The owner and operator of the Del Mar Fairgrounds has agreed to pay more than $5.6 million to resolve allegations that it obtained a $4.7 million pandemic-related loan without being eligible, which the 22nd District Agricultural Association says happened amid an extremely dire financial situation.
Association officials said the situation also highlights an ongoing lack of clarity regarding the organization's status under state law and the federal tax code.
While numerous Paycheck Protection Program loans were provided to small businesses affected by the COVID-19 pandemic, the Department of Justice says the 22nd DAA was not eligible for such a loan because it is a government-owned entity.
However, the 22nd DAA's CEO, Carlene Moore, obtained a $4,713,700 PPP loan in May of 2020, leading the government to pay out the loan amount, plus $97,890 in fees and interest to the bank that processed the loan, according to the U.S. Attorney's Office.
The settlement, which includes an agreement to have the 22nd DAA and Moore pay $5,664,015, was reached without any determination of liability.
"These loans were intended to provide critical relief to eligible businesses during a time of global crisis," said San Diego U.S. Attorney Tara McGrath in a statement. "This settlement upholds the integrity of the COVID relief program and holds the DAA accountable for obtaining millions in taxpayer- funded benefits to which they were not entitled."
The 22nd DAA contended in a statement that it was eligible to receive the loan, but said it reached "an amicable settlement" with the U.S. Attorney's Office "to avoid the costs and risks of litigation, as well as unnecessary distractions."
The organization said it applied for the loan amid dire financial straits caused by the pandemic, which forced the 22nd DAA to lay off around 85% of its staff.
"The PPP program was a lifeline to the 22nd DAA and to many DAAs across California," the 22nd DAA's statement reads. "We are very grateful that we received the loan, which enabled the Del Mar Fairgrounds and other 22nd DAA properties to continue to operate as a community gathering place in times of celebration — and to serve as an emergency resource center in times of need. And after surviving the pandemic, the 22nd DAA is in its strongest financial position in recent history."
The association said the scrutiny from prosecutors came as a surprise.
"We have cooperated fully with the (U.S. Attorney's) office's lengthy inquiry. While we maintain that the 22nd DAA was indeed eligible, the inquiry has made one thing abundantly clear: there is a lack of clarity about DAAs' standing as ill-defined `state institutions' under the law and their eligibility for state and federal funding and grant programs."
The 22nd DAA said it has agreed to repay the loan to "American taxpayers, who rescued the 22nd DAA," and said, "Our Board of Directors is confident this decision will allow the 22nd DAA to move forward and get back to doing what we do best: producing and hosting cherished events and activities that bring our diverse communities together."
