The Archdiocese of Agana on Tuesday sued the U.S. Small Business Administration, claiming it was unlawfully denied access to a COVID-19 pandemic loan because of its bankruptcy status.
The archdiocese applied for a $151,769 loan under the SBA's Paycheck Protection Program on May 8 in an effort to keep its employees on payroll during the pandemic. The archdiocese is asking the court for a preliminary and permanent injunction that prohibits SBA from denying its PPP loan, based on its bankruptcy status.
The PPP loan is part of the Coronavirus Aid, Relief and Economic Security, or CARES, Act, a massive financial assistance package for states and territories to help them deal with the pandemic.
The archdiocese said nothing in the CARES Act, SBA regulations, procedures, or SBA's first and second interim rules, authorize SBA to exclude debtors in bankruptcy from the PPP.
Without the PPP loan, the archdiocese said it will be "forced to lay off or furlough essential employees."
This will have a permanent effect on its bankruptcy estate and the Chapter 11 bankruptcy case, archdiocese attorneys Bruce Anderson and John Terlaje said in a June 2 filing in the U.S. District Court Bankruptcy Division.
The archdiocese sought bankruptcy protection in January 2019 under the weight of clergy sex abuse claims of more than $1 billion. Nearly 300 clergy abuse claims have been filed in court.
Since the start of the COVID-19 pandemic, the archdiocese's financial struggles worsened.
The public health state of emergency banned all gatherings for some two months, stopping the monthly parish assessments that makes up a significant portion of the archdiocese's income.
The archdiocese said it will struggle to continue making payroll payments, which is the main eligibility requirement for the PPP.
"After carefully reviewing your application, we are sorry to advise you that we cannot grant a loan to you for the following reasons: bankruptcy," Bank of Guam stated in a May 22 letter to the Archdiocese on its PPP loan application.
The PPP loan may be fully forgiven if at least 75% of the funds are used for payroll costs, interest on mortgages, rent and utilities.
The archdiocese's PPP application is separate from the Catholic schools, parishes and a cemetery's $1.8 million PPP loan application, most of which were approved, based on previous filings in the archdiocese bankruptcy case.