In part of its response to the Covid-19 pandemic earlier this year, the federal government created the Paycheck Protection Program, a loan program “that helps businesses keep their workforce employed” during the pandemic.
In July, the national nonprofit investigative news organization ProPublica published a database tracking approved loans over $150,000 via data from the Small Business Administration. It doesn’t include exact amounts for loans, but provides payout ranges.
ProPublica’s database, combined with SBA data on loans under $150,000, show more than 400 businesses in East Lansing received a PPP loan. (Disclosure: ELi received $14,200 through the program.) The program expired on Aug. 8, 2020, and has not been renewed.
On a tip from a reader, we took a look at the database in part to try to understand employment in East Lansing, as we look to continue reporting on the East Lansing income tax and how it might be impacted by the shut-downs this year.
Here’s some of what we found:
Thirteen East Lansing companies each obtained $1 million or more
Two corporations got loans from $5-10 million dollars. They are the Michigan Education Association-NEA (a Michigan teachers’ union) and the Michigan Education Special Services Association (a health care service corporation for Michigan public schools’ employees). They indicated they kept 285 and 275 jobs on payroll, respectively, through the program’s funds.
For loans ranging from $2-5 million, six entities in East Lansing were approved:
· Douglas Holdings Inc. (This company, which has “elementary and secondary schools” listed as its industry appears to be Douglas J Holdings. The Douglas J Aveda Institute is located at 331 E. Grand River Ave.)
· T&B Services Inc. (a commercial construction design/manufacturing firm)
While there aren’t a number of jobs saved listed by MHINSS, the other five businesses collectively kept 1,498 employees on payroll for the duration of the loans, according to the ProPublica data.
Five businesses located in East Lansing received a total of between one and two million dollars through PPP. Those entities are:
· DHI MSO (apparently a parent corporation for Michigan Gastroenterology Institute)
· Hackney Grover PLLC (a law firm)
The loan applicants reported that the funds preserved anywhere from 72 to 351 jobs at their businesses.
Then there’s a loan to Chappelle Development Company
The reader who suggested we look into PPP in East Lansing pointed us in particular to the records for Chappelle Development Company. The company is owned by East Lansing real estate developer Scott Chappelle, who also runs Strathmore Real Estate Group, according to his LinkedIn page.
Chappelle was the developer behind the long-running blight at East Lansing’s main downtown corner, at Abbot Road and Grand River Ave., before he finally lost those properties to a foreclosure action. As ELi reported, he was recently indicted for “tax evasion, filing false documents with the Internal Revenue Service (IRS), making false statements to IRS Criminal Investigation (IRS-CI) agents, and mortgage fraud” by a federal grand jury in Grand Rapids.
With PPP funds totaling between $150,000 and $350,000, Chappelle Development Company reported it was able to keep 24 employees on payroll for the eight-week period of the loan, approved on April 10, 2020.
The unrelated indictment issued just two months later noted that Chappelle allegedly failed to pay the IRS the money withheld from wages of employees from 2010 to 2019. When the IRS attempted to collect the $830,000 in unpaid taxes, Chappelle allegedly made “false statements to the IRS about his and his companies’ assets and income, failing to disclose his vacation house on Lake Michigan, and purchasing real property in nominee names instead of his own.” (Read more.)
The federal government has been interested in misuse of funds in the PPP program. On Sept. 1, 2020, the U.S. House of Representatives Select Subcommittee on the Coronavirus Crisis released a report outlining how billions of dollars worth of loans were at risk for fraud.
City Attorneys, past and present
Many law firms applied for and obtained funding through PPP. In East Lansing, that included McGinty, Hitch, Pearson, Yeadon & Anderson, P.C., the law firm that for decades had been contracted as the City of East Lansing’s legal counsel, which received between $150,000 and $350,000 through the PPP to keep 13 employees on payroll.
Council voted in July to terminate the contract with the McGinty firm on October 1, 2020 and subsequently voted in September to hire the Lansing-based law firm of Foster Swift Collins & Smith PC as the new City Attorney. ProPublica’s records show that Foster Swift obtained a loan in the $2-5 million range to keep its 217 employees on payroll.
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