A union representing dozens of laid-off workers from the Four Points by Sheraton Los Angeles International Airport hotel has filed a complaint with the U.S. Small Business Administration, alleging the hotel’s owner may have misused federal funds that were intended to keep staff employed.
The workers, who recently held a protest outside the Sheraton, are urging the SBA to conduct an investigation into the nearly $4.4 million in federal Paycheck Protection Program loans that were approved for the hotel.
Owner Rui Gao Inc. closed the Sheraton’s doors a week after gaining approval for a second round of money.
Permanent closure notices
The hotel was first approved for $2.4 million of PPP funds on April 10, 2020. But that had little impact on keeping workers on board, according to Kurt Petersen, co-president of Unite Here Local 11.
“They said they were going to save 234 jobs with that money, but they didn’t because there were only about 30 employees still working at the hotel from April of last year until February of this year,” he said.
The hotel filed a permanent closure Worker Adjustment and Retraining Notice with the state on July 24, 2020 that became effective Sept. 24, the complaint said. That impacted 28 jobs.
On Jan. 29, 2021, the hotel received approval for a second PPP loan of $2 million that was tied to the retention of 220 jobs. But it filed a second WARN notice on Nov. 30, 2020, that became effective Feb. 5, impacting another 214 jobs.
“They sent out a WARN notice in November, knowing they were going to close the hotel,” Petersen said. “We don’t know if there was fraud, but on its face this seems pretty egregious. It seems like they stole the money. I don’t know how else to put it.”
Representatives with San Marino-based Rui Gao Inc. could not be reached for comment.
Graciela Gomez, who worked as a housekeeper at the Four Points hotel for 20 years, said the funds didn’t provide help to her or her coworkers.
“My coworkers and I were surprised to learn that our owner received millions in PPP loans,” Gomez said in a statement. “We did not see how any of that money got used to help us. Where is the money?”
The union’s complaint says the loans the hotel received “appear to violate the spirit, if not the letter” of the CARES Act, as Congress intended that PPP funds be used by small businesses to keep workers on the payroll.
Seeking information
Unite Here is asking the SBA to determine how much of the hotel’s PPP money was used for non-payroll costs and whether Rui Gao has applied for full or partial loan forgiveness.
The Paycheck Protection Program was intended to help small businesses cover payroll costs. Unite Here’s analysis of SBA data released Dec. 1, 2020, found that 4,064 California hotel borrowers collected $950 million in PPP loans, with large hotel chains winning an exemption from SBA rules that allowed them to apply for loans at multiple properties.
Rui Gao Inc. may be one of the large firms that benefited from the loophole, Unite Here said, while small businesses were not able to access the program.
The SBA has not presented an audit plan for Rui Gao or other large hospitality firms that were approved for millions in PPP loans, Unite Here contends, and has instead proceeded with processing loan forgiveness applications.
Former Treasury Secretary Steve Mnuchin indicated early last year that all PPP loans over $2 million would be audited, the union said, and the House Select Subcommittee on the Coronavirus Crisis later indicated that some audits have occurred. But it hasn’t disclosed which businesses have been audited or had PPP loans forgiven.
The union found that as of April 1, the SBA had forgiven and paid back over $209 billion while denying forgiveness for only $700 million.
SBA disclosures reviewed by Local 11 do not indicate whether Rui Gao’s loans were forgiven.
The union’s complaint was also forwarded to several lawmakers, including U.S. Sen. Dianne Feinstein, D-California, Rep. Judy Chu, D-Pasadena, U.S. Sen. Alex Padilla, D-Los Angeles.
