$9M MSLP Loan Went To Firm Tied To Convicted Felon

$9M MSLP Loan Went To Firm Tied To Convicted Felon
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Report: $9M Main Street Lending Program (MSLP) Loan Went To Firm Tied To Convicted Felon Who Was Sentenced to Prison For Tax Fraud 3 Weeks Later

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Q3 2020 hedge fund letters, conferences and more

Convicted Tax Felon Gets Away With A $9M MSLP Loan

WASHINGTON, D.C. – New reporting by the Kansas City Star reveals that a $9 million taxpayer-backed Main Street Lending Program (MSLP) loan went to a Kansas-based trash collection company that reports having just three drivers and was recently controlled by a convicted tax felon. Warren L.C. — whose management was transferred from Thomas Fritzel to his wife sometime after May 2019 — was approved for the loan just three weeks before Mr. Fritzel checked into in a federal prison in South Dakota for tax fraud. See additional details about the loan HERE from government watchdog Accountable.US.

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To date, the MSLP — the severely-under-utilized $600B CARES Act program that Treasury Secretary Mnuchin abruptly announced was coming to end on Dec 31 despite billions in leftover available funds and the ongoing recession — has only funded a total of 522 loans with a face value of ~$5.2 billion. The program is intended to provide taxpayer-backed loans to small- and medium-sized businesses struggling through COVID-19 pandemic. Yet somehow, one of the few beneficiaries was a company recently controlled by a convicted felon who is currently sitting in federal prison for tax fraud.

The Issue Of Federal Oversight

The MSLP’s list of prohibited borrowers—based on the U.S. Small Business Administration’s criteria—includes businesses significantly owned or controlled by anyone indicted for a felony or incarcerated. Given Warren L.C.’s ongoing ties to a felon who exploited the tax system for personal gain, it raises serious questions about how much federal oversight has taken place under this program, if any.

There have already been at least $3 billion dollars' worth of waste, fraud and abuse discovered in the SBA’s Paycheck Protection Program (PPP) due to the Trump administration’s poor management and design. This new report raises questions whether the Trump Treasury’s and Federal Reserve’s MSLP has suffered the same kind of problems that come with a lack of accountability and transparency. In addition to Warren L.C., just last month, Wellshire Financial Services, part of a multi-state title loan business run by major Trump donor Rod Aycox, received a $25 million loan with a 3.15 percent interest rate — while the loans the company dishes out to consumers can come as high as 350 percent annually. Confronted about this loan in a congressional hearing last week, Treasury Secretary Steven Mnuchin admitted that Wellshire’s loan was likely “not the spirit and the intent" of the MSLP.

“This money was meant to help Main Street businesses stay above water during the pandemic, not help those neck-deep in tax fraud issues. But instead of reforming the program, the Trump team is shutting it down to spite the next administration,” said Derek Martin, spokesperson for government watchdog Accountable.US. “This crisis calls for responsible leadership, and that means letting the Biden administration reform and repair this economic lifeline instead of denying aid to legitimately struggling businesses.”

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