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Ounces Media bought $5.7 million in reduction loans to assist pay workers, however ex-staffers say they did not see any of it

Carlos Watson data a TV debate for Take On America With OZY at The Bently Reserve on October 29, 2018 in San Francisco, California.

Kimberly White | Getty Pictures

A number of former workers of Ounces Media say there isn’t any proof that the thousands and thousands of {dollars} the corporate obtained by way of a federal Covid reduction program to guard paychecks ever went to save lots of jobs or enhance pay.

Ounces, which has come underneath scrutiny after quite a few studies detailing questionable enterprise ways, utilized for 2 loans by way of a program known as the Paycheck Safety Program, or PPP, according to the Small Business Administration’s website.

Ounces’s first mortgage, for $3.75 million, was authorised in April 2020, a month after the U.S. government passed a $2 trillion coronavirus reduction invoice. The corporate was authorised for an additional $2 million in February 2021.

It’s unclear how Ounces used the PPP funds. Ounces Media’s co-founder and CEO, Carlos Watson, didn’t return a number of emails with particular questions on how the corporate used the cash or who determined how the cash could be used. Nor did he reply a query about why Ounces utilized for the second mortgage. The corporate claimed it had $50 million in revenue in 2020. It laid off a number of staffers and lower salaries earlier that 12 months.

Ounces introduced it was shutting its doorways final week after a collection of studies forged doubt on the corporate’s enterprise practices. The New York Instances detailed an event from February — the identical month Ounces obtained its second PPP mortgage — the place co-founder and Chief Working Officer Samir Rao impersonated a YouTube government on a convention name with Goldman Sachs in hopes of securing a $40 million funding.

Throughout an interview on the syndicated radio program “The Breakfast Membership” on Tuesday, Watson said he has asked Rao to step down, regardless of claiming the incident stemmed from a “mental health issue.”

Whereas it wasn’t uncommon for media firms to take part within the PPP, Ounces particularly earmarked its loans for payroll. Full-time workers who labored for Ounces instructed CNBC that they’d no thought the place the cash went and that it did not go to restoring their salaries after they took pay cuts.

“Nobody to my data, and I am speaking to a minimum of 10 folks. Nobody had something returned to them by means of wage publish them receiving these PPP loans,” in line with a former worker who left Ounces earlier this 12 months.

“I need to’ve adopted up with Samir [Rao] 4 to 6 occasions,” mentioned one other with respect to reinstating wage. “It was disheartening. You’re employed so onerous and provides your life to this firm, to be dismissed and disrespected.” 

The previous Ounces workers who talked to CNBC labored in numerous departments throughout the corporate. They spoke on the situation of anonymity to debate personal issues and with a view to keep away from retribution.

Watson told Axios in January 2021 — one month earlier than taking the second PPP mortgage — that his firm was worthwhile for the primary time in 2020 after taking in $50 million in income. The Instances first reported Ozy has inflated its traffic numbers and has a historical past of overstating its success. Watson instructed CNBC earlier this week that Ounces overmarketed itself about 20% of the time.

“That is on me, and I personal that,” Watson said Monday.

Axios first reported Ozy laid off round 20% of its workers in early 2020. The information outlet additionally reported Ounces applied pay cuts of round 19%. CNBC has since discovered some workers took even larger reductions, together with one individual whose wage was lower by 35%, in line with two folks aware of the matter.

Watson announced Monday that Ozy was planning to keep its doors open, simply days after he told employees the company would close. Additionally on Monday, LifeLine Legacy Holdings, which claims to have invested $2 million in Ounces Media, filed a lawsuit against the company, alleging “fraudulent, misleading and unlawful conduct.”

Fortune reported Wednesday that Watson has reached out to workers asking them to return to Ounces.

PPP mortgage standing

PPP, initiated underneath then-President Donald Trump’s administration, generated almost $800 billion in forgivable loans for small companies that had been struggling because the coronavirus pandemic raged.

The SBA web site says Ounces’s PPP loans, which had been formally distributed by the Silicon Valley Financial institution, are ongoing and every has “not but been absolutely repaid or forgiven.” For its first mortgage, Ounces recognized its business as “customized pc programming providers,” according to the SBA site. For the second mortgage, Ounces’s business is described as “web publishing and broadcasting and internet search portals.”

Ounces claimed that the overwhelming majority of the mortgage cash could be used for payroll, and that the cash helped the corporate retain 143 jobs, in line with the February 2021 loan document. Watson mentioned in Tuesday’s interview with “The Breakfast Membership” that Ounces had “75-plus” full-time workers earlier than Friday’s shutdown.

Watson additionally mentioned in that interview he hasn’t taken a wage because the begin of the pandemic with a view to maintain extra folks at his firm employed.

Representatives for Ounces and Watson didn’t return requests for remark. Representatives for the Silicon Valley Financial institution referred questions in regards to the loans to Ounces and declined to remark additional. Nationwide Public Radio’s David Folkenflik tweeted Wednesday that Watson’s new spokesman, Phil Singer, had give up after simply 4 days on the job.

Watson has talked to a number of shops, together with CNBC’s “Squawk Box,” since Ounces’s board instructed workers the corporate would shut down, however he didn’t reply to a number of requests to touch upon this text. CNBC additionally despatched an in depth record of inquiries to Watson, who didn’t return a request for remark earlier than publication.

A spokeswoman for the SBA wouldn’t touch upon the loans to Ounces however did present a proof of how loans like these had been offered.

“The PPP is a delegated lending course of, the place taking part lenders act as an agent of the federal government to approve and disburse loans,” Shannon Giles, a spokeswoman for the SBA, instructed CNBC in an e-mail Tuesday. “A taking part lender submits a PPP mortgage utility, which it has already authorised, to the SBA for the federal assure. The SBA doesn’t have particulars on PPP mortgage disbursements. That may be a third-party transaction between lender and borrower. Every PPP-participating lender is to implement this system to its debtors inside its Congressionally granted guidelines and program tips.”

Ounces Fest prices

The 2020 mortgage got here a 12 months after Ounces Media was set to host its annual Ounces Fest in New York on Central Park’s Nice Garden. Though it will definitely was canceled due to the heat that summer, The Instances reported that prime tickets for the occasion had been promoting at $400. The pageant was set to function music by John Legend, meals by movie star cooks together with Rachael Ray and comedy by “Day by day Present” host Trevor Noah.

CNBC’s Andrew Ross Sorkin directly asked Watson in 2019 how a lot the corporate needed to pay town of New York to host the extravaganza.

“You simply say I am with Andrew Ross Sorkin and the whole lot works out, so it is easy that manner,” Watson replied. “One of many issues that we’re actually appreciative of is town’s embraced it,” Watson added. He additionally mentioned in that very same interview they had been anticipating 100,000 folks to attend the 2019 occasion.

In actual fact, Ounces paid town a minimum of as much as $2 million for the usage of Central Park’s Nice Garden, in line with an individual briefed on the matter. The corporate shelled out the same quantity on advertising and marketing the pageant. It is unclear what occurred to that cash after the occasion was canceled.

Former baseball celebrity Alex Rodriguez, who appeared with Watson within the interview, steered on the time that a minimum of some festivalgoers could be aware of some form of “swag.” When requested about that 12 months’s “swag bag,” Watson mentioned it included “uncommon VR [virtual reality] headsets.”

Press representatives for Rodriguez have but to answer CNBC’s requests for remark.

Ounces Fest was additionally on the heart of a authorized headache for Watson that raised extra questions on his firm’s enterprise mannequin lengthy after the matter was settled. Music business legends Sharon and Ozzy Osbourne sued in 2017 over the identify Ounces Fest, saying it was too near the identify of their music pageant, Ozzfest. The perimeters ultimately reached a settlement.

Then, in 2019, Watson claimed reside on CNBC that Sharon and Ozzy Osbourne had been buddies and buyers in his firm after yearlong authorized battle. Sharon Osbourne recently told CNBC they have never been friends with Watson or investors in Ounces Media. In an interview broadcast Monday on CNBC, Watson mentioned that there was an settlement that the Osbournes would get round 50,000 Ounces shares as a part of a settlement. Sharon Osbourne additionally known as Watson a “shyster.”

Watson on Monday additionally disputed that he known as Sharon Osbourne a pal.

“I did not say she was a pal. You realize what? Play the tape, then. Please go forward and play the tape. You realize what, cue up the tape,” Watson mentioned Monday.

The tape reveals that Watson did certainly describe the Osbournes as buddies throughout the 2019 interview: “Enjoyable reality: our pal Ozzy and Sharon sued us briefly, after which we determined to be buddies and now they’re buyers in Ounces.”

WATCH: Ozy Media CEO Carlos Watson calls the Osbournes “friends” during 2019 interview.

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