Millions in federal relief goes to Minnesota companies with ties to lawmakers

More than three dozen Minnesota companies owned by or connected to state and federal lawmakers received millions in federal aid during the COVID-19 pandemic, according to new data from the Small Business Administration.

Recipients include a Duluth hockey company owned by Republican U.S. Rep. Pete Stauber; and the Washington, D.C.-based political consulting firm co-owned by the husband of Democratic congresswoman Ilhan Omar.

Minnesota Senate Majority Leader Paul Gazelka, R-East Gull Lake, got relief for his Baxter insurance agency. Rep. John Lesch, a St. Paul Democrat, used aid to make payroll at his St. Paul law firm.

The funds came through the popular Paycheck Protection Program and Economic Injury and Disaster Loans (EIDL), which were part of the $2 trillion stimulus package passed by Congress in March to help bolster the economy during the COVID-19 pandemic.

Some lawmakers said they are employees of large companies that got PPP loans but had no role in the process of applying for the loans, which are low interest and forgivable if they meet certain requirements. Others said political position and connections had nothing to do with getting funds to prop up their ailing businesses.

"Oh heavens no," said Rep. Dave Baker, R-Willmar, who received $52,790 in PPP in April as tourism slowed to help keep the doors open on a Super 8 Motel he owns. "You had to follow the framework within federal guidelines."

Minnesota state legislators only serve part time, so many have other jobs or own businesses outside of the Capitol. Baker said the funds helped keep 20 to 25 part and full-time employees on the payroll through the pandemic without interruption.

"We were lucky in that we had some resources to get through the time frame when the political parties were figuring out how to do this, but we were limping through," he said. "I was grateful and I used it exactly how the government wanted it to be used. It kept people off unemployment and it kept our doors open."

The relief that went to companies with lawmaker owners, employees or connections totaled nearly $18 million, including a $10 million PPP loan to a Superior, Wis. construction company where Rep. Dave Lislegard, DFL-Aurora, works.

Through a spokesperson, Lislegard said he is just an employee at the firm and had no involvement in the application process.

Omar's husband Tim Mynett co-owns E-Street Group, which received $135,000 in PPP and $500,000 in EIDL relief. Omar recently severed ties with the consulting firm, which her campaign reported paying more than $1.1 million for advertising and consulting in the third quarter of this year alone.

Omar and the firm have defended those transactions in the past, noting most of the money went directly to other vendors or toward advertising.

"Rep. Omar had no involvement in this loan whatsoever," said spokesman Jeremy Slevin. "She has fought hard to make sure workers across the country can stay on payroll and get direct financial relief, and to make sure that relief is transparent."

Stauber's 30-year-old family business, a hockey sporting goods store in Duluth, received a $47,750 PPP loan on April 9 and $150,000 from the EIDL program on May 14.

"We were able to keep our employees on the payroll," Stauber said of the five people employed by Stauber Bros., Inc.. "Unfortunately because the busy season of hockey is not there, we weren't able to hire additional employees during the busy times like many, many small businesses."

Stauber, who is on the House's small business committee, said his own experience as a small-business owner made him empathize with the experience of Minnesota companies trying to weather the economic blows being dealt by the pandemic. "This is happening across the state. Devastation, is what many of my small businesses are telling me," he said.

Stauber added that his role as an elected official had no part in the success or timing of his company's loan.

"We qualified using my brother, who's a manager," Stauber said. "We qualified legally just like the small businesses that went through the exact same channels anybody else would."

Rep. John Poston, R-Lake Shore, owns three restaurants and a catering company in northern Minnesota and received more than $400,000 in PPP in April and a $150,000 EIDL loan in June. In a statement, Poston said the closure of bars and restaurants has been "absolutely devastating" and his catering company had more than 50 events and weddings postpone or cancel.

"The Paycheck Protection Program loan allowed us to save dozens of jobs and saved these restaurants from closing their doors permanently," he said. "We are complying with every requirement of the program, and 100% of the funds were used on payroll, utilities and rent."

Gazelka's insurance agency received $27,600 in April, and a chiropractic business owned by Sen. Jim Abeler, R-Anoka, received $70,900 on April 15. GOP state senators whose businesses received loans did not respond to requests for comment.

Meanwhile, a public relations firm owned by Sen. Melisa Franzen, DFL-Edina, was the recipient of an April $47,200 PPP loan. In July, Franzen's business also received $150,000 in aid from the EIDL program. Franzen declined to comment for this article.

Businesses linked to Sen. Nick Frentz, D-North Mankato, meanwhile received more than $400,000 in pandemic relief earlier this year. A Mankato law firm at which Frentz is a partner received $323,200 on April 5. Days later, his Tandem Bagels LLC received a loan of $97,749.

In a statement this week, Frentz said that he is not involved in the day-to-day fiscal management of the law firm, partly because of the time commitment required of him in the Senate.

"I was of course aware that the firm did apply for and receive a PPP loan, and we used the loan proceeds in accordance with PPP purposes," Frentz said.

Rep. Steve Drazkowski, a vocal opponent of government spending on COVID-19 relief, voted against a state aid package in May, the same month he received a $5,800 PPP loan for his 94-year-old family-owned shoe business.

The Mazeppa Republican said the fact that he was an elected official was not disclosed on his application, which he submitted to pay wages for four part-time employees. He said the store suffered financial losses when the pandemic hit.

"The choice that I and other independent, free-market-oriented business owners faced when presented with a federally-passed bailout program was to either participate and know that we will have to pay this all back in future taxes, or don't participate and still have to pay all other participants' loans/grants back through future taxes," Drazkowski said in a statement.

Briana Bierschbach • 651-925-5042

Twitter: @bbierschbach