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

A number of former workers of Oz Media say there isn’t a proof that the hundreds of thousands of {dollars} the corporate acquired via a federal Covid reduction program to guard paychecks ever went to avoid wasting jobs or increase pay.

Oz, which has come beneath scrutiny after quite a few reviews detailing questionable enterprise techniques, utilized for 2 loans via a program known as the Paycheck Safety Program, or PPP, according to the Small Business Administration’s website.

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

It’s unclear how Oz used the PPP funds. Oz 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 Oz utilized for the second mortgage. The corporate claimed it had $50 million in revenue in 2020. It laid off a number of staffers and reduce salaries earlier that 12 months.

Oz introduced it was shutting its doorways final week after a sequence of reviews forged doubt on the corporate’s enterprise practices. The New York Instances detailed an event from February — the identical month Oz acquired 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, Oz particularly earmarked its loans for payroll. Full-time workers who labored for Oz advised CNBC that that they had no concept 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 at the least 10 individuals. Nobody had something returned to them by the use of wage publish them receiving these PPP loans,” in line with a former worker who left Oz 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 arduous and provides your life to this firm, to be dismissed and disrespected.” 

The previous Oz workers who talked to CNBC labored in numerous departments throughout the corporate. They spoke on the situation of anonymity to debate personal issues and as a way 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 advised CNBC earlier this week that Oz 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 employees in early 2020. The information outlet additionally reported Oz carried out pay cuts of round 19%. CNBC has since realized some workers took even larger reductions, together with one individual whose wage was reduce by 35%, in line with two individuals 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 Oz 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 Oz.

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

The SBA web site says Oz’s PPP loans, which have 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, Oz recognized its business as “customized laptop programming providers,” according to the SBA site. For the second mortgage, Oz’s business is described as “web publishing and broadcasting and internet search portals.”

Oz 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 Oz had “75-plus” full-time workers 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 as a way to preserve extra individuals at his firm employed.

Representatives for Oz and Watson didn’t return requests for remark. Representatives for the Silicon Valley Financial institution referred questions in regards to the loans to Oz 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 retailers, together with CNBC’s “Squawk Box,” since Oz’s board advised 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 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 Oz however did present an evidence of how loans like these have been supplied.

“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 authorized, 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 pointers.”

The 2020 mortgage got here a 12 months after Oz Media was set to host its annual Oz 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 have been promoting at $400. The competition was set to characteristic music by John Legend, meals by celeb cooks together with Rachael Ray and comedy by “Every 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 every thing works out, so it is easy that approach,” 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 have been anticipating 100,000 individuals to attend the 2019 occasion.

The truth is, Oz paid town at the least as much as $2 million for using Central Park’s Nice Garden, in line with an individual briefed on the matter. The corporate shelled out an analogous quantity on advertising and marketing the competition. 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, instructed on the time that at the least some festivalgoers could be aware about some kind 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 reply to CNBC’s requests for remark.

Oz 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 title Oz Fest, saying it was too near the title of their music competition, Ozzfest. The edges ultimately reached a settlement.

Then, in 2019, Watson claimed stay on CNBC that Sharon and Ozzy Osbourne have been associates and traders in his firm after yearlong authorized battle. Sharon Osbourne recently told CNBC they have never been friends with Watson or investors in Oz Media. In an interview broadcast Monday on CNBC, Watson mentioned that there was an settlement that the Osbournes would get round 50,000 Oz 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 buddy.

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

The tape reveals that Watson did certainly describe the Osbournes as associates in the course of the 2019 interview: “Enjoyable truth: our buddy Ozzy and Sharon sued us briefly, after which we determined to be associates and now they’re traders in Oz.”

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