Scattered among the industrial brick buildings in St. Joseph, Missouri — once the starting point for the pony express — lies the story of government pandemic spending gone awry. Among nearly a half-dozen crumbling structures, some with signs posted that warn of conditions that “may present an imminent and substantial endangerment to human health or the environment" are lingering reminders about HPI Products Inc. That’s the local pesticide company that still has not cleaned up a mess it made over a decade ago.
St. Joseph endured 25 years of HPI workers discharging industrial wastewater into the city’s sewer system. In 2007, the U.S. Environmental Protection Agency ordered HPI to stop illegally storing hazardous waste in corroded drums and leaking in its warehouse. In 2009, the Department of Justice secured a guilty plea from HPI owner William Garvey in federal court for violating the Clean Water Act and hazardous waste storage laws. Garvey was sent to prison. The following year, the EPA obtained a consent decree against the company to pay cleanup costs. After the EPA violations, HPI Products Inc. was debarred — meaning it cannot seek federal contracts or financial assistance from the federal government — on Jan. 1, 2010.
Despite its long history of mismanagement and eventual debarment, HPI was approved this spring for a $441,580 loan through the U.S. Small Business Administration Paycheck Protection Program, part of the federal government’s massive pandemic economic relief package, according to a review by NBC News.
Companies debarred by the federal government are not supposed to receive these low-interest federally backed loans, according to the requirements for the PPP program. But the House Select Subcommittee on the Coronavirus Crisis reported in September that it found more than 600 loans totaling over $96 million went to companies that were excluded from doing business with the government. Then on Jan. 11, the SBA’s inspector general reported the number of loans to debarred firms appears to be more than 950. But neither report named those companies.
NBC News, which obtained the loan data under the Freedom of Information Act after a federal court ruling, was able to identify at least 60 debarred businesses worth $32.4 million that were approved for PPP loans. NBC News was among a dozen news organizations that together sued the SBA for release of the information under FOIA. House staffers were able to find more companies because they were given additional identifying information not provided by the SBA to news organizations.
The SBA’s inspector general’s latest report said it found “serious concerns about improper payments” in the PPP program, including money going to debarred companies. It said enough still has not been done by the SBA to prevent these companies from getting loans and to prevent their loans from being forgiven.
U.S. Rep. James E. Clyburn, D-S.C., chair of the House Select Subcommittee, said in a statement to NBC News, “The troubling findings by the SBA Office of the Inspector General are unfortunately consistent with the Select Subcommittee’s report in September that SBA approved hundreds of PPP loans to ineligible borrowers who had been debarred or suspended from federal contracting.”
“Treasury and SBA must immediately improve oversight and accountability to ensure that taxpayer dollars are not squandered,” he added. “I’m hopeful that the incoming Administration will implement timely measures to improve oversight.”
Dodging requirements
Since the PPP program began, it has required companies seeking loans to confirmthey have not been debarred. An SBA spokesman said the burden is on companies to provide accurate information, not on banks or on the agency to verify that information.
The agency can consider federal criminal or civil prosecution for misrepresentations on government loan application forms like not disclosing being debarred. But Justice Department records show no such cases yet, and the SBA was unable to point to any actions that have cited debarment as a reason for legal action.
But the SBA said it is examining loan forgiveness applications and would reject requests from any debarred company it finds. “Debarment is one of those items that makes a borrower ineligible” for forgiveness, and they would need to repay the loan, an SBA spokesman said.
With the latest round of PPP loans, approved Dec. 27 as part of a $900 billion economic package, SBA officials say they are trying harder to root out fraud. This time, the SBA is running a computerized check of each company seeking a loan. Applications will be screened by the agency through Treasury Department data systems to confirm the identity of the businesses. These computerized checks that should take less than a day would include confirming tax identification numbers and other information, according to an agency representative.
Following the release of the inspector general’s report this week, the SBA said its efforts to better track fraud include working with the Treasury Department’s Do Not Pay team to flag debarred firms. While the inspector general reported those steps are not yet fully in place, an SBA representative disagreed and said, “The guardrails are in place.”
Debarment triggers
Many of the companies NBC News identified were debarred by the EPA for violations of the Clean Air or Clean Water acts. Others were debarred by the Department of Homeland Security, Department of Labor and the General Services Administration.
In Missouri, HPI has continued to prompt a variety of violations for the small city of St. Joseph. According to a lawsuit filed by the city on Nov. 30, 2020, separate from the EPA actions, HPI has not come into compliance with city code and continues to mix and store pesticides in its “increasingly derelict facilities.”
“He has been so successful not complying,” said Janet Storts, a local activist. Told about HPI’s PPP loan, she noted that the company “just got another $400,000 for not doing it right.”
EPA confirmed HPI is debarred following the criminal conviction under the Clean Water Act. In the case of HPI, the debarment is specific to the St. Joseph location where the offense occurred, the same location listed for the approved PPP loan.
HPI did not respond to requests for comment.
Pollutant problems
Among other companies NBC News identified as receiving PPP loans and being debarred for EPA violations are Nupro Industries Corporation, an oil and lubricant manufacturer in Philadelphia whose Neatsfoot Oil products are used for caring for items like baseball mitts and horse riding saddles. It was approved for a $300,000 PPP loan even though it has been debarred since 2012.
The company is required to monitor pollutants in its industrial wastewater by taking samples and testing for pollutants like pH and ethylbenzene, which can cause respiratory issues and dizziness with acute exposure. From 2006 to 2007, Nupro watered down its test samples to appear in compliance with the pollutant limits, according to EPA records. Nupro was criminally prosecuted and pleaded guilty and paid a $200,000 fine.
A.J. Berg, director of operations at Neatsfoot Oil Refineries Corporation, a subsidiary of Nupro, told NBC News the issue had been resolved. But he did not clarify which issue and did not respond to follow-up questions.
Continued headaches
In the meantime, the city of St. Joseph is still struggling to clean up the mess that HPI has left. Garvey still owns at least 11 buildings in St. Joseph. A third building the company previously owned was in disrepair, and the city spent two years trying to get the company to repair the roof to no avail. After a storm in 2017, the facade of the building collapsed.
HPI did not pay for the demolition of the building and instead the city dug into its own funds, spending $390,000. Money was pulled from three funds including the state’s casino gaming initiative, which goes toward Save Our Heritage grants. These grants help owners of historic buildings in the city to make structural and exterior repairs.
But the city keeps hoping for some justice. Aimee Davenport, the attorney representing St. Joseph in its current suit against HPI, said in the lawsuit the city is asking for past damages and fees associated with city compliance violations.
“It’s an economic harm, public safety issue, and environmental issue. All of it,” Davenport said. “We’re trying to get them back into compliance for the protection of all of it as soon as possible.”
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