Federal Probe Uncovers Controversial PPP Loan Activity at Del Mar Fairgrounds

PPP
PPP Paycheck Protection Program as SBA loan written on the mask and money.

A federal investigation revealed that the Del Mar Fairgrounds improperly received millions from a pandemic assistance loan.

At a Glance

  • The 22nd District Agricultural Association settled allegations of PPP loan misuse, agreeing to repay $5.7 million.
  • The Justice Department asserted that the DAA was ineligible for the loan as a government-owned entity.
  • The settlement resolved the loan issue without determining liability.
  • The DAA claimed the loan was necessary for survival during the pandemic.

Misuse of PPP Funds

The Del Mar Fairgrounds found itself the subject of a federal investigation for acquiring a Paycheck Protection Program (PPP) loan despite being a government-owned entity, which rendered them ineligible for this type of financial aid. In total, the 22nd District Agricultural Association (DAA) received a $4.7 million loan plus nearly $98,000 in fees and interest in May 2020. Although the loan was approved and later forgiven, concerns arose over its legitimacy.

The Department of Justice made it clear that government-owned entities like the DAA do not qualify for PPP loans. The funds obtained were meant to provide relief to small businesses struggling due to the economic impact of COVID-19. After reaching an agreement with federal authorities, the DAA agreed to pay back $5.7 million. The decision allowed them to continue operating without a determination of liability.

Settlement Without Admission of Guilt

The settlement was a pragmatic choice, taking into account the possible litigation costs and risks. While the DAA did not admit guilt or liability, the settlement upholds the integrity of the COVID-relief program, according to the U.S. Attorney’s Office. Tara McGrath, San Diego U.S. Attorney, remarked, “These loans were intended to provide critical relief to eligible businesses during a time of global crisis.” This understanding underscores why the PPP was off limits for government-owned operations from the start.

“This settlement upholds the integrity of the COVID relief program and holds the DAA accountable for obtaining millions in taxpayer-funded benefits to which they were not entitled.,” said McGrath.

Despite the lack of a definitive legal verdict, the settlement steered clear of contentious legal battles while affirming accountability for funds obtained and forgiven illegally. By circumventing an official finding of liability, the DAA kept alive options for future state and federal assistance, something they assert is necessary for their continued role in hosting community activities.

Future Clarification and Implications

Assessing eligibility for government programs led the DAA to look into working with lawmakers to classify District Agricultural Associations’ (DAAs) standing. They aim to clarify eligibility for future state and federal financial aid. The DAA claims they applied for the PPP loan out of necessity and was transparent during the application process.

“As an organization in the business of mass gatherings, the 22nd District Agricultural Association—which does not ordinarily receive taxpayer funding, generates millions of dollars in local and sales tax revenue, and provides an annual economic impact of more than $680 million—was left devastated by the COVID-19 pandemic in 2020,” remarked the DAA.

The DAA emphasizes the critical nature of the loan in maintaining operations during a time when massive gatherings at the fairgrounds came to a halt. Going forward, they intend to regain stability by focusing on hosting events and activities significant to the community while ensuring compliance with financial aid regulations.