Bussiness
University Club, other local business repaying pandemic relief funds after federal crackdown
The federal government is clawing back relief money it granted to local businesses during the pandemic, after finding that some may have been ineligible for the funds.
Two Milwaukee-area businesses recently agreed to pay back loans that had been forgiven through the Paycheck Protection Program just three years earlier.
Those businesses — University Club of Milwaukee and machinery manufacturer Zund America — have agreed to pay $1 million and $2.3 million respectively to settle the federal government’s claims that they obtained those loans improperly. Neither business admitted liability.
The Paycheck Protection Program — one of the biggest federal pandemic relief efforts — offered forgivable loans to small businesses, nonprofits and independent contractors. The program was designed to keep the economy afloat during the pandemic’s economic disruption.
The loans were essentially free if the businesses and their expenses were deemed eligible. The federal government awarded nearly $800 billion in PPP loans and forgave about 95% of those claims.
University Club, which struggled financially during the pandemic, was awarded about $600,000 in PPP loan forgiveness in November 2021.
Later, the federal government determined the club had not been eligible for those funds — given that it restricts membership to its private country club and dining facilities for reasons other than capacity, the U.S. Department of Justice said in a news release.
In a statement, University Club Board Chair Peter Duback said the club believed it met the federal government’s criteria for the loan but chose “to repay the loan and settlement rather than engage in a protracted legal battle.”
Oak Creek-based Zund America, which received about $1.3 million in second-draw PPP loan forgiveness, became the subject of a Department of Justice investigation after a whistleblower tipped off the department to a potential false claim.
The whistleblower will receive a portion of the settlement.
Those loans were restricted to small businesses with a maximum of 300 employees and should not have been awarded to Zund America, the department said.
Although it has fewer than 300 employees, Zund America is owned by a larger Swiss parent company with 19 affiliates, according to the department.
Crackdown on pandemic relief fund claims
The local investigations are part of a broader crackdown on misuse of pandemic-era relief funds.
For several years since, the federal government has been reviewing those claims for cases of misuse or outright fraud.
In one case, federal prosecutors alleged four men, including a Milwaukeean, collected more than $9.5 million in federal stimulus funds by posing as the consulate of a fictional country.
Recently, the focus has shifted to less egregious “cases involving more technical noncompliance,” according to attorneys with law firm Perkins and Coie.
That’s a risk for businesses that may not have intended to mislead or defraud the government, attorneys Markus Funk and Sean Solis wrote in an October article for Bloomberg Law.
“The unprecedented business impact of stay-at-home orders, the desire to take advantage of the limited funds available, and conflicting early advice from the [Small Business Administration] and others concerning eligibility criteria all led to an ‘apply now, ask questions later’ mentality that became the norm for many,” Funk and Solis wrote.
University Club struggled during the pandemic
University Club, once a thriving scene for dining and networking, in December 2023 shut down its historic downtown building at 924 E. Wells St.
The property, sold in June for $4.25 million to a Northwestern Mutual affiliate, could be redeveloped as event space and other uses.
University Club lost many of its non-golf members after it merged with Tripoli Country Club in 2017 and changed its pricing structure. The pandemic, which temporarily shut down the club’s building, dealt another blow.
The club still operates its golf course, tennis courts and swimming pool at 7401 N. 43rd St., Brown Deer.
Board chair Duback said in a statement that “the Club had every reason to believe it qualified for the PPP loan.”
“Especially given the downtown Club’s dependence on business luncheons, weddings and other event-based revenue, the Club’s operations aligned with the program’s intent to support small businesses during a time of economic hardship,” Duback said.
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