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The Federal Government will now give PPP loans to borrowers in bankruptcy

The federal government has quietly reversed course on a policy that had kept thousands of businesses from applying for pandemic economic aid, with only weeks to go before funds are expected to run out.

In late March, ProPublica reported on a Small Business Administration rule that disqualified individuals or businesses currently in bankruptcy from getting relief through the Paycheck Protection Program, an $813 billion pot of funds distributed to small businesses in the form of loans that are forgiven if the money is mostly spent on payroll. The agency had battled in court against several bankrupt companies attempting to apply for PPP loans, and did not change course even after Congress explicitly passed legislation in December allowing it to do so.

Referencing ProPublica's story, the National Association of Consumer Bankruptcy Attorneys wrote a letter to newly installed SBA Administrator Isabella Guzman urging her to follow Congress' suggestion and tell the Executive Office for U.S. Trustees — a division of the Justice Department that oversees most American bankruptcy courts — to allow debtors to receive PPP loans.

The agency has not yet contacted the Justice Department. But on April 6, the SBA released new guidance as part of its frequently asked questions for the program, redefining what it means to be "presently involved in any bankruptcy." Under the new interpretation, debtors who filed under Chapter 11, 12 and 13 — which cover businesses, family farms and individual consumers, respectively — are eligible for PPP loans once a judge has approved their reorganization plan. A spokesperson for the SBA said the explanation had been added for "clarity."

A reorganization plan specifies the debtor's path to paying off obligations to creditors, and is monitored by a trustee. In simple cases, a judge can confirm it within a few months of filing. This is what often happens in consumer Chapter 13 cases, about 279,000 of which were filed in 2019, as well as in relatively straightforward Chapter 11 cases that don't require extensive litigation. About 5,500 companies filed for Chapter 11 in 2019.

The Administrative Office of the U.S. Courts doesn't track how many of those companies have confirmed reorganization plans in place, but it's estimated to be in the thousands. Now, companies on the road out of bankruptcy — which usually takes years to complete — can apply for PPP loans before the program's May 31 deadline. With $50 billion left after several extensions, PPP funds are likely to run out before then.

Ed Boltz, a bankruptcy attorney on NACBA's board who circulated the organization's letter, said he believes the SBA changed its position after becoming "aware of the foolishness of the prior administration's position."

The change would not have helped all the companies that sued the SBA over its policy. Florida-based Gateway Radiology Consultants, for example, didn't have a confirmed reorganization plan before it applied for a PPP loan last year, prompting a lawsuit. But the bankruptcy lawyer in that case, Joel Aresty, said plenty of his current clients could benefit.

"If they were lucky enough to already be confirmed, they could freely qualify for a PPP loan — the fact that you were in bankruptcy is no longer a deterrent," Aresty said. "It's amazing how difficult they made such a simple proposition, really."

The new definition may now help Mark Shriner, a coffee shop owner in Lincoln, Nebraska, who filed for Chapter 13 bankruptcy in 2018 following a divorce. His plan was confirmed the same year. The SBA's exclusion of debtors from the PPP originally prevented him from applying, forcing him to take on higher-interest loans to keep his doors open.

His cafe likely would have qualified for up to $25,000, and Shriner said he could have used some of the money to improve his online ordering or devise a takeout-friendly menu. Even now, he said, getting PPP money would help him plan for the future and bring back more staff.

Informed of the change last week, Shriner sent an application to his bank, which said it would hear back from the SBA within a couple weeks.

"Wow," Shriner said. "That would be great."

How a federal agency excluded thousands of viable businesses from Biden relief plan

Like every other storefront in downtown Lincoln, Nebraska, the Coffee House — a cavernous student hangout slinging espresso and decadent pastries since 1987 — saw its revenue dry up almost overnight last spring when the coronavirus pandemic made dining indoors a deadly risk. Unlike most, however, the business wouldn't have access to the massive loan fund that Congress made available for small enterprises in late March.

The reason had nothing to do with the business itself, which had been having one of its best years ever, according to its owner, Mark Shriner. Rather, it all came down to one box on the application for the Paycheck Protection Program money, which asked whether the company or any of its owners were "presently involved in any bankruptcy." Shriner had filed for Chapter 13 in 2018 after a divorce and was still making court-ordered debt payments, so he checked "yes." He was automatically rejected and lost about $25,000 in payroll and other costs that the program would have covered.

"My money is my store's money. When I got divorced and she was entitled to half, it's not like a company can raise money real quick," Shriner said, noting the way in which many small businesses are structured as pass-through entities that pay taxes on any profits as individual income. "All these businesses that had a tough time and are trying to make payments at the same time are getting kind of hosed."

Thousands of people file for Chapter 13 bankruptcy every year — 282,628 did so in 2019 alone. Although it's not clear how many of them own businesses, all of those individuals were barred from the PPP program, along with the thousands of businesses currently working through a reorganization plan under Chapter 11 and the family farms that file under the lesser-known Chapter 12.

In December, Congress allowed the Small Business Administration to give exceptions to some debtors. But so far the SBA has stuck to its position that debtors in bankruptcy aren't entitled to government aid. "Currently, the SBA is administering the law as written," SBA spokeswoman Shannon Giles emailed in response to questions.

Although Shriner did receive the $10,000 Economic Injury Disaster Loan advance payment, which doesn't have to be repaid, the SBA turned him down for a larger Economic Injury Disaster Loan because of his personal credit. Instead, he took out two loans worth $107,000 from Square — with total fees of nearly $12,000 — to keep the lights on and the staff paid as they operated on a drastically limited basis, still down by more than half since before the pandemic.

"The biggest consequences are that we haven't had the time to take a week and shut down and plot our way forward, come up with a to-go menu or some new things, because we're busy working the counter trying to save money," Shriner said. "A lot of other businesses that got PPP have been able to hire people to help them head in a different direction, get apps made, fix their websites, that kind of thing."

The prohibition on PPP loans going to debtors began with the SBA's original concept for the program: It extended its 7(a) loan program, its most common credit offering for small businesses, which already bars bankrupt companies. New pandemic relief measures were basically grafted on to those rules, which reflect an agency position dating back to its beginnings in the 1950s that bankrupt companies were more likely to default.

"SBA has an institutional prejudice against people who file bankruptcy," said Ed Boltz, a North Carolina bankruptcy lawyer who serves on the board of the National Association of Consumer Bankruptcy Attorneys. "The attitude of government in a lot of things is, 'Bankruptcy is hard and confusing and these people are probably bad people.'"

Almost immediately, this position was challenged in courts across the country. In Hidalgo County, Texas, for example, an emergency medical transportation company in bankruptcy sued after it was denied a PPP loan. A bankruptcy judge issued a temporary injunction against the SBA, saying it was in the public interest during the pandemic to make sure the company's trucks and helicopters could keep ferrying patients to hospitals. In June, the 5th U.S. Circuit Court of Appeals vacated that decision, saying the judge had exceeded his authority.

Meanwhile, the SBA hastily published a rule explicitly barring companies in bankruptcy from participating in its pandemic relief program. "The Administrator, in consultation with the Secretary, determined that providing PPP loans to debtors in bankruptcy would present an unacceptably high risk of an unauthorized use of funds or non-repayment of unforgiven loans," the rule read. "In addition, the Bankruptcy Code does not require any person to make a loan or a financial accommodation to a debtor in bankruptcy."

Around the same time, a Florida radiology center also serving COVID-19 patients received a PPP loan, even though it was reorganizing under Chapter 11 bankruptcy. When it filed for approval with its bankruptcy court to take on the additional debt, the SBA objected again. The bankruptcy court found in favor of the radiologists in June, writing that "it is plain Congress did not intend to exclude chapter 11 debtors from the Paycheck Protection Program." In December, however, the 11th Circuit overturned the lower court and sided with the government.

Maury Udell, the radiology company's lawyer, said he plans to appeal to the Supreme Court. The PPP is more of a grant than a loan, he argues, since all companies had to do in order for the money to be forgiven is spend most of it on payroll. Bankrupt companies are arguably more likely to do so, given that they're on court-ordered plans for how they must manage their expenses. Besides, the program did not require that companies demonstrate their ability to repay — plenty of businesses on very shaky footing applied for and received funding, sometimes filing for bankruptcy later.

"The SBA's argument for not allowing Chapter 11 debtors is that the risk of nonpayment is high," Udell said. "That's not a factor in whether you were approved. It's just as high as anyone else, because there's no other underwriting guidelines."

Frustration with the SBA's position mounted through the fall until December, when Congress passed a fresh round of $900 billion in pandemic-related relief, along with the regular budget. It included $285 billion for a second draw of PPP loans, and a bit of potential relief for debtors: an amendment to the U.S. Bankruptcy Code that allows PPP loans to businesses that have filed for bankruptcy under Chapters 12, 13 and Subchapter V, a new category for small businesses established in 2019. (Chapter 11 debtors were left out.)

However, there was a catch: In order to trigger the exemption, the SBA would have to write a letter to the Executive Office of the U.S. Trustee, an division of the Justice Department that oversees U.S. bankruptcy courts, alerting it to the change. So far it has not done so, even as Congress has extended the deadline for PPP applications to May 31, with $103 billion in authorized funds yet to be expended.

President Joe Biden's choice to run the SBA, Isabella Guzman, was confirmed on March 16. The SBA would give no indication of whether she plans to change course. Spokespeople for senators on the committees of jurisdiction either had no comment or said they were looking into the issue.

Last week, as his hope of getting a PPP loan waned, Mark Shriner set up a GoFundMe page to try to keep his doors open. More than $21,000 has flowed in. Meanwhile, he also learned about the Restaurant Revitalization Program established by the $1.9 trillion American Rescue Plan. So far, since it's a straightforward grant rather than a loan, it doesn't seem to prohibit applications from companies — or company owners like him — who've filed for bankruptcy. But he's not counting on anything, since aid programs have been so disappointing.

It's a difficult contrast, he said, when he looks around town and sees all the federal money that helped people who didn't always need it.

"I'm not a wealthy person at all, but I have many millionaire friends who own businesses, insurance firms, architecture firms," Shriner said. "These millionaires got money and money and money and money from the government, and they're all driving on the golf course. It is tough when I think about it."

Twitter and YouTube banned Steve Bannon -- but Apple still gives him millions of listeners

Late at night on Jan. 5, the day before President Donald Trump was scheduled to deliver a defiant speech before thousands of his most dedicated supporters, his former adviser Steve Bannon was podcasting from his studio near Capitol Hill. He had been on the air several times a day for weeks, hyping the narrative that this was the moment that patriots could stand up and pull out a Trump win.

"It's all converging, and now we're on the point of attack tomorrow. It's going to kick off, it's going to be very dramatic," Bannon said in his fluent patter, on a day that would see four of his "War Room" shows posted online, up from his usual two or three. "It's going to be quite extraordinarily different. And all I can say is strap in. You have made this happen and tomorrow it's game day."

The next morning Bannon was back. "We're right on the cusp of victory," Bannon said, as protesters massed at the Ellipse to hear from Trump.

"This is not a day for fantasy, this is a day for maniacal focus. Focus, focus, focus," Bannon went on. "It's them against us. Who can impose their will on the other side."

To the protesters massing in Washington, Bannon's message was clear: They could force the outcome by pressuring Vice President Mike Pence and Congress not to certify the electoral vote.

Ultimately, the day resulted in a bloody brawl that took the lives of both police and protesters, in a security breach unlike any America has seen in decades. It was planned in explicit detail across websites that were taken offline, like Parler, or censored, as Twitter did with thousands of QAnon-affiliated accounts and even the president's.

But Bannon, who himself was banned from YouTube and Twitter after saying in November that Dr. Anthony Fauci and FBI Director Christopher Wray should be beheaded, continues to reach an enormous audience via Apple's podcast app, which is installed by default on every iPhone. Although the app doesn't show the number of times the show has been streamed, Bannon gives updates every few days on its popularity. As of last week, he claimed total downloads of 29 million.

Bannon did not respond to a request for comment.

It's not just Bannon. Several podcasts that spread baseless claims of election fraud, including shows by former Trump strategist Sebastian Gorka and Judicial Watch's Tom Fitton, continue to be broadly available on major platforms. The fact that such beliefs were the battle cry of a violent mob that threatened congressional leaders has brought podcasting platforms face to face with a difficult question: What are their responsibilities when it comes to stifling what otherwise could be seen as protected speech?

In the weeks since Nov. 3, Bannon has spent several hours a day exploring the minutiae of baselessly disputed elections in several states, giving ample airtime to Trump defenders like Rudy Giuliani, Sidney Powell and presidential adviser Peter Navarro. Using a mix of football, military and religious analogies, Bannon speaks often in apocalyptic terms about the risk of losing.

"It's the children of light and the children of darkness," he said on Jan. 3, after interviewing the right-wing Archbishop Carlo Maria Viga, whom Pope Francis fired as the Vatican's ambassador to the United States after he sided with anti-gay culture warriors. "One side's going to win and one side's going to lose. Everything that the Judeo-Christian West represents is at stake. That's what this battle is about. That's what Wednesday is about."

While social media companies have become more willing over the past few months to censor accounts that engage in hate speech, podcasts are still largely unmoderated. Part of that has to do with the industry's structure: The main podcast portals merely index the shows, like Google indexes websites. Despite canceling Bannon's YouTube channel, Google Podcasts still indexes "War Room." (Apple accounts for more than half of the number of podcast streams, with Spotify a distant second.)

"Online platforms know that rhetoric promoting violence and disinformation absolutely matters. That is why most of them ban such activities in their own terms of service," said Megan Squire, a computer science professor at Elon University who has studied the right-wing podcasting ecosystem.

"However, in the case of podcasts, Apple usually explains that they are just cataloging the show and not actually distributing it," Squire said. "For example when they banned Alex Jones, they just stopped listing him, but what guidelines they used were a bit unclear. Contrast this to their app store guidelines, which are very clear."

Apple declined to comment on how it evaluates whether to de-list a podcast. Its terms of service prohibit "content that is illegal or promotes illegal activity, self-harm, violence, or illegal drugs, or content depicting graphic sex, gore, or is otherwise considered obscene, objectionable, or in poor taste."

Audio files themselves are supported by a much more fragmented network of hosting services — which costs money, unlike simply being catalogued by a portal like Apple's. "War Room" is hosted by Podbean, which did not return a request for comment. Its terms of service forbid content that is "malicious, false, or inaccurate."

To be clear: Since his "heads on pikes" episode, Bannon has shied away from advocating violence. He sometimes caveats his calls to arms by cautioning that he's talking about political protest or "coloring inside the lines." He has downplayed allegations against Dominion Voting Systems, which threatened to sue other Trump allies and news outlets for spreading baseless claims of fraud. In the wake of Jan. 6, like many in the right-wing media ecosphere, he has praised peaceful protest and claimed the riot was instigated by liberal agents provocateurs rather than Trump supporters.

However, extremism experts say the rhetoric still feeds into an alternative reality that breeds anger and cynicism, which may ultimately lead to violence. Julia DeCook, an assistant professor at Loyola University Chicago's school of communications, notes that listeners who are convinced about one conspiracy theory are more likely to accept others, which is what makes more mainstream commentators like Bannon "dangerous."

"It's not like they hit you with the crazy stuff all at once. It's the little things that sow distrust and skepticism," DeCook said. "Steve Bannon goes right up to the line of what is acceptable and what is hate speech. But platforms are really bad at understanding borderline content."

Bannon seems to understand very well how the information he's putting out in the world influences his audience. On the eve of the Capitol riot, one of his co-hosts interviewed a young man at a pregame rally in downtown Washington who said his whole family had been dejected after the election. After discovering "War Room," they were increasingly encouraged and listened to every episode, resulting in his presence at Freedom Plaza that night. The "War Room" crew celebrated this exchange as evidence of its impact.

"As soon as you're able to create the structure or the context, and let them come to their own conclusions, they're going to be able to have their own mental map, they can then start making their own decisions, and then become disciples or force multipliers," Bannon said. "We've helped provide the information to people who are jacked up."

(Of course, Bannon also has an interest in helping Trump, who could still use his pardon powers to dismiss a federal charge concerning Bannon's alleged misuse of funds donated to a charity that said it was helping to build a wall on the border with Mexico.)

De-platforming Bannon, however, would be tricky.

Podcast directories and hosting services are loath to open the Pandora's box of content moderation. Todd Cochrane runs one of the largest, called Blubrry, which hosts 85,000 shows and indexes 1.3 million of them. Since Jan. 6, he said that many of his customers — especially Christian shows — are worried about being de-listed from other podcast directories. As long as they aren't using hate speech or inciting violence, which Blubrry's terms of service forbid, he said they're safe on his platform.

"This is a fine line for us," Cochrane said. Blubrry has a formal process for submitting complaints about shows with objectionable content and has only ever removed a handful. "Let's say I respond to a social justice campaign saying this show is ultimately resulting in violence. It's an internal decision of whether or not we want to host that content, but I wouldn't want to be in Podbean's position today."

Even if "War Room" were kicked out of Apple's directory or dumped by Podbean, that might fuel the argument — which Bannon has already exploited after being booted by Twitter and YouTube — that Big Tech has it out for conservatives. Plenty of liberal-leaning shows aren't paragons of truth either, but they haven't been banned.

"The inconsistency is a huge catalyst for these folks, because it gives them an endless supply of pretty accurate grievances to raise about 'why are we being shut down in this way,'" said Peter Simi, an associate professor of sociology at Chapman University. "It amplifies their sense that there's this left-wing conspiracy that's hell-bent on preventing them from even expressing their views."

Though Apple offers access to an enormous audience, it may only be a matter of time before Bannon and others are able to build up an alternative streaming universe that doesn't depend on the grace of Silicon Valley tech giants. On Jan. 13, Bannon talked on his show with Andrew Torba, the founder of Gab.com, which has become a haven for conspiracy theorists. Torba boasted of having built up enough of his own data-center capacity to support all of the traffic from people leaving Twitter and Facebook, but service is still groaning under the weight of new traffic. In emails to Gab members, Torba has been soliciting donations to support the expansion. "No one is coming to save us," he wrote on Jan. 8. "We must save ourselves."

"It's a conundrum, because now you have the right wing moving into their own silos," said Adele Stan, the editor of Right Wing Watch, a project of the left-leaning People for the American Way. "The thing we know about the right is that they're good at building infrastructure, in the way that the left has never gotten their act together on. We're just at this moment of chaos where it's hard to know if there's a base that's radicalized enough to be there for the long haul, when things start to not look very good for their side."

In the meantime, Bannon seems to know exactly how far he can go before his remaining platforms have an excuse to yank his access.

Also on Jan. 13, having just been booted off YouTube after the site banned videos that spread false election fraud statements, Bannon again had Giuliani as a guest. The leader of Trump's legal team said he had acquired videos showing "Antifa" agitators leading the Capitol violence, and at one point he suggested that one of them had actually shot Ashli Babbitt, the Air Force veteran who was, in fact, killed by a Capitol Police officer.

Bannon tried to rein in Giuliani and finally cut him off. "I don't mind being shut down for my craziness, but I'm not going to be shut down for yours," he told the former New York City mayor, who seemed offended. "I don't say crazy things," Giuliani responded, after Bannon had directed listeners to Giuliani's website to view the videos.

"I know, I'm teasing you," Bannon said.

Jack Gillum, Derek Willis, and Logan Jaffe contributed reporting.

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