Some law firms that took paycheck protection loans banked the money, consultant says
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More than 600 law firms received forgivable loans of more than $2 million under the government’s Paycheck Protection Program.
But the loans didn’t completely protect staff for at least 10 law firms, according to an analysis by Thomson Reuters Legal. And some law firms ended up banking the money, rather than using it for payroll, according to a consultant who spoke with the publication.
The 10 law firms received a combined $68.5 million in forgivable loans, yet they went on to cut jobs, salaries or both, according to the analysis. Many law firms that cut pay during the COVID-19 pandemic, however, have since reversed the cuts.
In another twist, the Daily Business Review is reporting that more than 50 equity partners in Florida took paycheck protection loans separately from their law firms, using their own professional associations. The loan amounts were typically around $20,000 to $35,000, but one was for $115,500.
Some of the loans were used to cover reduced monthly draws or to pay assistants who were employed by the lawyers’ professional associations, rather than their law firms.
According to Thomson Reuters Legal, the law firms that took loans but cut jobs or pay included:
• Hughes Hubbard & Reed, which borrowed nearly $8.7 million. The firm announced layoffs of “certain attorneys and staff” in July. At the time, the law firm said its PPP money “was used for its intended purpose, to save jobs during the worst of the crisis.” Hughes Hubbard & Reed chairman Ted Mayer told Thomson Reuters Legal that the firm waited until the end of the “prescribed period” to preserve jobs before it announced layoffs.
• Stroock & Stroock & Lavan, which received nearly $8.7 million. The law firm said in May it would reduce pay for lawyers and staff members.
Some law firms that received loans didn’t lay off people or cut pay, but they didn’t use the money for payroll, according to Altman Weil principal Tom Clay, who advises law firms.
“They just banked it, and it’s being looked at as liquidity [headed] into the next year,” Clay told Thomson Reuters Legal.
“It wasn’t a lifesaver because law firms weren’t going to die anyway, like some other businesses may have or will,” he said.
Thomson Reuters Legal didn’t include law firms in its analysis if they made cuts before receiving the loans. Nor did it include law firms that received loans and subsequently made cuts that were not reported by legal publications.
The U.S. Small Business Administration provided the loans under its Paycheck Protection Program to help businesses survive during the COVID-19 pandemic. The Small Business Administration is scrutinizing Paycheck Protection Program loans above $2 million.
The loans were to be forgiven if they were used for expenses such as payroll, mortgage interest, rent and utilities over an eight-week period after the loan is made.
According to prior coverage, firms will have to pay back part of the money if their head count is less than the number reported when the loan was originated. Loan forgiveness is also reduced if firms cut pay by more than 25% for people making less than $100,000.