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California Union Uses Loophole To Pocket COVID Relief Funds, Labor Experts Say

UNITE HERE Local 11's nonprofit affiliate took PPP loans as it hired union staff

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• December 20, 2021 4:58 am

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Labor experts say a top California union used its affiliate nonprofit to pocket over $250,000 in federal relief funds it was ineligible for.

Labor unions were not eligible for Paycheck Protection Program loans in 2020. But the Hospitality Industry Training and Education Fund, a 501(c)(3) affiliated with the UNITE HERE Local 11, received a $258,265 PPP loan in May 2020. The nonprofit is technically separate from the Los Angeles-based union, but the groups often operate as one entity. The nonprofit trains Local 11 workers and hired several Local 11 employees between May and July 2020. The hirings came after a series of layoffs at Local 11 that spring. Members of both groups often speak of them as one entity.

"So happy you are on the HTA/Local 11 Team," the nonprofit commented on the Facebook page of one of the employees it hired from Local 11. Several of the Local 11 employees who joined the nonprofit promote the union and identify as members.

Union watchers say arrangements like this allow unions to circumvent restrictions and line their pockets.

"Tricks like these allow unions to hide suspicious transactions in plain sight, evading the intent of laws designed to increase transparency, bring accountability, and curb corruption," the Yankee Institute’s Frank Ricci told the Washington Free Beacon.

Labor unions are struggling financially after decades of declining membership. In an attempt to capture dues in the face of right to work laws, unions have restricted the window during which members can opt out of paying dues. President Joe Biden is looking to roll back a Trump administration rule that prohibits third-party payments of Medicaid funds, which previously went to unions through membership dues.

In order to receive PPP loans, the Small Business Administration requires an organization to prove it needs federal funds to keep staff on payroll. But tax forms reviewed by the Free Beacon show that the union's nonprofit had a banner year.

The nonprofit received an unprecedented $34 million worth of government grants in 2020. Staff salaries rose by 33 percent across the board, while executive director Adine Foreman’s salary grew 75 percent. At $314,611, Foreman’s salary exceeds the total of the group’s PPP loan.

Neither Local 11 nor the Hospitality Industry Training and Education Fund responded to a request for comment.

Charlyce Bozzello, communications director for the Center for Union Facts, noted that Local 11 organizers have criticized hotels for using PPP loans during the pandemic closures.

"Instead of embracing the help for its-out-of-work members, Local 11 criticized hard-hit hotels for utilizing PPP," Bozzello told the Free Beacon. "Now, we learned that the union hypocritically made use of PPP funding for its own related entities, and may have even skirted the rules."

Labor unions were unable to receive PPP loans in 2020 but were approved for the program in March. Local 11 received a $1,851,872 loan in April.