In recent weeks, a number of businesses have been thrust in the media spotlight for accepting PPP loans made available through the CARES Act. Certain number of these businesses are now seeking to return the borrowed funds, including Ruth's Chris, Shake Shack, Potbelly Corp, and the Los Angeles Lakers. Whether these companies elected to return their respective loans as a result of the public relations pressure or the ever-changing guidance issued by the administration is unclear. On April 27, President Trump told reporters that he would be interested in having a list of names of PPP loan recipients made publicly available, but that he would have to give thought to the legal implications of such a disclosure.
These high profile borrowers receiving media attention are primarily publicly traded companies who must, under applicable securities laws, file documents with the Securities and Exchange Commission disclosing their receipt of PPP loans. However, a great deal of information about privately held borrowers is also likely subject to public disclosure under the Freedom of Information Act (FOIA).
PPP loan applicants should appreciate that if they accept a PPP loan, certain information they provide to their lender (and ultimately the SBA) could be released by the SBA pursuant to an FOIA request.
Indeed, The Wall Street Journal recently submitted FOIA requests to the SBA seeking disclosure of loan-specific data, including borrower names, loan amounts and lending banks, which the SBA typically discloses in response to FOIA requests. The SBA declined to answer The Wall Street Journal's requests, stating that its immediate focus is on assisting small businesses during the period of economic disruption caused by COVID-19. That response buys a little breathing room but will not hold the press at bay for long; it is likely such information will eventually become available.
According to the SBA's website, the following information is generally available in response to a FOIA request:
Consistent with these disclosure obligations, the SBA form PPP application provides that with respect to approved PPP loans the following borrower information is generally made available upon request: (i) the names of the borrowers (and their officers, directors, stockholders or partners), (ii) the amount of the loan, (iii) its purpose in general terms and (iv) the maturity.
Generally, proprietary data on a borrower is not routinely made available upon third party requests. Other information typically exempt from third party FOIA requests include:
As is often the case when a third-party makes a FOIA request, the agency receiving the request is unlikely to do much, if anything, to protect a borrower's privacy interests. At most, a borrower may receive notification from the agency that a third party has made a FOIA request and, absent the borrower obtaining an injunction, the agency advises that it intends to release the information by a specific date. This puts the onus on the borrower to file a lawsuit and seek immediate injunctive relief in order to protect their privacy interests in the information.
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