After deciding to give back its $10 million Paycheck Protection Program loan even before the Treasury Department weighed in, Shake Shack (SHAK -1.82%) more than recouped the lost cash by selling $135.9 million worth of shares, as reported in an SEC filing. In the meantime, U.S. Treasury Secretary Steven Mnuchin said all companies that receive $2 million or more through the federal program will be audited to see whether they actually qualified.
Shake Shack CEO Randy Garutti and chairman Danny Meyer published an open letter on LinkedIn explaining their decision. They noted the PPP loan's terms were "confusing" and they had hoped to use the funds to hire back furloughed employees, among other purposes. The pair also asserted the restaurant industry is "the lifeblood of the U.S. economy and the nation's spirit."
Treasury Secretary Mnuchin stated today that criminal penalties could apply to U.S. companies that obtained loans over $2 million, if the Treasury Department finds their application contains false certifications. He told Fox Business that large companies obtaining money through the PPP loan program when they had other sources of liquidity available should realize "one, it won't be forgiven, and two, they may be subject to criminal liability, which is a big deal."
Mnuchin singled out the Los Angeles Lakers basketball team, which secured a $4.6 million loan, in a CNBC interview. He said he's a fan of the team, but not of their loan application, adding, "I think that's outrageous, and I'm glad they've returned it or they would have had liability."