A military equipment supplier that has been accused of fraudulently misrepresenting its size in order to benefit from privileges associated with being a small business has received a Paycheck Protection Program small business loan worth at least $2 million, public records show.
Atlantic Diving Supply, a Virginia Beach, Va., reseller of specialized military gear, is the latest organization whose receipt of taxpayer-backed loans through the PPP has raised questions about a program launched in early April to help sustain employment at small companies through the economic crisis.
In late April, the Treasury Department retroactively clarified its rules after well-known restaurant chains, car dealerships, and hotel companies reported receiving PPP loans. Several of them returned the loan funds following public uproar; others kept the money. The Small Business Administration has said it will audit all PPP loans above $2 million to determine whether the recipients were eligible.
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Representatives from the SBA and Atlantic Diving Supply did not comment on the company’s receipt of loans.
The company’s legal issues are detailed extensively in a report released Monday by the nonprofit Project on Government Oversight, known as POGO. A review of business data by POGO and the nonprofit Anti-Corruption Data Collective concluded that Atlantic Diving was one of at least 27 PPP recipients estimated annual sales of more than $1 billion in 2019. Another 2,068 loan recipients cleared $100 million in sales last year, according to the analysis.
Nick Schwellenbach, a senior investigator at POGO, questioned whether it’s appropriate for Atlantic Diving to receive small business coronavirus loans. Schwellenbach’s investigation also found that two other firms allegedly tied to the company — including one that was named in a settlement with the Department of Justice — separately received smaller PPP loans.
‘‘It’s important that taxpayer funding reserved for genuine small businesses isn’t siphoned off by companies that are not eligible,’’ Schwellenbach said. ‘‘As a top government contractor with revenues well over a billion dollars a year, it strains credibility that Atlantic Diving Supply is a real small business, especially given several recent settlements and law enforcement outcomes related to their alleged small business contracting fraud.’’
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Although it received a favorable ruling from the SBA as recently as November 2019, the company’s small business credentials have long been called into question.
It started as a small, family-owned shop focused on the military diving community in Virginia Beach, which includes the Navy Seals. It was transformed under the leadership of longtime chief executive Luke Hillier, winning its first major government contract in 2000. It grew quickly to meet an insatiable demand for military gear of all sorts in the years following 9/11.
That fast growth became permanent business as the US military presence in Iraq, Afghanistan, and elsewhere dragged on for nearly two decades.
At one point, the company filed papers to go public, something that is usually the purview of large corporations. In 2015 it purchased Theodore Wille International, a military food and equipment supplier with offices in seven countries.
Its business has remained healthy despite recent troop reductions. It received more than $3 billion in unclassified government contract dollars in 2019, procurement records show. That’s more than some well-known, objectively large government contractors. Atlantic Diving has already cleared $1 billion in federal contract receipts in 2020.