Del Mar

Del Mar Fairgounds to pay $5.6M to settle allegations it was ineligible for PPP pandemic loan

The federal Department of Justice says the 22nd District Agricultural Association was not eligible for such a loan because it is a government-owned entity

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The owner and operator of the Del Mar Fairgrounds has agreed to pay over $5.6 million to resolve allegations that it obtained a $4.7 million pandemic-related loan without being eligible, the Department of Justice announced Tuesday.

While numerous Paycheck Protection Program loans were provided to small businesses affected by the COVID-19 pandemic, the Department of Justice said the 22nd District Agricultural Association 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.

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."

By settling the claim, there was no determination of liability and the 22nd DAA maintains their eligibility to receive the loan.

Tristan Hallman, Chief Communications Officer for the 22nd DAA, said the organization applied for the loan out of necessity while being "fully transparent about its pursuit, receipt, and forgiveness of the loan." The organization was surprised to learn this year they were being investigated by the federal government.

"We have cooperated fully with the 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," a written statement from Hallman said, in part. "Going forward, we now plan to take a leadership role within our industry and work with our lawmakers to better clarify DAAs’ status under state law and the federal tax code."

Read the 22nd DAA's statement in full, below:

"As an organization in the business of mass gatherings, the 22nd District Agricultural Association — which does not ordinarily receive taxpayer funding, generates millions of dollars in local and sales tax revenue, and provides an annual economic impact of more than $680 million — was left devasted by the COVID-19 pandemic in 2020. Without a strong cash position to fall back on, the 22nd DAA was forced to take drastic measures, including laying off about 85% of its staff.

"To survive during a chaotic and confusing period when revenue sources were cut off, the 22nd DAA — like many other DAAs across the state — applied for federal aid through the newly established Paycheck Protection Program (PPP) after exhausting other possibilities. In its successful loan application for a $4.7 million loan, the 22nd DAA explained the organization’s unusual structure in a detailed cover letter, which was a step above and beyond the requirements of the application. The bank approved the loan, and the Small Business Administration later forgave the balance, thereby converting it to a grant. During this time, the 22nd DAA, a well-known organization that has existed since 1891, was fully transparent about its pursuit, receipt, and forgiveness of the loan.

"The PPP program was a lifeline to the 22nd DAA and to many DAAs across California. 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.

"However, several years after the loan was forgiven, we were surprised to learn that the local United States Attorney's Office had begun to question whether the 22nd DAA was technically eligible for a PPP loan under its interpretation of the 2020 CARES Act legislation. We have cooperated fully with the 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. Going forward, we now plan to take a leadership role within our industry and work with our lawmakers to better clarify DAAs’ status under state law and the federal tax code.

"Furthermore, to avoid the costs and risks of litigation, as well as unnecessary distractions, we have reached an amicable settlement with the U.S. Attorney’s Office to repay American taxpayers, who rescued the 22nd DAA, with the full amount of the loan, plus interest and processing fees — a total of about $5.6 million — without penalty.

"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."

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