This past April, a freshman Nevada congresswoman lobbied the federal government to expand coronavirus aid to her state’s gaming industry. Two weeks after the change went into effect, her husband’s casino company received millions of dollars in government-backed loans.
In a letter to the heads of the Treasury Department and Small Business Administration, Democrat Rep. Susie Lee urged the agencies tasked with administering the Paycheck Protection Program to reconsider regulatory language that excluded gaming companies from the program’s small business aid, which extended forgivable loans to help cover payroll and overhead costs amid the pandemic.
“Every day that passes without relief results in further harm to those businesses' employees and their families,” Lee wrote. “For the SBA to take the position that these small businesses are not eligible for needed aid because of their involvement in the gaming industry belies the economic realities of their location and will doom countless small businesses in Nevada to bankruptcy.”
Within a couple weeks, federal regulators made the precise change she was seeking. In late April, Treasury and SBA updated their PPP eligibility guidelines to include businesses with fewer than 500 employees that derive more than half of their income from gaming.
“On further consideration,” SBA said, “the Administrator, in consultation with the Secretary, believes this approach is more consistent with the policy aim of making PPP loans available to a broad segment of US businesses.”
It was a major win for the casino industry and for the Nevada economy generally, which relies heavily not just on casinos but on other businesses that happen to house games such as slot machines. One Nevada-based gaming company that took advantage of the change to the PPP program was Full House Resorts, a casino developer led by chief executive Daniel Lee, Rep. Lee’s husband.
About two weeks after the SBA made PPP loans available to gaming businesses, Full House secured two such loans totaling about $5.6 million, according to a filing with the Securities and Exchange Commission. The company said that the funds would “be used principally to rehire several hundred employees” and to prepare for the reopening of two of its casinos, neither of which were in Nevada: the Rising Star Casino Resort in Indiana and Bronco Billy’s Casino in Colorado.
A day after this piece was published, a Lee spokesperson told The Daily Beast that the congresswoman was informed that Full House planned to apply for those loans in the days after the SBA made the change to PPP eligibility, and was notified once the loans were approved. But the spokesperson said that she had no role in the company’s decision to apply for the loans.
“She is not involved in any aspect of Full House’s business or decision making,” the spokesperson wrote. “She had no influence over the decision to file the application, and she had no influence over whether or not that application was approved or denied. The conditions and details under which Full House Resorts received its PPP loan are entirely between Full House Resorts and regulators.”
Lee’s work to expand PPP eligibility for gaming businesses stood to benefit numerous companies, particularly in Nevada, beyond Full House. And she was not the only member of Congress pressing for that change. A day after her letter to Treasury and SBA, Lee signed onto a letter crafted by the entire Nevada congressional delegation urging House and Senate leadership to explicitly include small gaming businesses in future coronavirus relief legislation.
But Lee’s direct lobbying of federal regulators appears to have paid off more immediately for gaming businesses looking for federal assistance. Indeed, it’s an accomplishment she touts prominently on her website, and her office highlighted those efforts in its statement to The Daily Beast.“Congresswoman Lee has been a strong advocate for Nevada’s working families and her work to ensure that our state’s main industry was not unfairly excluded from this program demonstrates that commitment to ensuring that working families are protected,” her spokesperson said. “Congresswoman Lee will continue to focus on her work in Congress to fight for Nevada’s working families who need a helping hand now more than ever.”
The congresswoman’s push to expand the eligibility of the PPP loan program also underscores how frantic a scramble took place among distressed industries to get government cash in the wake of the pandemic-induced economic slow down—and how clever those industries and their champions were in finding ways to define the term “small business.”
Prior to the pandemic, Full House had approximately 1,600 employees, according to its SEC filing—well over the 500-employee limit that was the determination for what constituted a “small business.” But casinos it owns and operates, including Rising Star and Bronco Billy’s, each have fewer than 500 employees individually and therefore qualify for relief under SBA rules designed to assist franchises or subsidiaries of larger companies.
Like other gaming businesses, Full House was hit hard by the coronavirus pandemic and resulting stay-at-home orders. It laid off or furloughed nearly its entire staff; total Full House employment was down to just 30 in May, according to its SEC filing. From February 21 to March 18, its stock price declined by more than 83 percent, from $3.59 per share to just $0.53.
Among the shareholders hit by that decline were Rep. Lee and her husband. According to her personal financial disclosure filing covering 2018 and early 2019, they owned millions of dollars in Full House stock and stock options through brokerage, trust, and retirement accounts.
That stock price is still nowhere near its pre-pandemic high. But since the SBA reversed course and made casinos such as Full House’s eligible for PPP loans, the company has recovered a significant portion of its stock value. When Lee sent her letter to Treasury and SBA, Full House shares were trading at $1.04. When SBA changed its guidelines, the price was up to $1.17. On Friday, Full House’s stock closed at $2.00 per share.
-- This piece has been updated to reflect Lee's office statement that she did have knowledge of the loans awarded to her husband’s company.