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Federal agency denies COVID-19 loans for applicants' past mistakes

Robert Sherrill Book Cover.png
Posted at 12:47 PM, May 20, 2020
and last updated 2020-05-20 22:36:57-04

NASHVILLE, Tenn. (WTVF) — For some people who rebuilt their lives after previous run-ins with police and became law-abiding citizens, the COVID-19 economic crisis has been an especially cruel blow.

That's because the federal government is telling them that, because of those criminal histories, they cannot get disaster loans to help save their struggling businesses.

Case in point: local businessman Robert Sherrill, who has been listed as one of Nashville's most-admired CEOs.

"I pay taxes. I'm not in any trouble. I haven't been in any trouble. Clearly, they can look this up and see," Sherrill told NewsChannel 5 Investigates.

Sherrill's journey is a story of redemption that he recounted in a book, Journey Back to Now.

The 37-year-old North Nashville native was busted on drug charges at the age of 23.

"I was just selling drugs. I kept going in and out of jail," he recalled.

He did five years in federal prison, then got out and turned his life around.

Sherrill started his own commercial cleaning business.

In his old neighborhood, he co-founded a work space for other entrepreneurs and created a mentoring program to help young people avoid the mistakes he made.

"I've done everything that I've been asked to do, as a returning citizen, to get my community to trust me again, to build my reputation and build my name," he said.

But after the COVID-19 economic shutdown delivered a blow to his business, Sherrill applied to the U.S. Small Business Administration for an Economic Injury Disaster Loan (EIDL).

His application came back as "not eligible due to character reasons."

"Based on their assessment, the Robert Sherrill that gives back to his community, the Robert Sherrill that was pardoned by Governor Haslam, the Robert Sherrill that spends his life giving back to kids and pouring into his community, I don't fit the good character threshold," the Nashville businessman said.

In fact, Sherrill's redemption was good enough for him to get a pardon for his state charges, but he still has federal charges on his record for which he is also seeking a pardon.

And that, the SBA said, was a deal-breaker.

"I'm furious right now," Sherrill said.

"I don't know what I'm going to do. I've got all these families dependent upon me and I don't know in the next six months what it is going to look like for me."

Ironically, because Sherrill had a good relationship with his bank, he was able to get money from the Paycheck Protection Program (PPP) to try to keep his employees on the payroll.

The PPP is administered through the very same Small Business Administration that denied his disaster loan.

NewsChannel 5 Investigates noted, "So you have one side of the SBA saying you're an upstanding citizen and another side saying, no, you don't qualify."

"Exactly," Sherrill said. "That's the confusion. That's the frustration. That's the anger."

Attorney Margaret Love, who runs a nonprofit that helps individuals overcome the legal and social stigma of a criminal history, said, "That seems to be pretty standard operating procedure for the SBA."

Her group, the Collateral Case Resource Center, deals with such issues on a regular basis.

She noted that a slide posted on Reddit by an alleged SBA insider suggests that internal guidelines say if an applicant was ever arrested for a felony, the loan must be declined.

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An SBA spokesperson did not dispute the authenticity of the slide.

"Then you don't get the loan, period, end of story," Love said.

"It's certainly an over-broad policy. There are people who are arrested for things that are never convicted of anything."

In addition, "there are probably between 25 and 30 percent of the adult population in this country that have some sort of criminal record. It is inefficient and unfair to bar them from any opportunity in the marketplace and in employment."

The SBA spokesperson said the information in the slide "is incorrect. An applicant with a felony conviction in the last 5 years would be declined. "

"It's like being punished over and over and over and over again for something I did when I was younger," Sherrill said.

Ironically, the denial came from the Trump administration, which has claimed to be a champion of criminal justice reform.

"Everybody said that criminal justice reform couldn't be done, but I got it done, and the people in this room got it done," President Donald Trump said during this year's State of the Union, drawing a rare bipartisan standing ovation.

Sherrill said he hopes the president takes his concerns seriously.

"I hope he reaches out, I hope he pardons me," he added. "That's the only way I am going to be able to compete again."

An SBA spokesperson said that applicants who are denied the disaster loans for character reasons can ask the agency for reconsideration.

In the meantime, the SBA has already run through the $50 billion that Congress appropriate for the EIDL program.

A bill passed by the U.S. House would provide more money for the program and limit the ability of the SBA to use criminal history as a disqualifying factor.

Right now, that bill is stalled in the Senate.