U.S. District Judge Royce Lamberth in Washington. Credit: Diego M. Radzinschi / The NLJ

Lobbyists and political consultants faced a skeptical judge Monday in Washington as they pressed for access to coronavirus relief funds, in a hearing convened over the phone as courts across the country limit their operations amid the ongoing global health crisis.

The telephonic hearing before U.S. District Judge Royce Lamberth came a week after the American Association of Political Consultants sued for access to a nearly $350 billion federal loan program designed to help small businesses upended by the coronavirus outbreak.

In its lawsuit, the trade association argued the Trump administration had violated the free speech rights of political consultants in barring them from the Paycheck Protection Program, or PPP, which was authorized as part of the roughly $2 trillion coronavirus relief package.

Within days, the Justice Department answered that the federal government cannot be compelled to "subsidize" lobbying and other speech.

At Monday's hearing, Lamberth questioned the trade group about whether the loans amounted to the kind of subsidy that has long been off-limits to lobbyists and other political consultants.

Noting the favorable rates and other "unusual" terms, Lamberth asked for the "best argument" for why a loan through the Payroll Protection Program should not be seen as a subsidy.

"Your honor, it's not a subsidiary because [the relief is] still a loan," said Jason Torchinsky, a partner at Holtzman Vogel Josefiak Torchinsky, a Virginia firm representing the trade group. "You still have to go to a bank, you still have to submit an application, you still owe the bank interest on that money."

"When it looks like a loan and acts like a loan, it's a loan," he added.

"Well, that's not totally accurate," Lamberth replied, "because they're also saying most if not all of the loans are going to be forgiven, right?"

Torchinsky said the extent of loan forgiveness available under the program remains unclear, adding that, for small businesses, there is "no guarantee" of receiving such relief.

On Monday, Justice Department attorney David Morrell pointed to the favorable rates and availability of forgiveness to argue that the loans are "subsidies regardless of how one looks at it."

"For one thing, the availability of forgiveness of the loan transforms these into a subsidy," said Morrell, a top political appointee in the Justice Department's civil division.

"The delta between market terms and the terms of these loans is exactly the kind of economic benefit that transforms these into subsidies," he added.

Monday's arguments came just days after the PPP, a hallmark of the Trump administration's coronavirus stimulus, was fully tapped. During an appearance Sunday on CNN, Treasury Secretary Steven Mnuchin said the Trump administration was closing in on a deal with Democratic leaders to authorize more loans for small businesses upended by the coronavirus outbreak.

"I think we're very close to a deal today. I'm hopeful that we can get that done," Mnuchin said.

The deal under negotiation would inject another $370 billion into the small business relief program.

Lamberth said he hopes to issue a ruling Tuesday.

 

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