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Congress pressures San Jose-based Quantum to return $10M in Paycheck Protection Program funding

Tuesday, May 12, 2020

Congress pressures San Jose-based Quantum to return $10M in Paycheck Protection Program funding

Congress is singling out a Bay Area corporation for taking $10 million of funding from the Paycheck Protection Program, the emergency lending program intended to help small businesses stay alive during the pandemic.

SAN JOSE, Calif. (KGO) -- Congress is singling out a Bay Area corporation for taking $10 million of funding from the Paycheck Protection Program, the emergency lending program intended to help small businesses stay alive during the pandemic.

Quantum Corporation, a data-storage company based in San Jose, received a letter Friday from a Congressional Select Subcommittee asking the CEO to return the PPP money immediately.

I-TEAM ANALYSIS: 22 Bay Area public companies received $69 million in PPP funding intended for small businesses

"I want to know if Mr. Lerner Quantum CEO is going to return the money? The deadline for a response is today," said ABC7's Stephanie Sierra.

The ABC7 I-Team requested an interview with Quantum's CEO, Jamie Lerner, but he declined.

The company spokesperson sent the following statement:

"We have just recently received the letter sent by Chairman Clyburn. Quantum will be responding and looks forward to engaging with the Committee. Quantum believes it owes a duty to its American employees who would lose their jobs if Quantum returned its PPP loan to demonstrate why Quantum not only falls within the technical eligibility requirements of the PPP loan program, but also falls squarely within the spirit of what was intended by the Cares Act. This PPP loan is saving American jobs at Quantum -- without it we would most certainly be forced to reduce headcount. We owe it to our employees - who've stuck with us through a long and difficult turnaround - to do everything we can to save their jobs during this crisis."

The company has a current market value exceeding $150 million.

"The intent of this was for businesses that needed the money," said Treasury Secretary Steven Mnuchin.

So how did Quantum qualify in the first place?

ABC7 sat down with SBA S.F. District Director Julie Clowes.

"Julie, we know Quantum has 800 employees, more than 500 employee limit. How did the company still qualify?" Sierra asked.

"As long as they didn't have more than 500 employees in a given location," Clowes said. "There is an eligibility factor that allows the SBA to look at location by location and aggregate the loan," she said.

Clowes confirmed provisions under the CARES ACT allowed this to happen.

"In some industries they can have upwards of 1,500 employees and still be small under SBA guidelines," she said.

Yet we've heard from Mnuchin, "The intent of this money was not meant for big public companies."

According to SEC filings, Quantum reported more than $402 million in revenue last year.

Records show Lerner's salary was more than $337,000 - plus he was awarded a stock option worth more than $1.9 million. Yet, Quantum still qualified as a small business under SBA guidelines.

"I'm not real happy about that," said Joe Field, owner of a Concord-based comic book store.

ABC7 has profiled Field over the past couple months. He's applied for a PPP loan through three different banks and has yet to see a dime.

"All I hear... you're still in line, but we're not ready for you yet," Field said.

According to the letter issued by the Congressional Select Subcommittee, the deadline for Quantum to respond on whether any funds will be returned is Monday.

ABC7 has yet to hear back from the company.

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