Letter to The Honorable Steven Mnuchin and The Honorable Jovita Carranza (June 15, 2020)

Summary

A letter dated June 15, 2020, from the Select Subcommittee on the Coronavirus Crisis to Steven Mnuchin of the Department of the Treasury and Jovita Carranza of the Small Business Administration. It states that the Select Subcommittee is investigating whether implementation of the Paycheck Protection Program (PPP) has favored large, well-funded companies over struggling small businesses in underserved communities. The letter cites a May 8, 2020 report by SBA's Inspector General and states that as of June 6, 2020, SBA had approved more than $511 billion in PPP loans, leaving more than $130 billion available. It asks the recipients to issue guidance to lenders and to produce documents and information by June 29, 2020. The signature block names James Clyburn as Chairman, Maxine Waters, Carolyn Maloney and others.

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Issuer: Congressional materials
Document type: 2020 06 15 2020 06 15 Select Committee To Mnuchin Carranza Sba Re Ppp
Date: 2020-06-15
Case: 2020 06 15 2020 06 15 Select Committee To Mnuchin Carranza Sba Re Ppp

Cite this document

“Letter to The Honorable Steven Mnuchin and The Honorable Jovita Carranza (June 15, 2020).” Dated 2020-06-15. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2020-06-15-2020-06-15-2020-06-15-select-committee-to-mnuchin-carranza-sba-re-ppp/, SHA-256 c54bd2057dada6e7785900fb9789ace47ded595e433ca4c20965b5c5bdd8d4a6.

Full text

June 15, 2020

The Honorable Steven Mnuchin
Secretary
Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220

The Honorable Jovita Carranza
Administrator
Small Business Administration
409 3rd Street, S.W.
Washington, D.C. 20416

Dear Secretary Mnuchin and Administrator Carranza:

The Select Subcommittee on the Coronavirus Crisis is investigating whether
implementation of the Paycheck Protection Program (PPP) has favored large, well-funded
companies over struggling small businesses in underserved communities—contrary to Congress’
clear intent. We are writing to seek documents and information and to urge the Treasury
Department (Treasury) and Small Business Administration (SBA) to take immediate steps to
ensure that remaining PPP funds are allocated to businesses truly in need, and to increase
transparency so taxpayers can see whether federal funds are being diverted due to waste, fraud,
and abuse.

When Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES)
Act with strong bipartisan support, we intended to provide urgent relief to small businesses that
otherwise could be forced to lay off employees or shut down. The CARES Act specifically
encouraged SBA to issue guidance “to ensure that the processing and disbursement of covered
loans prioritizes small business concerns and entities in underserved and rural markets,”
including businesses owned by veterans, members of the military, socially and economically
disadvantaged individuals, and women.1 Unfortunately, SBA and Treasury failed to issue clear
guidance, potentially undermining this core principle of the program.

Media reports indicate that some large lenders apparently created a two-tier system for
processing PPP loan applications. The banks’ wealthiest clients had access to a personalized
application process that ensured their applications were processed first. Other applicants had to

1
Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, §§ 1102, 1106 (2020).
The Honorable Steven Mnuchin
The Honorable Jovita Carranza
Page 2

use poor-performing electronic portals, faced significant processing delays, and sometimes
needed to find another lender to consider their application. 2 For example, one report found that
JPMorgan Chase “provided loans to virtually all of its commercial banking customers” that
sought PPP loans “while the lender’s smallest customers were almost entirely shut out.” 3

Unfortunately, SBA and Treasury did not provide any public guidance to lenders until
nearly two weeks after lenders started processing loan applications and just a day before the
initial round of funding dried up. Despite Congress’ clear intent, this guidance made no mention
of prioritizing loans to underserved communities. 4

On May 8, 2020, SBA’s Inspector General reported that SBA’s guidance “did not fully
align with” the CARES Act, noting, “We did not find any evidence that SBA issued guidance to
lenders to prioritize the markets indicated in the Act.” The Inspector General also concluded
SBA failed to provide an optional demographic questionnaire with the PPP loan application,
undermining SBA’s ability to determine whether lenders appropriately prioritized loans to
underserved communities. The Inspector General concluded:

Because SBA did not provide guidance to lenders about prioritizing borrowers in
underserved and rural markets, these borrowers, including rural, minority and
women-owned businesses may not have received the loans as intended. In
addition, because SBA did not require demographic data to identify PPP
borrowers in underserved markets, it is unlikely that SBA will be able to
determine the loan volume to the intended prioritized markets. 5

2
See, e.g., Banks Gave Richest Clients ‘Concierge Treatment’ for Pandemic Aid, New York Times (Apr.
22, 2020) (online at www.nytimes.com/2020/04/22/business/sba-loans-ppp-coronavirus.html); Many Small
Businesses are Being Shut Out of a New Loan Program by Major Banks, Vox (Apr. 7, 2020) (online at
www.vox.com/2020/4/7/21209584/paycheck-protection-program-banks-access); In Race for Small-Business Loans,
Winning Hinged on Where Firms Bank, Wall Street Journal (Apr. 20, 2020) (online at www.wsj.com/articles/in-
race-for-small-business-loans-winning-hinged-on-where-firms-bank-11587410421).
3
JPMorgan’s Small Business Loans Instead Went to Its Biggest Customers, Bloomberg (Apr. 22, 2020)
(online at www.bloomberg.com/news/articles/2020-04-22/jpmorgan-commercial-clients-beat-out-smaller-ones-for-
sba-loans).
4
Small Business Administration, Business Loan Program Temporary Changes; Paycheck Protection
Program, 85 Fed. Reg. 20811, 20813 (Apr. 15, 2020) (interim final rule); see also The Paycheck Protection
Program Ran Out of Funding. What’s Next For Small Business Owners?, Forbes (Apr. 16, 2020) (online at
www.forbes.com/sites/advisor/2020/04/16/the-paycheck-protection-program-ran-out-of-funding-whats-next-for-
small-business-owners/#15c8ae8d7440).
5
Small Business Administration, Office of Inspector General, Flash Report Small Business
Administration's Implementation of the Paycheck Protection Program Requirements (May 8, 2020) (online at
www.sba.gov/document/report-20-14-flash-report-small-business-administrations-implementation-paycheck-
protection-program-requirements).

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The Honorable Steven Mnuchin
The Honorable Jovita Carranza
Page 3

After facing public scrutiny, some larger companies that received PPP loans have
returned the money. 6 For example, on May 8, 2020, the Select Subcommittee sent letters to
companies that had received at least $10 million in PPP loans, despite having more than 600
employees, a market capitalization of more than $25 million, and publicly traded stock. 7 In
response, one company, which recently paid $6.5 million to resolve allegations of defrauding the
federal government, returned its $10 million PPP loan. 8

Congress acted to address these issues in the Paycheck Protection Program and Health
Care Enhancement Act, which was enacted on April 24, 2020. Of the $310 billion in additional
PPP funds appropriated by that law, $60 billion was reserved for various community lenders,
which have a proven track record of serving small businesses lacking longstanding relationships
with large financial institutions.9 As of June 6, 2020, SBA had approved more than $511 billion
in PPP loans, leaving more than $130 billion available for future lending. 10

Congress’ decision to reserve some PPP funds for community lenders does not relieve
the Administration of its responsibility to ensure that all PPP lenders prioritize underserved
communities. Given the significant remaining funds and the fact that many small businesses are
still struggling to stay afloat, we request that you immediately issue guidance to lenders directing
them to prioritize entities in underserved markets, including businesses owned by veterans,
members of the military, socially and economically disadvantaged individuals, and women.

We also urge you to provide more transparency about the administration of this program
so American taxpayers can understand whether federal funds are helping vulnerable businesses
and saving jobs, or are being diverted due to waste, fraud, and abuse. Among other steps, the
Administration should release the names of all PPP borrowers—as the SBA routinely does for
similar loan programs. Contrary to Secretary Mnuchin’s recent testimony, there is nothing
“proprietary” or “confidential” about a business receiving millions of dollars appropriated by
Congress, and taxpayers deserve to know how their money is being spent.11

6
Relief Aid Stalls With Small Businesses Returning Loans Unused, Bloomberg Law (May 29, 2020) (online
at https://news.bloomberglaw.com/coronavirus/relief-aid-stalls-with-small-businesses-returning-loans-unused).
7
Select Subcommittee on the Coronavirus Crisis, In First Official Action, House Coronavirus Panel
Demands That Large Public Corporations Return Taxpayer Funds Intended For Small Businesses (May 8, 2020)
(online at https://coronavirus.house.gov/news/press-releases/first-official-action-house-coronavirus-panel-demands-
large-public-corporations).
8
Select Subcommittee on the Coronavirus Crisis, Company Returns $10 Million In Taxpayer Funds
Intended For Small Businesses In Response To Select Subcommittee Inquiry (May 11, 2020) (online at
https://coronavirus.house.gov/news/press-releases/company-returns-10-million-taxpayer-funds-intended-small-
businesses-response).
9
Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, § 101 (2020).
10
U.S. Small Business Administration, Paycheck Protection Program (PPP) Report (June 6, 2020) (online
at www.sba.gov/sites/default/files/2020-06/PPP_Report_Public_200606%20FINAL_-508.pdf).
11
Mnuchin Loosens Restrictions on Small-Business Loans to Ease Forgiveness, But Borrowers to Remain
Secret, Washington Post (June 10, 2020) (online at www.washingtonpost.com/us-policy/2020/06/10/mnuchin-small-
business-paycheck-protection-program/).

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The Honorable Steven Mnuchin
The Honorable Jovita Carranza
Page 4

To assist the Select Subcommittee with this investigation, please produce by June 29,
2020, the following documents and information from March 1, 2020, to the present:

1. All formal or informal guidance regarding PPP requirements, including but not
limited to guidance regarding SBA’s “first come, first served” policy, the
prioritization or exclusion of any applicants, and the issuance of loans to entities
in underserved and rural markets.

2. All communications with JPMorgan Chase, Bank of America, PNC, Truist, Wells
Fargo, U.S. Bank, Citibank, and Santander regarding requirements, guidelines,
policies, and procedures for marketing, originating, and servicing PPP loans.

3. All communications regarding PPP with industry associations, including but not
limited to communications with the American Bankers Associations, the Bank
Policy Institute, the Consumer Bankers Association, the Credit Union National
Association, the National Association of Government Guaranteed Lenders, and
the U.S. Chamber of Commerce.

4. All communications regarding the prioritization of loans to small businesses in
underserved and rural markets, as well as the decision not to include an optional
demographic questionnaire in the PPP application process, including internal SBA
and Treasury communications, communications between SBA and Treasury, and
communications with other federal agencies, the White House, or third parties.

5. A list of all PPP applications received and loans issued, including:

a. the applicant’s name, street address, NAICS Code, NAICS description,
and business type;
b. the lender’s name and street address;
c. the amount of funds requested;
d. the date the application was received;
e. whether the application was approved;
f. the amount and date of the approved loan;
g. the employee size of the applicant;
h. the SBA District Office of the applicant;
i. the congressional district of the applicant;
j. the loan status;
k. the number of jobs supported;
l. whether the small business is owned or controlled by a veteran, woman, or
a socially and economically disadvantaged individual as set forth in the
CARES Act; and
m. the amount and date of any funds returned by the borrower.

In addition, we request a staff briefing from the Treasury Department and SBA on these
issues by June 29, 2020.

4
The Honorable Steven Mnuchin
The Honorable Jovita Carranza
Page 5

Modeled after the Truman Committee during World War II, the Select Subcommittee on
the Coronavirus Crisis was established by the U.S. House of Representatives on April 23, 2020,
pursuant to House Resolution 935, “to conduct a full and complete investigation” of the
“efficiency, effectiveness, equity, and transparency of the use of taxpayer funds and relief
programs to address the coronavirus crisis,” the nation’s “preparedness for and response to the
coronavirus crisis,” and “any other issues related to the coronavirus crisis.”

An attachment to this letter provides additional instructions for responding to the Select
Subcommittee’s request. If you have any questions regarding this request, please contact Select
Subcommittee staff at (202) 225-4400.

Sincerely,

__________________________ __________________________
Rep. James E. Clyburn Rep. Maxine Waters
Chairman

__________________________ __________________________
Rep. Carolyn B. Maloney Rep. Nydia M. Velázquez

__________________________ __________________________
Rep. Bill Foster Rep. Jamie Raskin

__________________________
Rep. Andy Kim

Enclosure

cc: The Honorable Steve Scalise, Ranking Member

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Responding to Oversight Committee Document Requests

1. In complying with this request, produce all responsive documents that are in your
possession, custody, or control, whether held by you or your past or present agents,
employees, and representatives acting on your behalf. Produce all documents that you
have a legal right to obtain, that you have a right to copy, or to which you have access, as
well as documents that you have placed in the temporary possession, custody, or control
of any third party.

2. Requested documents, and all documents reasonably related to the requested documents,
should not be destroyed, altered, removed, transferred, or otherwise made inaccessible to
the Committee.

3. In the event that any entity, organization, or individual denoted in this request is or has
been known by any name other than that herein denoted, the request shall be read also to
include that alternative identification.

4. The Committee’s preference is to receive documents in electronic form (i.e., CD,
memory stick, thumb drive, or secure file transfer) in lieu of paper productions.

5. Documents produced in electronic format should be organized, identified, and indexed
electronically.

6. Electronic document productions should be prepared according to the following
standards:

a. The production should consist of single page Tagged Image File (“TIF”), files
accompanied by a Concordance-format load file, an Opticon reference file, and a
file defining the fields and character lengths of the load file.

b. Document numbers in the load file should match document Bates numbers and
TIF file names.

c. If the production is completed through a series of multiple partial productions,
field names and file order in all load files should match.

d. All electronic documents produced to the Committee should include the following
fields of metadata specific to each document, and no modifications should be
made to the original metadata:

BEGDOC, ENDDOC, TEXT, BEGATTACH, ENDATTACH, PAGECOUNT,
CUSTODIAN, RECORDTYPE, DATE, TIME, SENTDATE, SENTTIME,
BEGINDATE, BEGINTIME, ENDDATE, ENDTIME, AUTHOR, FROM, CC,
TO, BCC, SUBJECT, TITLE, FILENAME, FILEEXT, FILESIZE,
DATECREATED, TIMECREATED, DATELASTMOD, TIMELASTMOD,
INTMSGID, INTMSGHEADER, NATIVELINK, INTFILPATH, EXCEPTION,
BEGATTACH.

7. Documents produced to the Committee should include an index describing the contents
of the production. To the extent more than one CD, hard drive, memory stick, thumb
drive, zip file, box, or folder is produced, each should contain an index describing its
contents.

8. Documents produced in response to this request shall be produced together with copies of
file labels, dividers, or identifying markers with which they were associated when the
request was served.

9. When you produce documents, you should identify the paragraph(s) or request(s) in the
Committee’s letter to which the documents respond.

10. The fact that any other person or entity also possesses non-identical or identical copies of
the same documents shall not be a basis to withhold any information.

11. The pendency of or potential for litigation shall not be a basis to withhold any
information.

12. In accordance with 5 U.S.C.§ 552(d), the Freedom of Information Act (FOIA) and any
statutory exemptions to FOIA shall not be a basis for withholding any information.

13. Pursuant to 5 U.S.C. § 552a(b)(9), the Privacy Act shall not be a basis for withholding
information.

14. If compliance with the request cannot be made in full by the specified return date,
compliance shall be made to the extent possible by that date. An explanation of why full
compliance is not possible shall be provided along with any partial production.

15. In the event that a document is withheld on the basis of privilege, provide a privilege log
containing the following information concerning any such document: (a) every privilege
asserted; (b) the type of document; (c) the general subject matter; (d) the date, author,
addressee, and any other recipient(s); (e) the relationship of the author and addressee to
each other; and (f) the basis for the privilege(s) asserted.

16. If any document responsive to this request was, but no longer is, in your possession,
custody, or control, identify the document (by date, author, subject, and recipients), and
explain the circumstances under which the document ceased to be in your possession,
custody, or control.

17. If a date or other descriptive detail set forth in this request referring to a document is
inaccurate, but the actual date or other descriptive detail is known to you or is otherwise
apparent from the context of the request, produce all documents that would be responsive
as if the date or other descriptive detail were correct.

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18. This request is continuing in nature and applies to any newly-discovered information.
Any record, document, compilation of data, or information not produced because it has
not been located or discovered by the return date shall be produced immediately upon
subsequent location or discovery.

19. All documents shall be Bates-stamped sequentially and produced sequentially.

20. Two sets of each production shall be delivered, one set to the Majority Staff and one set
to the Minority Staff. When documents are produced to the Committee, production sets
shall be delivered to the Majority Staff in Room 2157 of the Rayburn House Office
Building and the Minority Staff in Room 2105 of the Rayburn House Office Building.

21. Upon completion of the production, submit a written certification, signed by you or your
counsel, stating that: (1) a diligent search has been completed of all documents in your
possession, custody, or control that reasonably could contain responsive documents; and
(2) all documents located during the search that are responsive have been produced to the
Committee.

Definitions

1. The term “document” means any written, recorded, or graphic matter of any nature
whatsoever, regardless of how recorded, and whether original or copy, including, but not
limited to, the following: memoranda, reports, expense reports, books, manuals,
instructions, financial reports, data, working papers, records, notes, letters, notices,
confirmations, telegrams, receipts, appraisals, pamphlets, magazines, newspapers,
prospectuses, communications, electronic mail (email), contracts, cables, notations of any
type of conversation, telephone call, meeting or other inter-office or intra-office
communication, bulletins, printed matter, computer printouts, teletypes, invoices,
transcripts, diaries, analyses, returns, summaries, minutes, bills, accounts, estimates,
projections, comparisons, messages, correspondence, press releases, circulars, financial
statements, reviews, opinions, offers, studies and investigations, questionnaires and
surveys, and work sheets (and all drafts, preliminary versions, alterations, modifications,
revisions, changes, and amendments of any of the foregoing, as well as any attachments
or appendices thereto), and graphic or oral records or representations of any kind
(including without limitation, photographs, charts, graphs, microfiche, microfilm,
videotape, recordings and motion pictures), and electronic, mechanical, and electric
records or representations of any kind (including, without limitation, tapes, cassettes,
disks, and recordings) and other written, printed, typed, or other graphic or recorded
matter of any kind or nature, however produced or reproduced, and whether preserved in
writing, film, tape, disk, videotape, or otherwise. A document bearing any notation not a
part of the original text is to be considered a separate document. A draft or non-identical
copy is a separate document within the meaning of this term.

2. The term “communication” means each manner or means of disclosure or exchange of
information, regardless of means utilized, whether oral, electronic, by document or
otherwise, and whether in a meeting, by telephone, facsimile, mail, releases, electronic

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message including email (desktop or mobile device), text message, instant message,
MMS or SMS message, message application, or otherwise.

3. The terms “and” and “or” shall be construed broadly and either conjunctively or
disjunctively to bring within the scope of this request any information that might
otherwise be construed to be outside its scope. The singular includes plural number, and
vice versa. The masculine includes the feminine and neutral genders.

4. The term “including” shall be construed broadly to mean “including, but not limited to.”

5. The term “Company” means the named legal entity as well as any units, firms,
partnerships, associations, corporations, limited liability companies, trusts, subsidiaries,
affiliates, divisions, departments, branches, joint ventures, proprietorships, syndicates, or
other legal, business or government entities over which the named legal entity exercises
control or in which the named entity has any ownership whatsoever.

6. The term “identify,” when used in a question about individuals, means to provide the
following information: (a) the individual’s complete name and title; (b) the
individual’s business or personal address and phone number; and (c) any and all
known aliases.

7. The term “related to” or “referring or relating to,” with respect to any given subject,
means anything that constitutes, contains, embodies, reflects, identifies, states, refers to,
deals with, or is pertinent to that subject in any manner whatsoever.

8. The term “employee” means any past or present agent, borrowed employee, casual
employee, consultant, contractor, de facto employee, detailee, fellow, independent
contractor, intern, joint adventurer, loaned employee, officer, part-time employee,
permanent employee, provisional employee, special government employee,
subcontractor, or any other type of service provider.

9. The term “individual” means all natural persons and all persons or entities acting on
their behalf.

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