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What strip clubs and political consultants have in common: They're fighting for PPP loans.

The Charlotte Observer logo The Charlotte Observer 5/13/2020 By Jim Morrill, The Charlotte Observer

Should political consultants have the same right to federal relief as strip clubs?

That’s essentially the case that attorneys planned to make Tuesday in a federal appeals court in Washington.

Like strip clubs, consultants and lobbyists are barred from receiving coronavirus relief money under rules from the Small Business Administration. Other industries are considered ineligible, too, such as payday lenders. At stake is a share of the $669 billion Congress has approved for small business loans under the Paycheck Protection Program.

Many North Carolina consultants are dismayed by the SBA rules.

“Our industry is being impacted by this (pandemic) and it is frustrating that we can’t get relief,” said Heather Dickson, a Republican fundraising consultant from Raleigh who did not apply for a loan.

The American Association of Political Consultants sued to overturn the SBA regulation. After a federal judge in Washington ruled against the group last month, it is appealing to the federal appeals court for the District of Columbia.

A similar argument was made this week in Michigan, where a judge ruled strip clubs should be eligible for the loans.

Jason Torchinsky, general counsel for the consultants’ trade group, said the SBA ban is based on the idea that “the federal government should not be subsidizing lobbying or political activity.”

“Our position is they’re not subsidizing it,” he said. “They’re loans.”

In rejecting that argument, U.S. District Judge Royce Lamberth called it “a distinction without a difference.”

The loan program, part of the $2.2 trillion CARES Act, offers loans at 1% interest. Loans will be forgiven if all employees are kept on the payroll for eight weeks and the money is used for expenses such as rent or utilities.

The program has drawn fire for awarding loans to hundreds of publicly traded companies including large hotel and restaurant chains. Some — including the NBA’s Los Angeles Lakers — have returned the money.

In a case brought by a coalition of strip clubs, a judge in Michigan came to a different conclusion than his counterpart in Washington.

“Simply put, Congress did not pick winners and losers in the PPP,” District Judge Matthew Leitman wrote. His decision is expected to be appealed.

SBA’s ‘over 50%’ clause

In North Carolina, consultants are divided over the SBA rule.

Democratic consultant Dan McCorkle of Charlotte said in a busy election year, consultants shouldn’t need the help.

“If you’re an experienced consultant, you still have your candidates and they still need your help,” he said. “So why would you need a small business loan?”

And Paul Shumaker, a GOP consultant whose clients include U.S. Sens. Thom Tillis and Richard Burr, said the money, “needs to go to people who need it.”

But most consultants run small operations; some are no larger than themselves. Even with a busy election year, some say they’re having a hard time amid the pandemic.

Dickson, the fundraising consultant, said traditional fundraisers have disappeared as candidates have gone online to raise money. And Thomas Mills, a Democratic consultant, said he’s worried his business could suffer like it did a decade ago in the Great Recession, when it all but dried up.

“Anybody who’s in the marketing industry is going to get hit hard, especially in this business,” Mills said.

Mills said he has applied for an emergency federal loan.

So have other North Carolina consultants under a clause in the SBA regulations. It says no one is eligible if over 50% of their annual revenue comes from political or lobbying activities.

PPP for consultants

Republican Dee Stewart is president of The Stewart Group, which does corporate public affairs as well as political consulting. He got a $64,300 loan under the program. He said political consulting accounts for less than half the company’s annual revenue.

“We followed the letter and spirit of the regulation,” he said. “We dotted every ‘i’ and crossed every ‘t’ and take great pride in doing things the right way as a small business and as an employer. This loan will help our business keep its employees on the payroll.”

Republican Chris Sinclair runs Sinclair Public Affairs, whose clients have included Tesla, a health care group and bond campaigns as well as political candidates. He applied for a loan at the recommendation of his CPA. He got $34,000.

“Like thousands of other small business owners, I have lost business and client work as a result of this unprecedented pandemic — and have a payroll to make with employees who depend on me,” he said. “Also like other small businesses, we are working hard to make ends meet during this economic downturn.”

Some N.C. consultants, including Shumaker and Morgan Jackson, who works for Gov. Roy Cooper and other Democrats, said they aren’t applying for the loans. Others declined to comment.

Democratic consultant Brad Crone said he applied and was approved for $6,000. Then he found out the SBA rules and didn’t take it.

“The rules clearly say that if you’re engaged in lobbying or political consulting you’re not eligible to apply,” he said. “If you take the money and you’re audited you’re going to have to pay the money back. It’s not worth the hassle having to return the money.”

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©2020 The Charlotte Observer (Charlotte, N.C.)

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