58 Minnesota firms with political connections received large PPP loans

While thousands of other business owners in Minnesota were scrambling to find a bank willing to take their application for the popular Paycheck Protection Program, Minnesota Senate President Jeremy Miller found himself at the front of the line.

His family's application for a forgivable loan was approved April 3, the same day the U.S. Small Business Administration began taking applications for the program, according to recently released records from the federal agency. Miller's company, Wm. Miller Scrap Iron & Metal Co., received $200,000, assistance that helped the Winona recycling operation retain 19 jobs, SBA records show.

"I don't think [my political connections] had any impact on the loan process for Miller Scrap, and I'm confident the bank would say the same thing," said Miller, noting that his company's sales were down 60% at the time he sought federal help. "Miller Scrap being a longstanding customer of the bank, that may have made a difference."

Altogether, 58 politically connected companies in Minnesota received between $64.9 million and $144 million in PPP money, according to the SBA, which released information for all firms that collected at least $150,000. However, the SBA limited the data to certain size categories, such as loans worth $5 million to $10 million, and did not provide exact dollar amounts.

Those 58 companies received a disproportionate share of the largest PPP loans, which were capped at $10 million. At a minimum, the companies received an average of $1.1 million, while the typical small business in Minnesota got $114,209 through the program, federal records show. Most of the officials have made political contributions to congressional or presidential candidates, or political action committees that support those candidates.

The recipients included a technology company owned partly by U.S. Rep. Dean Phillips, a construction firm that owns most of state Sen. John Jasinski's real estate agency and six board members of Enterprise Minnesota, a consulting firm that helps manufacturing companies on the state's behalf.

State officials defended their participation in the program, noting they followed all of the rules and used the money as it was intended by maintaining their payrolls at a time of great economic uncertainty. Most officials said the money allowed them to avoid laying off a significant number of employees.

Steven Chies, a member of the Board of Examiners for Nursing Home Administrators whose nursing home company, North Cities Health Care, received $1.9 million in PPP aid, said he even handed out bonuses during a "critical" phase of COVID.

"We didn't buy a Lamborghini like the guy in Florida did," said Chies, referring to a Florida businessman who was recently charged with fraud for making false statements on his PPP application and using some of the proceeds to buy a $318,000 sports car.

Officials also denied that their politically appointed positions made it easier to connect with a lending institution. Though other companies had to wait as long as a month or two to complete the PPP process, most of the politically connected firms received approval for their loans in the first week of the program, federal records show.

Mary Ives, who was first appointed to the Higher Education Facilities Authority in 2016, acknowledged that several banks competed for the chance to handle two applications for her hotel companies. She obtained a total of $550,000, with the first loan approved on April 9.

"We had very good treatment by our local banks, and it had absolutely nothing to do with education," said Ives, whose family owns four hotels in northern Minnesota, including Timberlake lodges in Grand Rapids and Staples. "I doubt the banks even know I was involved in the commission."

The Star Tribune reviewed the financial disclosure statements of more than 3,000 state officials in Minnesota for this story, ranging from people who serve on local watershed districts to state regulatory boards, as well as state legislators and other statewide officials. The Star Tribune also reviewed the financial disclosure statements of the 10 members of Minnesota's congressional delegation. To have been included on the politically connected list, the public official either has an ownership interest or serves as a high-ranking executive or director of the PPP recipient.

Minnesota received a total of $11.2 billion, with about 1% flowing to the 58 firms, records show.

Only one Minnesota member of Congress made the list: Phillips, who co-authored legislation that tripled the amount of time small business owners have to spend their PPP money and still have the loan forgiven by the government. Earlier this year, Phillips told the Star Tribune he thought it was wrong for members of the U.S. House and Senate to take PPP money.

However, Phillips acknowledged last week that he invested about $100,000 for a 1% stake in a Minneapolis company, MyMeds Inc., that received $150,000 to $350,000 through the PPP. The loan was approved on the program's first day. Phillips said he made the investment several years ago. He said he is not involved in the company's management and was unaware of the loan.

"There's a big difference between being an investor and an owner or operator," said Phillips, adding that he stopped discussing his extensive financial holdings with his advisers when he first ran for Congress to avoid any possible conflicts of interest.

Rajni Shah, head of client engagement and business development at MyMeds, said neither Phillips nor his staff provided help on the loan. MyMeds is a technology company that provides medication support.

"His name was not used in any way," Shah said.

Phillips, who also co-sponsored a measure that would have required all PPP loan amounts to be public, said he did not apply for a loan for his business Penny's Coffee, despite taking significant losses during the pandemic.

The Star Tribune also found that the wife of U.S. Rep. Jim Hagedorn, state Republican chairwoman Jennifer Carnahan, received a PPP loan of $1,800. Carnahan used the money to help her small boutique in Nisswa. Carnahan said her husband played no role in helping her get the PPP loan or her business, which she said she founded with her own savings before she married him.

"I'm not an elected official," Carnahan said. "I'm a small-business owner. It shouldn't matter who my husband is."

Most officials at the politically connected companies said they pursued PPP money because of concerns over plunging revenue related to a downturn that has swamped the American economy. At Ives' hotels, which were closed for three months, the companies lost more than $1 million in event bookings and room occupancies are still hovering at the anemic level of 50%.

Board of Electricity member Duane Hendricks said sales at his Minneapolis construction company, Egan Co., will probably finish the year down 20% from the original forecast. Egan received $5 million to $10 million in PPP money; Hendricks declined to be more specific. The company qualified with exactly 500 employees, the maximum allowed under PPP rules.

"Our business is doing OK," Hendricks said. "A lot of projects got put on hold and others that were started got put on delay. ... We didn't have the financial capacity to carry us through the downturn with the people we employ."

However, officials at the Animal Emergency & Referral Center of Minnesota, which received $2.3 million in PPP money, acknowledged they don't really need the money.

"It's been crazy busy, which has taken us all by surprise," said chief marketing officer Heidi Brenegan.

Brenegan said the company sought federal relief shortly after it closed its St. Paul hospital, figuring revenue would plunge. Instead, she said, the caseload for emergency services is up 25% this year over the same period in 2019.

Hospital co-owner Steven Shadwick, who was appointed to the Board of Veterinary Medicine in 2018, said the company will not be seeking forgiveness of the loan. "We don't think it is the right thing to do," he said.

The Star Tribune called all of the officials who received PPP money and received responses from most of them. When asked if their public positions helped them obtain public money, some officials laughed. Others became angry. A few said they were glad the Star Tribune was asking such questions.

"If federal money is being used, it is good you guys are checking up on that," said Katy Graves, whose law firm, Henson Efron, obtained $1 million to $2 million in PPP money. Graves is a member of the Board of Marriage and Family Therapy.

Several board members of Enterprise Minnesota said they didn't discuss the program before they applied for a PPP loan.

"Any discussion as a board came after the fact," said Steve Palmer, whose North Central Door Company received $1 million in federal relief. "There was nothing about, 'How can we do this?' "

Several officials distanced themselves from the process, saying other people at their company handled the PPP application and dealt with the bankers.

"I am 71 years old, and I am not active in the business," said Racing Commission member Alan Gingold, whose company, Lorenz Bus Service, received $1 million to $2 million in PPP money. "I have no connections at the state level that would be useful for my business."

Sen. Jasinski acknowledged that his real estate company shares ownership and offices with Met-Con Companies, but he said he had nothing to do with the construction company's PPP application. The Faribault firm received $150,000 to $350,000.

"I don't even know how much they got," said Jasinski, who serves as the Senate's Assistant Majority Leader.

None of the officials acknowledged having any influence over the process or receiving inside information that was not available to the general public.

"Maybe the banks were making decisions on priority customers and maybe they weren't," said Minnesota Ballpark Authority member Paul D. Williams, the former deputy mayor of St. Paul who is now president and CEO of affordable housing provider Project for Pride in Living, which received $2.4 million in PPP money. "The whole thing was so fast moving. ... It doesn't strike me as something that I would worry a whole lot about."