University Club of Milwaukee Agrees to Pay Over $1 Million to Resolve Claim on Paycheck Protection Program Loan

Summary

United States Attorney Haanstad for the Eastern District of Wisconsin announced that the University Club of Milwaukee has agreed to pay $1,003,993.86 to settle claims that the club improperly obtained a loan through the Paycheck Protection Program (PPP). According to the government, when the club applied for a PPP loan and for loan forgiveness, the club limited membership for reasons other than capacity and was therefore ineligible. The release cites a Small Business Administration regulation under which private clubs and businesses that limit memberships for reasons other than capacity are not eligible for loans. It states the club does not admit liability and no court has made any determination as to liability.

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Full text

Gregory J. Haanstad, United States Attorney for the Eastern District of Wisconsin, announced that the University Club of Milwaukee has agreed to pay $1,003,993.86 to settle claims that the club improperly obtained a loan through the Paycheck Protection Program (“PPP”) administered by the United States Small Business Administration (“SBA”).
The PPP loan program, enacted in March 2020, provided emergency financial assistance to Americans suffering from the economic effects of the COVID-19 pandemic. The program allowed eligible businesses and non-profits to receive loans guaranteed by the federal government and, if the borrower spent the funds on qualified expenses, the federal government would repay the loan on the borrower’s behalf.
Congress directed the SBA to guarantee PPP loans “under the same terms, conditions, and processes” as ordinary small business loans administered by the agency. 15 U.S.C. § 636(a)(36)(B). With respect to loan eligibility, Congress expressly endorsed the SBA’s regulation explaining what entities would be ineligible for loans. 15 U.S.C. § 636(a)(37)(A)(iv)(III)(aa). For decades, this regulation has explained that “[p]rivate clubs and businesses which limit the number of memberships for reasons other than capacity” are not eligible for loans through the SBA. 13 C.F.R. § 120.110(i).
The University Club of Milwaukee operates a private country club and dining facilities, which are not open to the general public. According to the government, at the time the University Club of Milwaukee applied for a PPP loan and for loan forgiveness, the club limited its membership for reasons other than capacity and, therefore, was ineligible to participate in the PPP.
“The Paycheck Protection Program was an important but limited resource made available by Congress to assist small businesses around the country suffering the financial impacts of the COVID-19 pandemic,” said United States Attorney Haanstad. “But in making this resource available, Congress made a legislative determination that public funds would not be provided to private clubs that restricted their membership for reasons other than capacity. This settlement represents the continued efforts of the Small Business Administration and the Department of Justice to enforce Congress’s legislative determination and protect the public fisc.”
Assistant United States Attorney Aaron R. Wegrzyn represented the government in connection with this matter, in coordination with Kandace Zelaya in the SBA’s Office of Litigation and Office of General Counsel. While the settlement resolves the government’s allegations against the University Club of Milwaukee with respect to its PPP loan, the club does not admit liability and no court has made any determination as to liability.
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