As a result, the popcorn seller says he is “now on the brink as he desperately tries to keep his employees.”
The forgivable loan program, the centerpiece of the $ 2 trillion stimulus package passed by Congress, aims to keep small businesses and their workers afloat during the pandemic.
“Finding out that you’ve been left out is disheartening,” Stacy Hawkins-Armstrong, who founded and manages Sha-Poppin, told CNN Business in an interview.
Hawkins-Armstrong was seeking $ 25,000 in emergency loans from JPMorgan Chase, money that would be used to keep his business afloat and continue to pay his employees. Instead, she only received $ 6,000 through a community bank.
“Chase didn’t give me anything,” Hawkins-Armstrong said.
The small business was profitable enough to allow Hawkins-Armstrong’s two children to go to college. Now she doesn’t know if her business will survive the crisis.
“I hope he can survive, but at this point I just don’t know,” Hawkins-Armstrong said.
“The damage has been done”
“The damage was done,” argues the trial. “The return of Ruth’s Chris cannot reverse the lost opportunities, the time value of money lost and the unnecessary stress suffered by these small businesses and their owners.”
The plaintiffs say this is the first time that a large company has been sued for taking P3 funds. The Trump administration is now strongly urging state-owned companies to repay these loans.
The backlash against banks and large corporations that received loans underscores concerns that the forgivable loan program suffers from a lack of oversight that results in funds being diverted from those who need it most.
Ruth’s owner Chris is listed on the Nasdaq and has a market valuation of $ 250 million. There are 150 Ruth’s Chris restaurants, including 20 international franchised restaurants in Mexico, Canada and other countries.
JPMorgan Chase did not comment.
Shake Shack, Sweetgreen Yield Fund
Chris de Ruth declined to comment on the lawsuit. However, a spokeswoman for Ruth’s Chris said the company never used the $ 20 million in P3 funds it received. The spokeswoman said Ruth’s Chris had spent $ 10 million of her own funds since March 15 to cover payroll and pay 100% of employee health benefits.
“We intended to repay this loan as per government guidelines, but as we learned more about the program’s funding limits and the unintended impact, we decided to expedite this repayment,” said Cheryl Henry, President and CEO of Ruth’s Hospitality in a press release. emailed to CNN Business on Thursday. “We remain committed to protecting our hard-working team. We hope these funds will be loaned to another company to protect their employees, as we planned.”
“The purpose of this bailout was to help mom-and-pop stores across the country,” Jay Edelson, CEO of Edelson PC, the law firm that filed the lawsuit. “It’s amazing how subverted this has been.”
The loans, which charge just 1% interest, can be used by small businesses with 500 or fewer employees to pay workers’ wages, rent, and utility costs. Loans are only repayable if small businesses maintain current levels of employees and compensation.
Demand was so high for PPP loans that the program ran out of money earlier this month, leaving tens of thousands of small businesses without the lifelines they need to weather the crisis.
“White glove treatment”
“While the plaintiff sat for hours furiously trying to access Chase’s website (and never was able to), defendant Phunware received the white glove treatment from Chase,” said the trial.
Phunware did not respond to requests for comment.
The White House and the Trump campaign did not respond to requests for comment. The SBA declined to comment.
Big banks accused of harming small businesses
Banks have been criticized for allegedly failing to process PPP requests on a first come, first served basis. This left some small businesses without the financing they needed.
The lawsuit against JPMorgan Chase alleges that the bank made “every effort to prioritize processing loan applications from its preferred customers first, and processing the rest later.”
This lawsuit was brought by various small California businesses, including a cybersecurity company, an auto repair company, law firms and a frozen yogurt store.
The lawsuits, however, did not produce any emails or internal documents suggesting this was the banks’ intention.
However, a spokeswoman said that Chase Business Banking, which caters to small businesses with revenues of $ 20 million or less, has funded more than twice as many loans as the rest of the banks combined.
JPMorgan Chase also said that 80% of Chase Business Banking’s PPP loans have gone to companies with revenues of less than $ 5 million. And over 60% of these PPP loans went to clients with less than 25 employees.