A Congressional coronavirus committee is demanding that a San Jose data-storage company valued at more than $170 million in the stock market return a $10 million pandemic-relief small business loan.
The letter from Democrats on the House coronavirus subcommittee said that when Congress voted offer loans to small businesses affected by the outbreak, it intended to provide “an invaluable lifeline for small businesses that otherwise might be forced to lay off employees or shut down entirely.” The Paycheck Protection Program wasn’t for big companies with substantial investor bases and access to capital markets, the letter sent Friday to Quantum CEO Jamie Lerner said.
“Unfortunately, many large companies were able to utilize this program and obtained PPP loans that were intended for small businesses,” the letter from the Select Subcommittee on the Coronavirus Crisis said. “Some of the companies returned these funds amid widespread public outrage. However, other companies including yours — still have not returned these funds.
“Returning these funds will allow truly small businesses — which do not have access to alternative sources of capital — to obtain the emergency loans they need to avoid layoffs, stay in business, and weather the economic disruption caused by the coronavirus crisis.”
The committee was created by the Democrat-led House to oversee spending of money appropriated by Congress to address the pandemic. The committee is bi-partisan but with a Democratic majority. The letter was signed only by seven Democrats, and cc’d to Republican Rep. Steve Scalise, the ranking member on the committee.
Quantum said in a regulatory filing last month that it intended to keep the $10 million. It did not immediately respond to questions from this news organization Friday about whether it intended to comply with the House committee’s demand that it respond by May 11.
The firm earlier told the Washington Post in a statement that its workforce of 550 was smaller than the maximum 1,250 employees for Paycheck Protection Program loans set by the Small Business Administration for companies in its class, and that without the loan, it would have to cut jobs.
The loan program has been beset by controversy, with huge restaurant chains and other companies including the Los Angeles Lakers basketball team receiving approval for large loans and in several cases agreeing to give them up amid public outrage. The first round of funding, $349 billion, ran out in less than two weeks. Congress allocated $310 billion for a second round. Loans become grants if companies keep employees on the payroll.
U.S. Treasury Secretary Steven Mnuchin has said the federal government would audit any company accepting a PPP loan of more than $2 million.
Last fiscal year, Lerner received total compensation of $2.3 million including a $338,000 base salary, while chief financial officer J. Michael Dodson received $1.1 million including a $318,000 salary, according to a Securities and Exchange Commission filing. Also last year, the company’s previous CEO received $4.1 million in compensation and its previous chief financial officer received $2.1 million, the filing said. Quantum suffered a $43 million loss last year, the filing said.
