The Heist

Published — October 15, 2020

The virus: Transcript

In this April 2, 2020, file photo, "For Sale By Owner" and "Closed Due to Virus" signs are displayed in the window of a store in Grosse Pointe Woods, Mich. (AP Photo/Paul Sancya, File)


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Episode 5 of The Heist

UNIDENTIFIED VOICES: From the Center for Public Integrity, this is The Heist. 

SALLY HERSHIPS, HOST: The Roosevelt Room is right across the hall from the Oval Office. It’s used for staff meetings and sometimes for big announcements.

DONALD TRUMP: We have a lot of media present. The room is loaded up with media as much as they can, considering we have social distancing. We’re practicing social distancing. (fades out) 

HERSHIPS: Trump was wearing a grey suit with a little American flag lapel pin. Ivanka was there, in a bright red dress. 

IVANKA TRUMP: When we began making phone calls a couple of weeks ago…(fades out)

HERSHIPS: There was an oil painting on the wall with a fancy, flourish-y gold frame, big flags in stands, a bronze statue of a buffalo fighting off wolves. The whole effect was pretty patriotic. And Trump was there to make a patriotic-sounding announcement. 

TRUMP: We had the greatest economy in history, the greatest economy that we’ve ever had, the greatest economy that anybody’s ever had. And then one day, they said, you got to close it down, close the country.

HERSHIPS: The coronavirus had hit. And for the past few weeks, members of Congress had been debating: What was the best way to save the economy? Small businesses were closing their doors. A lot of them probably for good. And millions of American workers were filing for unemployment. It was the beginning of the worst economic crisis since the Great Depression.

But finally, at the end of March, Congress had passed the CARES ACT. President Trump had signed it. It was part of a multi-trillion-dollar effort to save the country. And on this day, April 7th, 2020, Trump had gathered reporters to promote the law’s signature element.

TRUMP: As you know, on Friday, we launched the Paycheck Protection Program to help small businesses keep workers on the payroll.

HERSHIPS: The Paycheck Protection Program, or PPP, was supposed to offer interest-free loans to small businesses struggling to stay afloat during the pandemic. The government had set aside 670 billion dollars.

STEVEN MNUCHIN: And we want to make sure that every single small business can participate. 

HERSHIPS: Steven Mnuchin, the Treasury Secretary, was instrumental in getting the bill passed. 

MNUCHIN: And we want to assure the workers that if you don’t get the loan this week, there’ll be plenty of money for you next week. 

HERSHIPS: The announcements were incredibly upbeat. Trump and the administration were making big promises — that PPP would save small businesses, the country would see a major economic turnaround. But that’s not what happened. Instead, a program designed to help mom and pop businesses also ended up giving cash to companies that didn’t necessarily need it. Big companies, companies with connections to banks and politicians.

I’m Sally Herships and this is The Heist, a new podcast from the Center for Public Integrity. We’ve been doing a deep dive into how power works in Trump’s America. 

This is our final episode of the season. We started at the beginning of Trump’s presidency looking at how his policies favored the wealthy. Now, at a moment of crisis, the same pattern is playing out again. In this episode we ask: What went wrong with PPP? And what can it tell us about how the system is rigged to favor the rich?


HERSHIPS: We’re going to start our story today talking to the owners of a very, small business. They’re a husband and wife team. They operate out of a storefront and a Ford minivan. We’re in La Habra, California, a suburb of LA about 20 minutes from Disneyland.

LUIS RIVERA: Hi, how are you?

KATHRYN KRANHOLD: Hi Luis. Thanks for doing the interview. We appreciate it. 

LUIS RIVERA: Anytime, anytime.

HERSHIPS: The couple, Ana and Luis Rivera, run a heating and air conditioning business. And basically, Luis goes into people’s homes. He installs heating and air conditioning units. Luis does the work pretty much on his own, he just has a few part-time contractors for backup.


HERSHIPS: Kathryn Kranhold is a reporter for the Center for Public Integrity. She’s the one who visited the Riveras. Kathryn, tell me about the company and how it got its start. 

KRANHOLD: Well, Luis had been working for other people for about ten years. Then about five years ago he got his refund on his tax return and he used that to start his own business. So on the day I visited Luis, he was on his way to a job in Compton.

LUIS RIVERA: We are working on the air conditioning. We’re putting in brand new systems and ductwork. 

KRANHOLD: This is a typical day for Luis. He’s used to fielding dozens of calls like this a day from potential customers. 

HERSHIPS: But that was before the pandemic. 

ANA RIVERA: We didn’t know how serious it was. We didn’t know if it was a hoax. But when your family and friends are getting hit with the coronavirus, is when it makes it real. 

HERSHIPS: So Kathryn, you talked on the phone with Luis’ wife, tell us about her.

KRANHOLD: Ana’s the CEO. But she doesn’t take a paycheck. She has a second job for that — she manages the apartment complex where they all live. She and Luis also have five kids, ages three to 21. Ana does not have a lot of free time on her hands.

ANA RIVERA: I was trying to answer the phone, trying to get to my customers. Learning how to balance the kids, the work and trying to take care of myself, now that I think about it, I was going a little cuckoo bananas, to be honest. 

HERSHIPS: Even though their business was considered essential and technically they could keep working the Riveras were hit hard by the lockdown.

ANA RIVERA: We did go from having work every day to three weeks with no calls. 

HERSHIPS: They went from making $20,000 in January to $5,000 in March.

KRANHOLD: Ana tried to cook more to save money. She even took her kids to get free lunches at school. 

ANA RIVERA: Nobody tells you, yeah, you could pay me later. I still had to pay our phones, you know? There is definitely a little struggle.  

HERSHIPS: There are more 30 million small businesses in the United States. So if you take the problems Ana and Luis were facing and multiply them by 30 million and you can see why the Riveras are exactly the kind of small business owners that Congress and the Trump Administration said it wanted to help with PPP.

Ana and Luis had a healthy small business and they would have one again when the pandemic was over. They just needed help getting through this rough patch.

One of the main criteria for getting one of these loans was having fewer than 500 employees. It’s complicated, but generally speaking, that’s one of the ways the federal government defines a small business. And Kathryn, this is where many small businesses, like the Riveras, had a hard time? Right?

KRANHOLD: Right, well what it meant is that you found some really surprising definitions of “small businesses.” And really small companies like Ana and Luis’s with one employee, or maybe two, they ended up competing against companies with many more employees for that same pot of PPP money.

HERSHIPS: The idea behind the PPP program is that the money would help small businesses keep paying employees for several months, even if there was no work. 

The way PPP was set up, it was easiest to apply through a bank. Back on March 30th three days after President Trump signed the CARES Act Ana Rivera reached out to her banks. She called Wells Fargo and she emailed Chase. She’d had accounts with them for years. 

ANA RIVERA: I thought I had a good relationship with them. I thought I was gonna be okay. I have a friend that works for the bank. I should be okay. But that wasn’t the case. They were just so overwhelmed with people trying to get the loans that nobody reached out to me. Nobody helped me. 

HERSHIPS: We wanted to find out what happened. Why did a small company like the Riveras have so much trouble getting a loan? And we didn’t have to go very far to find out. We looked into a company called Continental Materials, which had a lot more luck getting quick access to government cash.   

KRANHOLD: Continental Materials. It’s been around for about 60 years. It’s got factories all over the country. And one of the factories turned out to be right here in Southern California about an hour from the Riveras. It is also in the same business as the Riveras. It makes furnaces and air conditioning units. 

HERSHIPS: And like Luis and Ana’s company Continental’s factory is also considered an essential business, so it also did not have to shut down. But unlike the Riveras, Continental did not appear to be struggling.

KRANHOLD: I reached out to a union leader and he told me that the company had a few orders that were put on hold at the end of March. And they had to furlough some employees at the same time. But since then, they’ve been working 12 hours a day, six days a week, pretty much throughout the pandemic.

HERSHIPS: Still, Continental got a PPP loan for $5.4 million. For context you should know that the average PPP loan was just over 100 grand. And Continental got its loan approved within just three business days of when the loans were first available. 

Meanwhile Ana Rivera hadn’t even heard back from either of her two banks. And all of this brings us back to our question: How did this happen?

KRANHOLD: Right, if you’re a big company, it’s likely you do a lot of business with your bank, mostly borrowing money. That’s one reason big companies like Continental got access to PPP money so quickly — banks.   

HERSHIPS: There was a middle man in the process, something between the government and the business that applied for its loan. In Continental’s case its bank is a global giant, CIBC.

KRANHOLD: Here’s how it works. Banks often assign one person or maybe a team to take care of you And it’s in the best interest of those banks, of course, to take care of their best customers.

HERSHIPS: So in the first days of the Paycheck Protection Program, banks were catering to their biggest clients first. But these loans were for millions of dollars, not a few thousand, like the Riveras. And in general, the bigger the loan, the more money banks made from servicing that loan.

But there was another reason that big businesses got PPP money. Remember that rule that required companies that applied for the loans to have less than 500 employees? Congress wrote a huge loophole into the law. It allowed some businesses like hotel and restaurant chains to apply as long as they didn’t have more than 500 employees per location. 

CNBC CLIP: We are hearing from small business owners still in limbo over this funding and frustrated to hear of big name companies like Ruth’s Chris Steakhouse and Shake Shack being able to access those PPP loans.

MAD MONEY CLIP: 13 public companies by the way all returning including Potbelly and Shack and Ruth’s Chris, and Auto Nation. 

HERSHIPS: Which explains how all those big companies you probably heard about on the news got PPP loans. Some of these companies were getting millions. 

And here’s a caveat to our story. A lot of journalistic outlets got PPP money too, including  more than 50 public radio stations, Newsday, The Texas Tribune, Prairie Public Broadcasting in North Dakota, and us. For full disclosure, the Center for Public Integrity got a loan for $658,000 back in April. 

But Kathryn, it’s important we understand a couple of things,  right?

KRANHOLD: Right. Well, first, the guidelines to qualify were loose. And these loans were available, so all you had to do was apply, and you got approved somewhat easily. You know, most of these businesses didn’t appear to do anything wrong. But there was a lot happening that went against the spirit, if not the intent of the law. And eventually some were shamed into giving the money back. 

CHRIS CILLIZZA: Like the Los Angeles Lakers. Wait what?

HERSHIPS: Steven Mnuchin was especially annoyed about that one. He told CNBC about it over the phone.

MNUCHIN: I never expected in a million years that the Los Angeles Lakers, which I’m a big fan of the team, but I’m not a big fan of the fact that they took a $4.6 million loan. I think that’s outrageous, and I’m glad they’ve returned it or they would have had liability.

HERSHIPS: But unlike the Lakers, five weeks after she’d called and emailed her banks Ana Rivera still hadn’t heard back yet from Chase or Wells Fargo. So she applied for a loan online, directly from the Small Business Administration. Ana tried to stay positive. 

ANA RIVERA: I did not let myself get to the place of fear and losing hope. I’m the type of person who, I’m going to pray about it. I’m going to grow through it. 

HERSHIPS: But after weeks of waiting with no money in sight, Ana hit a wall.   

ANA RIVERA: I was done. I was like, well, I guess maybe just PPP was just not for us. And maybe we just don’t qualify. Maybe we’re too small. 

MATT GARDNER: You know, there are a lot of anecdotal stories out there about small business owners, precisely the people we all care about the most at this time, simply not hearing back from the SBA after applying, waiting week after week after week to get any word about whether their applications were going to be approved.

HERSHIPS: We wanted to get a tax expert to weigh in on the rollout of the PPP. So we spoke with Matt Gardner. He’s a senior fellow at the Institute for Taxation and Economic Policy. It’s a left-leaning think tank. In other words, Matt is an expert on policies that give big corporations an edge over the little guy. And he says the CARES Act falls into that bucket, despite what the administration said it would do.

GARDNER: It’s pretty clear that the PPP process was run in a way that pushed needy small businesses to the back of the line while prioritizing the influential, and that’s not at all the way it was built. Certainly not at all the way Americans would want to see it work.

HERSHIPS: So here’s what we’ve learned so far — Big companies that had close relationships with their banks got in line first for PPP loans. But there were other problems too. And to explain what those are we need to take a close look at a wealthy guy named Ronald Gidwitz. Robin Amer, in Chicago, has been reporting on him for a while.

ROBIN AMER: Yeah, Gidwitz is interesting and not just because of his money. I’ll uh, I’ll let him tell you about it.  

RONALD GIDWITZ: I’m Ambassador Ronald Gidwitz, the acting representative of the United States to the European Union. (fades out)

AMER: So Ronald Gidwitz, as you just heard, is America’s acting representative to the European Union. He’s also the U.S. Ambassador to Belgium. 

GIDWITZ: Now more than ever, we need to leverage this partnership. (fades out)

AMER: Before he became an ambassador, he was a businessman here in Chicago.  

HERSHIPS: Remember that company, Continental, we mentioned earlier? The one that got a $5.4 million loan within just days of when the money was available? Gidwitz’s family owns the company.

So we had a lot of questions. First, did Ambassador Gidwitz’s political connections have anything to do with this loan?

AMER: We did the obvious thing first, we reached out to the ambassador and were told by a State Department official that when Gidwitz was first appointed, he resigned the company’s management and promised not to get involved in its financial matters. His son took his place. In other words, he’s hands off. 

And, of course, we looked into his family too. The Gidwitz family is actually one of Chicago’s wealthiest and most prominent up there with the family of Illinois Governor J.B. Pritzker. Back in the ‘80s and ‘90s, Gidwitz was president and CEO of Helene Curtis, a cosmetics company that his father built.

HERSHIPS: And, Gidwitz is also a big political fundraiser. During Trump’s last presidential last run, he was Illinois finance chairman. He held a big fundraiser at Trump Tower in Chicago, the kind where donors pay more than 25 grand just to have their picture taken with the candidate, and he raised more than a million dollars. Gidwitz also gave hundreds of thousands of dollars of his own money to Trump and other Republicans in the leadup to the last presidential election.

AMER: Yeah, we pulled records from the Illinois Board of Elections and the Federal Election Commission and found that over the last quarter century, he and his wife have given more than $8.4 million to various political causes.

And as often happens in Washington, Gidwitz was handsomely rewarded for those efforts. In May of 2018, Trump appointed him to be the U.S. ambassador to Belgium.

HERSHIPS: So Gidwitz, an ambassador, is clearly rich and well connected. But, to be fair, that doesn’t necessarily mean he pulled any strings to get this loan. So we also checked federal lobbying records. 

AMER: And we didn’t see any smoking guns. In other words, we didn’t see any direct evidence to show that Gidwitz or anyone else from Continental had officially lobbied the Treasury Department to get a PPP loan.

HERSHIPS: But one of the big questions we’ve been asking ourselves all along is how Trump’s friends, family members, high level appointees, and even members of Congress were able to benefit from the PPP program. While Gidwitz wasn’t actively part of the management of the company at the time the loan went through, his family and he own nearly all the company’s shares, if not all of them. So he still profits from the company. In some ways it’s like President Trump supposedly passed on the management of his family business to his sons while he’s president. Trump is out. But he’s still in.Congress actually tried to address this kind of scenario. 

KATHLEEN CLARK: The CARES Act prohibits businesses controlled by the President, the Vice President, members of Congress, and heads of executive departments from getting loans or investments from the program. 

HERSHIPS: We wanted to learn more about the rules around politicians and PPP money. So we spoke with Kathleen Clark, an ethics expert who teaches at Washington University in St. Louis.

CLARK: The Democrats didn’t want Trump or Kushner to get any of this money. They wanted to make sure that didn’t happen.

AMER: But that hasn’t stopped prominent politicians or their family members from getting these loans. According to data the SBA released in July, Elaine Chao’s family business got a loan. She’s the U.S. Secretary of Transportation, and she’s married to Senate Majority Leader Mitch McConnell. 

Businesses belonging to several members of Congress also got loans. Texas Republican Roger Williams got one for his car dealerships. And Oklahoma Republican Kevin Hern got more than a million bucks. His Tulsa company owns McDonald’s franchises. 

And while Congress said it didn’t want this money going to the president or his cabinet, Kathleen Clark says that it didn’t explicitly ban all presidential appointees from getting this money, appointees like Ambassador Ronald Gidwitz. 

CLARK: And I just want to point out that this is just a typical example of Congress or any legislature trying to address an ethical concern and making, you know, a first cut at the problem. And it’s not surprising that it’s incomplete in its coverage because frankly, Congress’s main concern was getting this money out the door. 

HERSHIPS: OK, so businesses are businesses, they are there to make money. It’s practically their job to take advantage of tax laws and government money. From this perspective, Continental did nothing wrong. This was the system that Congress put in place. But looking closely at Continental can help reveal a pattern. What does it tell us about how the system is rigged in favor of big companies?

AMER: We spent a lot of time looking at the company itself to try and answer this question. Gidwitz’s father and uncles started Continental back in 1954 as a uranium mining company. They owned these two mines in Utah. And for most of the last 60-plus years, the Gidwitz family has controlled the company.

HERSHIPS: And in looking at their recent records something became apparent. While the company did have financial problems, those problems had nothing to do with the pandemic. 

AMER: We wanted to be absolutely certain though that Continental didn’t need that PPP money. So we asked our tax expert Matt Gardner, to look at documents we pulled from the Securities and Exchange Commission. And he confirmed — Continental had been facing financial difficulties long before the pandemic began.

GARDNER: In 2019, the company took a huge loss related to shutting down some of its mining operations and, you know, acknowledged pretty candidly that those operations just weren’t financially workable anymore. 

HERSHIPS: When the PPP loan program first started, anyone could apply, as long as they had fewer than 500 employees. Continental just squeaked under the wire, with 445. But a month later, a second benchmark was added. Applicants needed to promise that they needed the loan. And importantly, they had to certify that if they did have access to other sources of cash than PPP loans, tapping into it would be “significantly detrimental” to their business.

And that brings us to our next big question: Did Continental have access to other sources of cash? So to find out we looked at SEC filings and learned that something really interesting happened around the time Continental got its loan. 

AMER: Just three weeks before that, the company got a $20 million credit line from its longtime bank, CIBC. And a credit line is kind of like a credit card with a limit and it gave Continental this nice cushion of cash if the company needed it. So when the pandemic hit, Continental had plenty of money to pay its employees and run its factories.

HERSHIPS: Now we want to be clear here. When Continental applied for its loan, this second benchmark had not been spelled out yet. That means that at that point in time it met the guidelines for a PPP loan. But there’s another interesting wrinkle here. 

AMER: At the same time Continental was looking to get a PPP loan, Ambassador Gidwitz and his family were about to take the company private, buying up pretty much all the company stock that they didn’t already own. It’s called a management buyout, and to pay for it, the Gidwitz family got another credit line, this one for almost $9 million.

HERSHIPS: And just a couple of days later, Continental was approved for its $5.4 milion PPP loan. According to the records we reviewed, Continental got its PPP loan a few days before the Gidwitz family bought out most of the company’s remaining shares.  The timing was interesting. Did the Gidwitz family end up using the money from one of its lines of credit to buy its shares? Did it use its PPP loan? 

AMER: Remember, the guidelines for companies that received PPP loans required them to use the money primarily for payroll. So if the Gidwitz family had used that money for the buyout, that would be a problem. Our tax expert Matt Gardner says that it’s impossible to say for sure how the company management actually used its PPP money, but…

GARDNER: What I can say is that, you know, certainly getting the PPP loan made it easier for Continental Materials management to think about buybacks, to think about alternative uses of their money and made it more lucrative for them to do so. 

HERSHIPS: So, should Continental have received a PPP loan? 

GARDNER: The CARES Act and the PPP in particular, was supposed to be for companies that were facing existential threats due to COVID and that lacked access to capital. That didn’t have a means of borrowing to keep themselves afloat, to get through the short-term difficulties presented by COVID, by the shutdown. And what seems pretty clear about Continental Materials is that neither of these things apply to them. 

HERSHIPS: And the fact that Continental got such a big loan so quickly, Gardner says that’s a problem, too. 

GARDNER: Because every time a company like Continental Materials gets to the front of the line, it’s pushing back smaller businesses for whom the threats really are existential, for whom getting that $5 million or $500,000 even, is the difference between keeping your employees on payroll with the hope that you can come back in a couple of months, and just calling it quits and letting them all go.

HERSHIPS: Continental declined to get on the phone with us, but in an emailed statement, the company said it followed all the rules in applying for a PPP loan. I’ll quote the email. “Over the years, the company has dealt with and survived considerable industry and economic turmoil, none of those as drastic as what the COVID-19 crisis continues to present today.”

But that statement is hard to reconcile with the company’s SEC filings. In one of the company’s last public filings in May, Continental explained that its businesses had not been severely impacted by the pandemic, but that it couldn’t “predict” the impact on its finances for the remainder of the year.

LUIS RIVERA: As a matter of fact, yesterday we went to a call, a 90-year old lady, and she didn’t want us to be inside her house at all. We had to do the work by sections, by hours.

HERSHIPS: Ana and Luis Rivera are still in business, though the pandemic is still making life difficult for them. And the PPP program? They did end up having a bit of luck. I’m going to bring back in Kathryn Kranhold to explain what happened.

KRANHOLD: Well, five weeks after Ana Rivera first reached out to Chase and Wells Fargo, she finally got another kind of lender to help her apply for the PPP loan. She says once the lender — they’re called the Opportunity Fund — stepped in and helped her, she got a $7,000 loan, within two days. The lender, Opportunity Fund, is known as a community financial institution and it’s a nonprofit that makes micro loans. A big part of what they do is help minority-owned businesses. These were some of the hardest hit by the coronavirus. 

ANA RIVERA: And honestly, I feel like they were heaven sent. I know it sounds weird and funny, but I feel like they were just angels that came to me.

HERSHIPS: What happened to the Riveras is important not just for their family, but also because it helps to explain why other small mom and pop businesses struggled to get access to PPP loans. Back in April, when the Small Business Administration first started doling out money, microlenders like the Opportunity Fund, the one that helped the Riveras, were shut out. That meant that many businesses owned by people of color had little chance of getting a loan. 

KRANHOLD: At the Center for Public Integrity, we did an analysis of SBA data for loans over $150,000, which was the bulk of the money that had been given out under the PPP program. We found that only 7% of the companies that received loans were Hispanic-owned, and worse yet, less than 2% of companies that received loans were Black-owned.

HERSHIPS: Both the SBA and the Treasury claim, correctly, that the PPP program has helped millions of workers hold on to their jobs. but their numbers are off. They’ve claimed repeatedly that 51 million American workers have been helped. But there’s no way to really know that, because the SBA did a sloppy job collecting data about the numbers of employees kept on payroll with PPP money. We asked the SBA about those numbers and they didn’t respond.

And of course this may not be the last federal stimulus package meant to help economic strain caused by the pandemic. Our tax expert Matt Garder says that the question for future stimulus packages is whether the government will fix the systematic unfairness that favored well-connected companies, like Gidwitz’s, over the people it was meant to help like Ana and Luis Rivera.

GARDNER: What we can certainly ask for, and what would be a timely thing to think about is, when the next round of stimulus legislation is enacted, we can make sure that the terms of these loans, the terms of any tax breaks that are in the bill, meet up with the expectations of the American public. 

And that’s that they’re going to be targeted to the middle and low-income families who are threatened right now, going to be targeted to the small businesses who even now are hanging on by their fingertips just trying to keep their employees on payroll. And, that these provisions won’t unfairly advantage the bigger businesses that already have access to capital. 

HERSHIPS: With both the CARES Act and the Tax Cuts and Jobs Act of 2017, the Trump Administration promised that “working people,” the middle-class, would benefit. But in both cases a lot of money went into the pockets of the rich. These policies are not exceptions. In Donald Trump’s America, they are the rule.

Our episode today was reported by Robin Amer and Kathryn Kranhold. Our editor was Curtis Fox, with help from consulting editor Alison MacAdam and Center for Public Integrity’s Tax Project editor Allan Holmes. We had production help from Lucas Brady Woods, Brett Forrest, Camille Petersen, and Ali Swenson. Our theme music and original score by composer Nina Perry and performed by musicians Danny Keane, Dawne Adams, and Oli Langford. Our engineer is Peregrine Andrews. The Heist is executive produced by me and the Center for Public Integrity’s Mei Fong. 

With special thanks to David Felsen, Janeen Jones, and Joe Wertz. Thank you for listening to the last episode of Season One of The Heist. 

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