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Waiver bypasses federal ethics rules on relief loans


A brief and barely noticed "blanket approval" issued by the Trump administration allows lawmakers, Small Business Administration staff members, other federal officials and their families to bypass long-standing conflict-of-interest rules to seek funds for themselves, adding to concerns that coronavirus aid programs could be subject to fraud and abuse.

Under normal circumstances, lawmakers and some federal employees who apply for small-business funds in some cases have to seek approval of a little-known body called the Standards of Conduct Committee. The rule applies to officials who are business owners, officers, directors or shareholders with a more than 10% business interest, plus any "household members" of those officials.

But in a rule the administration issued April 13, the administration disclosed that the approval requirement had been suspended for all entities seeking funds from the $660 billion program "so that further action by the [ethics committee] is not necessary."

Policy experts and government watchdogs said the blanket waiver could allow officials to write the rules to benefit themselves. Josh Gotbaum, a Brookings Institution scholar who has worked in economic policy under Democratic and Republican administrations, said he was "appalled" by the waiver.

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"The idea that the Small Business Administration can, without any review or publicity, secretly let all of its employees arrange loans for their family members or associates is outrageous," Gotbaum said.

Because the administration has not yet released any information about the individual borrowers, it is unknown how many members of Congress or Small Business Administration officials have benefited from the program, but several representatives did, according to media reports and financial records.

Rep. Susie Lee, D-Nev., played a role in shaping the Paycheck Protection Program when she joined other Nevada legislators to urge the Trump administration to make casinos eligible for funds. Excluding casinos from loans, as the Small Business Administration had long done, "unfairly impacts countless small businesses throughout Nevada," the legislators argued in an April news release.

What Lee did not mention is that among the businesses being barred from applying for the funds was her husband's Las Vegas casino company, Full House Resorts. When the administration complied with Lee's request and allowed casinos to apply, Full House received two loans totaling $5.6 million, according to securities filings.

Lee was not aware of her husband's interest in applying for the loans at the time she was urging the administration to allow casinos to receive funding, said her spokesman, Jesus Espinoza.

"Congresswoman Lee joined the rest of Nevada's congressional delegation, which includes members from both parties, in fighting to reverse that decision and give our state needed resources in a crisis," Espinoza said. He added that Lee played no role in Full House's loan application or in the Treasury Department's decision to issue a blanket waiver for members of Congress and their families.

Full House, where Lee's husband, Daniel Lee, is president and chief executive, received its loans after the blanket waiver was put in place. The company did not return requests for comment.

Small Business Administration spokesman Jim Billimoria said the administration issued the blanket waiver because it treated the Paycheck Protection Program similarly to loan programs that the agency provides in the wake of natural disasters and because agency officials were concerned that there could be a large volume of waiver requests.

The Standard of Conduct Committee is typically made up of the Small Business Administration's general counsel, associate administrator of administration and the head of human resources.

Lee is not the only member of Congress to benefit. One of the wealthiest members of Congress, Rep. Roger Williams, R-Texas, said in a May 5 blog post that his auto dealerships had received loans. Rep. Vicky Hartzler, R-Mo., said that businesses owned by her family had received program loans, after they were disclosed in the Columbia Tribune.

Economists from both parties have mostly complimented the Small Business Administration for getting money out the door to millions of small businesses and their employees, buttressing the economy against staggering unemployment.

But the move to waive ethics rules is one of several high-level decisions that could hamper effective oversight of the program. The Trump administration has told congressional oversight committees that it is not required to provide information about loan recipients. It also declared that the special inspector general leading oversight of the relief measure cannot submit reports to Congress without "presidential supervision."

​​​​​Information for this article was contributed by Erica Werner of The Washington Post.


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