The Paycheck Protection Program, created in 2020, was intended to help businesses, contractors and certain nonprofits keep workers on payroll during the COVID-19 crisis. The initial round of the program did not exclude businesses owned by members of Congress or their immediate families, and the $1.7 million loan the Strand received was among many similar loans granted to such businesses.

But a December 2020 law expanding the program explicitly barred businesses from obtaining a second round of funding if a member of Congress or their spouse held a significant direct or indirect stake in the business. According to Jeanine Pirro, U.S. attorney for the District of Columbia, Bass Wyden's bookstore received more than $930,000 in that second round despite the restriction.

"The Paycheck Protection Program was created to save American jobs, not to enrich those who aren't eligible for taxpayer-funded relief, especially the wife of a U.S. Senator," Pirro said in a statement.

Bass Wyden certified at the time that she met the qualifications necessary to obtain the loan, a certification Pirro's office described as "knowingly and materially false."

In a statement, Bass Wyden said federal laws and regulations throughout the pandemic were "changing rapidly." She said her bookstore's accountant and the bank administering the loan were not aware of the new rules surrounding spouses "when the second-draw application was processed."

"The mistake was unintentional, and the funds were returned as soon as the issue came to our attention. We regret the oversight and recognize the importance of complying with all applicable laws and regulations," she wrote. "We hope this matter will be viewed objectively and in its proper context, with the understanding that the application of justice should always be fair, impartial and free from political considerations."

Hank Stern, a spokesperson for the senator, said in a brief statement that Wyden and his wife do not discuss Bass Wyden's business and that he had no involvement in the loan or the agreement with the federal government.

The case highlights the unusual position of lawmakers and their families as the federal government distributes billions of dollars in relief and contracts. The second-round prohibition was written into the December 2020 law precisely to prevent members of Congress and their spouses from benefiting from programs they helped oversee.

The Strand, a family-owned bookstore near Union Square that has become a New York City landmark, received the first-round loan before the restriction took effect. The settlement resolves the government's claim over the second-round funds, which the bookstore says it returned once the issue came to light.