The U.S. Treasury Department will audit every loan of more than $2 million provided under the Paycheck Protection Program for businesses hurt by the coronavirus fallout, Treasury Secretary Steven Mnuchin said earlier this week.
The announcement by Mnuchin comes after a public outcry over concerns some public companies and wealthy organizations may have benefited from the loans intended for small businesses. Among the organizations that reportedly received funding from the program are the Los Angeles Lakers of the NBA, Shake Shack, Ruth’s Chris Steak House, Ashford Hospitality Trust, and Braemer Hospitality. Some of those organizations have since returned the funds.
“This was a program designed for small businesses. It was not a program that was designed for public companies if they had liquidity,” he told CNBC in an interview, adding that companies that made false certifications under the program could face criminal liability.
The Department of the Treasury later issued guidance requiring borrowers to certify that they are unable to obtain credit elsewhere. It was “unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification,” the document noted.
Mnuchin said the audits of larger loans will come before they can be forgiven by the Treasury. He warned that firms that falsely stated in their application that the loans were necessary to continue operations will face stiff penalties.