taxpayer dollars by covering the cost of payroll for employees that have already been laid off,” the Democrats wrote.
Flying Food Fare did not respond to requests for comment. However, representatives for several of the other companies have said they have complied with the law, making job cuts before they signed their agreements with the government.
Treasury officials said that under the rules, layoff protections become effective once a company completes its agreement with the government, so reductions that occur before that date may not be a violation of the program.
Flying Food also received a loan of $350,000 to $1 million under the small-business program on April 29, The Post’s analysis found, and a business called Flying Food Fresh Solutions, which shares an address and executives, also received a similar-size loan.
But the rules on the small-business program are less stringent and do not prohibit layoffs.
While the small-business program was designed to help companies that generally have fewer than 500 employees or less than $7.5 million in annual revenue, the SBA’s rules allow many aviation companies to qualify if they have as many as 1,500 employees or as much as $35 million a year in revenue.
The program also has been criticized for making loans to foreign companies and large chains with connections to Wall Street — some of which returned money after facing public scrutiny.
Companies are subject to one standard or the other, so two cargo airlines qualified as small businesses despite having hundreds of millions of dollars a year in revenue because they employed relatively small numbers of people.
One of the largest beneficiaries of both programs was CommutAir, an airline that operates regional flights for United Airlines and employs about 1,000 people. It received at least $5 million in a small-business loan and $25 million from the aviation program.
The company said that the money allowed it to avoid furloughs and that it has not announced any future layoffs.
“The CommutAir family extends its appreciation to Congress and the President for providing this funding, which has helped maintain the employment of our 1,000 team members during this unprecedented impact to our nation and our industry,” the company said in a statement.
But the situation is different at Air Wisconsin Airlines, which received a small-business loan of at least $5 million and payroll grants of about $41 million. When the ban on layoffs lifts on Oct. 1, the company has said, it may have to temporarily lay off 400 employees.
Air Wisconsin did not return calls seeking comment.