Criminal record shouldn't bar small businesses from COVID-19 payroll loans, suit says




  • In US
  • 2020-06-11 22:11:44Z
  • By Charlotte Observer
 

Small business owners with a criminal record aren't eligible to receive certain government aid under the coronavirus relief bill designed to help keep stores afloat while the pandemic drags on.

The owner of a corner store in Maryland is looking to change that.

Altimont Mark Wilks - who owns two businesses in Hagerstown, Maryland - sued the Small Business Administration Wednesday, saying the agency acted outside the scope of its authority and ignored the text of the CARES Act when it adapted the so-called "criminal history" rule.

"Carmen's Corner Store is run by a person who has far surmounted his past difficulties," attorney John J. Vecchione said in a statement. "An administrative agency should not be able to block what the representatives of the people have granted."

Vecchione is senior litigation counsel at the nonprofit New Civil Liberties Alliance, or NCLA, which filed the complaint on Wilks' behalf.

The lawsuit, filed in Maryland federal court, also names Secretary Steven Mnuchin of the U.S. Treasury Department and SBA Administrator Jovita Carranza as defendants.

When COVID-19 emerged in the U.S. in March, Congress passed the Coronavirus Aid, Relief, and Economic Security Act - the CARES Act - which allows the federal reserve to set aside $2.3 trillion to help prop up small businesses and local governments during the pandemic, McClatchy News reported.

The funding also included the Paycheck Protection Program, designed to help those businesses pay their employees instead of laying them off.

As of June 10, the program has paid out more than $511 billion to 4.5 million small businesses, according to the SBA's website.

But shortly after the legislation passed, the SBA filed what's known as an "interim final rule" - an action federal agencies can take without first seeking public input, the Federal Register says.

Under the rule, a person who owned 20 percent or more of a small business and had been "incarcerated, on probation, on parole" or otherwise convicted of a felony in the last five years was ineligible to apply for a PPP loan.

It went into effect April 15.

Secretary Mnuchin has since testified before the Senate Small Business Committee that the agency plans to scale back the criminal history rule to bar anyone with a conviction in the last three years from applying instead, Business Insider reported.

As the rule currently stands, people like Wilks are out of luck.

According to Wednesday's complaint, Wilks pleaded guilty to felony drug and weapons charges in 2004 and served 15 years in prison. He was released on June 14, 2018 and remains on parole until 2021, the lawsuit states.

When he got out, the NCLA said Wilks reestablished Retail4Real, a business he had started before his incarceration that now trains former convicts to become delivery drivers for auto parts suppliers and dealerships.

Within a year, he also opened Carmen's as a neighborhood convenience store, the complaint states.

"It was really the blessing of my mother and my sister Patricia (Green) that got me back on the course of opening my own business," Wilks, then 48, told the Herald Mail at the store's ribbon-cutting ceremony last July.

After the pandemic hit, Wilks applied for a $10,000 PPP loan for Retail4Real and a $21,500 PPP loan for Carmen's Corner Store, according to the lawsuit.

But the bank denied him, citing his prior conviction and current probation.

According to the NCLA, the criminal history rule flies in the face of the CARES Act, which "makes unambiguously clear which businesses are eligible for PPP loans," the complaint states.

It also goes beyond the agency's scope of authority as an administrative agency, according to the lawsuit.

"Through its passage of the CARES Act, Congress did not delegate to SBA the authority to determine who is and is not morally worthy of a PPP loan," NCLA said in the lawsuit.

The suit seeks a federal judge's order barring the agency from enforcing the rule and requiring it issue PPP loans to all qualifying businesses - regardless of criminal history. It also requests that Wilks' loan applications be considered according to when he initially submitted them.

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