Ruling that the public interest in the Small Business Administration’s (SBA) management of the PPP outweighs any limited private interest in nondisclosure, a federal judge has ordered SBA to release information about the recipients of Paycheck Protection Program loans.
Judge James E. Boasberg of the U.S. District Court for the District of Columbia on Nov. 5 granted cross motions for summary judgment filed by the Washington Post and the Center for Public Integrity in a consolidated suit [WP Company LLC d/b/a The Washington Post, et al. v. U.S. Small Business Administration (Civil Action No. 20-1240) and Center for Public Integrity v. U.S. Small Business Administration (Civil Action No. 20-1614)].
The ruling directs the SBA to release the names, addresses and precise loan amounts of all individuals and entities that obtained COVID-19-related loans under the PPP and the Economic Injury Disaster Loans (EIDL) program by Nov. 19, 2020.
Throughout April and May 2020, 11 national-news organizations submitted Freedom of Information Act (FOIA) requests seeking records concerning SBA’s COVID-related loan programs, including the PPP and EIDL program. Similar requests were made by the Center for Public Integrity. The SBA initially refrained from disclosing the identities of loan recipients under these programs, as well as the specific amounts they obtained and other loan-level details.
Prompted by the court ordering it to issue a final response to the FOIA requests, in July the SBA released select information regarding individual PPP and EIDL loans, but the agency did not provide both dollar figures and borrower names and addresses for any of the PPP loans. Instead, it withheld the precise amounts of all loans of $150,000 or more, as well as recipients’ identities for loans under that figure, arguing that certain exemptions relating to privacy and confidentiality applied from releasing more specific information under the Freedom of Information Act. This forced the organizations to file motions for summary judgment.
Judge Boasberg was unpersuaded by the SBA’s arguments. “No doubt, SBA’s prior disclosures have proven useful in shining a light on programs that previously were entirely opaque. But many important aspects of their operation remain veiled,” he wrote. “Disclosure of the identities of recipients of PPP loans of less than $150,000, as well as the sole proprietors and independent contractors receiving EIDL loans, will contribute substantially to public understanding of SBA’s ‘performance of its statutory duties.’”
The judge noted that the statistics themselves are “striking,” in that loans of less than $150,000 make up more than 87% of all PPP loans. “In other words, the public has no official record as to the identities of the vast majority of PPP borrowers, as well as the many sole proprietorships and independent contractors receiving EIDL loans,” he stated, noting that release of the borrower information would enable the press and public to monitor whether taxpayer funds have been “distributed fairly and equitably.”
Even more critical, according to Judge Boasberg, are the “well-documented allegations of fraud” related to the disbursement and receipt of CARES Act funds, noting that numerous cases have recognized a public interest in determining whether government programs dispensing taxpayer money involve fraud, waste or abuse.
“Here, the Court finds that the balancing is not particularly close. The significant public interest in shedding light on SBA’s administration of the PPP and EIDL program dramatically outweighs any limited private interest in nondisclosure,” Judge Boasberg concluded.
According to the ruling, by Aug. 8, 2020, the SBA had approved $525 billion by way of more than 5.2 million individual loans under the PPP and the agency’s most recent EIDL figures reflect an additional $192 billion in approved COVID-related loans.
The Securities and Exchange Commission provided guidance in April advising that under certain circumstances, registered investment advisors must disclose forgivable loans they have received under the PPP. “If the circumstances leading you to seek a PPP loan or other type of financial assistance constitute material facts relating to your advisory relationship with clients, it is the staff’s view that your firm should provide disclosure of, for example, the nature, amounts and effects of such assistance,” the SEC stated in an FAQ.
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