According to labor experts, a prominent California labor union used an affiliated nonprofit organization to rake in more than $250,000 in federal relief funding it should not have received.
The federal Paycheck Protection Program provided loans to many private businesses needing funding to manage the downturn resulting from the COVID-19 pandemic. The 2020 program was not legally available to labor unions. However, California’s UNITE HERE Local 11 union was affiliated with the Hospitality Industry Training and Education Fund (HITEF), a nonprofit corporation. HITEF was eligible and received a federal PPP loan of $258,265 in May 2020.
HITEF was organized to train workers represented by UNITE HERE Local 11 and hired several union employees last May and June. The HITEF hirings came on the heels of layoffs of several Local 11 workers. People belonging to both organizations often refer to them as a single entity.
Labor union watchdog organizations have said that affiliations of that type have often been used to funnel money to unions that they would otherwise not be eligible to receive. Frank Ricci with the Yankee Institute said that the arrangement is a “trick” that allows unions to conceal suspicious transactions and circumvent laws “designed to increase transparency, bring accountability, and curb corruption.”
Labor unions in California and around the country have seen increasing financial difficulties during the pandemic. Declining membership and right to work state laws have cut the numbers of dues-paying members.
The federal Small Business Administration requires businesses and organizations to prove they need PPP loans to maintain staffing levels. Documents obtained by the Washington Free Beacon indicate that HITEF did not need the payroll loans. The organization received $34 million in government grants for operations in 2020 when its executive director’s salary shot up by 75 percent to $314,611.
Center for Union Facts spokesperson Charlyce Bozzello stated that Local 11 was critical of hotels crippled by the pandemic for using PPP loans. She contrasted that criticism with the news that Local 11 appears to have used HITEF to obtain PPP loans for its use. The rules were later changed to allow unions to apply for PPP loans directly, and Local 11 acquired a loan in April for more than $1.85 million.