By Andrew Kragie

Law360 (May 8, 2020, 9:18 PM EDT) -- The new House panel overseeing coronavirus relief on Friday urged five publicly traded companies to return millions of dollars in forgivable loans they received from the Small Business Administration's Paycheck Protection Program, though the panel's Republicans decried the move.

In its first official action, the House Oversight Committee's Select Subcommittee on the Coronavirus Crisis sent letters to five companies that received loans of at least $10 million from the small-business program even though they are publicly traded and have more than 600 employees and $25 million in market capitalization — although rules set by Congress and the administration do not necessarily block such participants.

The panel's Democrats asked the companies if they are going to return the money and, if not, to hand over documents related to their loans.

"Since your company is a public entity with a substantial investor base and access to capital markets, we ask that you return these funds immediately," the lawmakers wrote. "Returning these funds will allow truly small businesses — which do not have access to alternative sources of capital — to obtain the emergency loans they need to avoid layoffs, stay in business, and weather the economic disruption caused by the coronavirus crisis."

The five midsize public companies are EVO Transportation & Energy Services Inc., an Arizona-based U.S. Postal Service contractor; Gulf Island Fabrication Inc., a Houston-based construction contractor for energy projects that operates in Louisiana; MiMedx Group Inc., a Georgia-based wound care and emerging therapeutic biologics company; Quantum Corp., a California-based data management firm; and Universal Stainless & Alloy Products Inc., a Pennsylvania-based specialty steel manufacturer.

MiMedx said Friday that it would immediately repay the loan, which it said helped the company avoid layoffs as the pandemic halted elective surgeries and hit sales of its medical products. The company's statement added that, while publicly registered, it "is currently delisted from NASDAQ and does not have access to the public markets." It was delisted in late 2018 amid an internal investigation; its former top executives were charged with securities fraud last year, accused of inflating the firm's revenue.

Quantum said Sunday that it would engage with lawmakers but that the company "believes it owes a duty to its American employees who would lose their jobs if Quantum returned its PPP loan." Its statement added that it "not only falls within the technical eligibility requirements of the PPP loan program, but also falls squarely within the spirit of what was intended."

The other companies did not respond to requests for comment late Friday.

Program rules set by Congress and the Small Business Administration allow some companies with more than 500 workers to seek funds from the $660 billion Paycheck Protection Program if they are considered small in their industry or under other conditions, but companies such as Shake Shack and the Los Angeles Lakers faced negative press and public anger over their participation. Larger companies also have access to massive lending facilities from the Federal Reserve, including the $600 billion Main Street Lending Program.

"Congress itself wrote the eligibility rules and appropriated the original PPP money. Then it doubled down on its funding in another package a short time later with no changes to those rules," Steptoe & Johnson LLP partner James Barnette told Law360 in an email.

The oversight panel requested documents without mentioning any subpoena, but House Democrats gave subpoena power to the chairman, Majority Whip Jim Clyburn, D-S.C.

The subcommittee, established two weeks ago on a party-line House vote, was opposed by Republicans who questioned the need for an additional oversight body and suggested it will launch partisan attacks on the Trump administration. Speaker Nancy Pelosi, D-Calif., has said the committee fills a gap and is modeled on the Truman Committee that provided oversight during World War II.

Friday's letters were signed by the committee's seven Democrats but not its five Republicans, but they noted GOP criticism of large companies benefiting from the small-business relief. The Trump administration suggested public companies return their funds to avoid scrutiny, and Treasury Secretary Steven Mnuchin promised special reviews for all PPP loans over $2 million.

A spokeswoman for the subcommittee's Democrats told Law360 that Republicans were asked to sign the letters but declined.

The top Republican on the committee, Minority Whip Steve Scalise of Louisiana, called it "outrageous and telling that the first action committee Democrats have taken is blindly sending harassing letters to individual companies that followed the law to keep their workers on the payroll."

Scalise said in a statement that the panel should focus on China's role in the pandemic and leave the audits to the executive branch instead of exerting "dangerous government intimidation that could cause more widespread layoffs at a time when we should be trying to keep American workers on the payroll."

A senior GOP aide, who said the party's panel members were just named yesterday and have not yet discussed its rules, called the letters "wildly premature."

President Donald Trump offered his own denunciation of the panel during a meeting with congressional Republicans at the White House on Friday.

"They're the greatest Trump haters in history," he said, singling out one member, Rep. Maxine Waters, a California Democrat who chairs the Financial Services Committee and whom the president calls "a low-IQ person."

Trump said the panel was filled with "people that were screaming 'impeach' before I even announced" a run for president.

"You can't work with these people. I think they're stone-cold crazy," he said. "You look at some of the people in that committee. Everyone is a total kill, and it's a disgrace that they could do a thing like that. Here we go again."

--Editing by Kelly Duncan.

Update: This article has been updated with statements from MiMedx and Quantum.

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