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Ounces Media obtained $5.7 million in reduction loans to assist pay staff, 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 Photographs

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

Ounces, which has come below scrutiny after quite a few stories detailing questionable enterprise ways, utilized for 2 loans via a program referred to as the Paycheck Safety Program, or PPP, according to the Small Business Administration’s website.

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

Ounces introduced it was shutting its doorways final week after a sequence of stories forged doubt on the corporate’s enterprise practices. The New York Occasions 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 govt 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 corporations to take part within the PPP, Ounces particularly earmarked its loans for payroll. Full-time staff who labored for Ounces advised 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 the use of wage put up them receiving these PPP loans,” in keeping with a former worker who left Ounces earlier this yr.

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

The previous Ounces staff who talked to CNBC labored in varied departments throughout the corporate. They spoke on the situation of anonymity to debate personal issues and so as 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 Occasions first reported Ozy has inflated its traffic numbers and has a historical past of overstating its success. Watson advised 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 carried out pay cuts of round 19%. CNBC has since discovered some staff took even larger reductions, together with one individual whose wage was lower by 35%, in keeping with two folks acquainted with 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 staff asking them to return to Ounces.

PPP mortgage standing

PPP, initiated below then-President Donald Trump’s administration, generated practically $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 trade as “customized laptop programming companies,” according to the SBA site. For the second mortgage, Ounces’s trade is described as “web publishing and broadcasting and net 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 keeping with the February 2021 loan document. Watson mentioned in Tuesday’s interview with “The Breakfast Membership” that Ounces had “75-plus” full-time staff earlier than Friday’s shutdown.

Watson additionally mentioned in that interview he hasn’t taken a wage for the reason that begin of the pandemic so as 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 concerning 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 stop after simply 4 days on the job.

Watson has talked to a number of retailers, together with CNBC’s “Squawk Box,” since Ounces’s board advised staff the corporate would shut down, however he didn’t reply to a number of requests to touch upon this text. CNBC additionally despatched an intensive listing 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 collaborating lenders act as an agent of the federal government to approve and disburse loans,” Shannon Giles, a spokeswoman for the SBA, advised CNBC in an electronic mail Tuesday. “A collaborating lender submits a PPP mortgage utility, which it has already permitted, to the SBA for the federal assure. The SBA doesn’t have particulars on PPP mortgage disbursements. That could 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 yr 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 Occasions reported that high tickets for the occasion had been promoting at $400. The pageant was set to function music by John Legend, meals by celeb 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 the town of New York to host the extravaganza.

“You simply say I am with Andrew Ross Sorkin and all the pieces works out, so it is easy that means,” Watson replied. “One of many issues that we’re actually appreciative of is the 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.

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

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

Press representatives for Rodriguez have but to reply to 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 trade legends Sharon and Ozzy Osbourne sued in 2017 over the title Ounces Fest, saying it was too near the title of their music pageant, Ozzfest. The edges ultimately reached a settlement.

Then, in 2019, Watson claimed dwell on CNBC that Sharon and Ozzy Osbourne had been pals and traders 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 referred to as Watson a “shyster.”

Watson on Monday additionally disputed that he referred to as Sharon Osbourne a buddy.

“I did not say she was a buddy. 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 pals through the 2019 interview: “Enjoyable reality: our buddy Ozzy and Sharon sued us briefly, after which we determined to be pals and now they’re traders in Ounces.”

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

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