Committees Launch Investigation Into Waste and Abuse in Treasury’s Payroll Support Program

Analysis Finds More Than $728 Million in Federal Funds Going to Companies That Laid Off Thousands of Workers

Washington, D.C. (July 29, 2020) — Today, Rep. James E. Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, Rep. Peter DeFazio, Chairman of the Committee on Transportation and Infrastructure, and Rep. Maxine Waters, Chairwoman of the Committee on Financial Services, launched an investigation into the disbursement of federal funds from the Payroll Support Program to aviation contractors that recently laid off thousands of workers. In a letter to the Treasury Department, the Chairs explained that the Payroll Support Program was intended to save jobs—not provide a corporate bailout.

The Committees’ analysis identified at least twelve contractors that have accepted over $728 million in payroll support assistance after conducting nearly 9,300 layoffs. In letters to four aviation contractors that received some of the largest awards, the Chairs urged the contractors to either rehire laid-off workers or return the portion of the payroll assistance that corresponds to these workers.

“Congress created this program to ‘preserve aviation jobs’ by providing wage assistance to companies in exchange for keeping workers on the payroll,” the Chairs wrote. “Despite Congress’ clear intent, Treasury is providing hundreds of millions of taxpayer dollars to at least twelve airline industry contractors that recently laid off thousands of workers. Giving payroll support to companies that engaged in mass layoffs is not only contrary to congressional intent, but also wastes taxpayer dollars by covering the cost of payroll for employees that have already been laid off.”

Under the CARES Act, Payroll Support Program funds must be used exclusively to pay employee wages, salaries, and benefits. To receive these funds, recipients must “refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020.”

However, the Committees found that at least twelve companies laid off thousands of workers before signing Payroll Support Program agreements with the Treasury Department. Because the amount of assistance awarded to each company was calculated based on 2019 payroll figures, the Treasury Department appears to be distributing taxpayer funds to help preserve jobs that have already been eliminated.

The Chairs sent letters to the following companies:

Gate Gourmet is expected to receive more than $171 million in Payroll Support Program funds but has laid off more than 3,500 workers since the CARES Act was signed into law.
Swissport USA, slated to receive more than $170 million in Payroll Support Program funds, announced layoffs for over 2,800 workers before finalizing its agreement with Treasury.
Flying Food executed an agreement for $85 million, after laying off more than 800 workers.
G2 Secure Staff is expected to receive $81 million after laying off nearly 400 workers.

The other eight contractors identified by the Committees are expected to receive more than $220 million in payroll support and have laid off a combined total of more than 1,600 workers.

The Chairs also disputed Treasury’s assertion that it “implemented the CARES Act as written” and that its “hands are tied”:

“In the CARES Act, Congress also gave the Treasury Secretary discretion to determine the ‘appropriate’ ‘terms and conditions’ of the payroll assistance. This authority includes the ability to ‘clawback’ funds when a company does not ‘honor [its] assurances’ to refrain from conducting layoffs or furloughs. . . . To implement this program as Congress intended, we urge you to exercise your discretion under the CARES Act and reduce payroll assistance to companies that have conducted layoffs, unless the companies rehire such workers.”

Click here to read today’s letter to Secretary Mnuchin.

Click below to read today’s letters to aviation industry contractors:

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