Morning Brief: As Small Businesses Struggled, Scammers Tried To Cash In

Good morning, L.A.

As many small businesses and restaurants throughout L.A. were either not receiving help from federal loans or wondering if they would have to shut down for good, one Santa Clarita man was taking advantage of the pandemic as a way to cash in.

Raymond Magana, 40, pled guilty to fraudulently submitting applications for federal Paycheck Protection Program loans for nearly $1 million. Magana claimed to have 40 employees when in fact he had none, and cited a single-family home as his office building.

His actions are reprehensible, but they’re made much more so by the fact that real small business owners were losing their livelihoods at the same time that Magana, and others like him, were trying to cash in.

Federal lawmakers announced their plan to issue PPP loans almost immediately after the U.S. began shutting down because of the coronavirus. Of the fed’s initial $2 trillion stimulus package, $349 billion was earmarked for small businesses.

But within days, many entrepreneurs realized that the program was a bureaucratic nightmare; some never heard back from banks about their applications, others were rejected without being given a reason, and still more simply missed tight application windows during which banks met their loan caps almost immediately.

Meanwhile, in L.A., loans were disproportionately approved in wealthier, whiter, Westside communities than lower-income communities of color. Plus, a large portion of the money earmarked for small businesses was in fact doled out to multi-million dollar chains, including Shake Shack, Ruth’s Hospitality Group, Inc. (the parent company of Ruth’s Chris Steak House), and Kura Sushi USA.

Some of those companies returned their loans eventually, but the federal program was out of money two weeks after launching.

Many small businesses have closed down after not receiving loans, and others have had to rethink their business strategy altogether.

Magana faces 30 years in federal prison.

Keep reading for more on what’s happening in L.A. today, and stay safe out there.

What Else You Need To Know Today

• Officials admonished Southern California Edison for too often shutting down power to prevent wildfires, when it’s supposed to be a last resort.
• L.A. County plans to open 11 school sites as vaccination centers for teachers, school staff, and eligible older adults.
• Bank of America says it has lost "hundreds of millions" of dollars in California’s unemployment fiasco.
• Researchers are developing a color-changing test strip for masks that can detect Covid in a user’s breath or saliva.
• Restaurants can resume outdoor dining, but now owners have to decide whether it's worth the cost.

Before You Go … The Farm Of The Future Is Vertical And In A Warehouse

The exterior of Plenty's vertical farming facility in Compton. (Stefan Slater for LAist)

From the outside, the gray and white warehouse near the corner of Oris Street and Mona Boulevard seems like a thousand other mundane Southern California buildings. But the interior, once completed, will resemble a sketch from a futurist's daydreams.

If all goes well, the 95,000-square-foot Compton facility will house rows of hydroponic towers organized into emerald walls of non-GMO, pesticide-free leafy greens that rely on LED lamps, robots, and vertical towers of plants.

The operation is run by Plenty, a San Francisco-based startup that uses vertical farming to create high-quality, nutritious plants that, in their words, "you'd actually want to eat."

Help Us Cover Your Community

• Got something you’ve always wanted to know about Southern California and the people who call it home? Is there an issue you want us to cover? Ask us anything.
• Have a tip about news on which we should dig deeper? Let us know.

The news cycle moves fast. Some stories don't pan out. Others get added. Consider this today's first draft, and check LAist.com for updates on these stories and more. Follow us on Twitter, Facebook and Instagram.

Never miss an LAist story. Sign up for our daily newsletters.