The COVID-19 pandemic has really had an impact on businesses, employment, and the economy. Mom and pop businesses, especially, have suffered through rounds of limitations and forced closures as local governments try to get ahead of the spread of the virus. California has some of the strictest lockdown measures, imposing curfews, restricting dining (inside and outside), instituting rules like no singing or yelling over the holidays, and so on.
Gavin Newsom
The Golden State’s governor, Gavin Newsom (D), has been called to the carpet for flaunting the very rules he imposed on his constituents. Now Californians are discovering that while other businesses continue to struggle, or have had to close their doors for good, at least one of his companies somehow managed to get a small business loan through the Paycheck Protection Program (PPP) of nearly $1 million with a staff of just 14 employees.
Newsom is a partial owner of the PlumpJack Group which has several companies under its umbrella. In 2018, he placed his ownership into a blind trust so that he would not be able to make company decisions while serving as governor. However, his sister, Hilary Newsom, is the group’s president. At least nine of these companies have received close to $3 million via the PPP, and his 2019 tax return shows he made more than $1 million in profit from the businesses.
The Math Doesn’t Add Up
ABC7 investigated reports from the Small Business Administration (SBA) and provided an analysis of its findings.
The PlumpJack Group has several businesses under it, which include wineries, restaurants, and bars. Earlier in the year, the SBA showed the group had received around $350,000 worth of PPP loans, but, as ABC7 reported, newly released data indicated the group had received “more than eight times that amount at nearly $3 million altogether.”
A winery in Napa, Villa Encinal Partners LP, is drawing narrowed eyes and head-scratching. The company, with San Francisco billionaire Gordon Getty listed as an investor, received a loan on April 14, 2020, for $918,720. According to the analysis:
“Hypothetically, if divided equally, each of them would’ve received around $40,000 to cover their payroll over a period of three months – that would amount to an annual salary of around $160,000 per employee.”
To put this into perspective, “[t]he average small business loan for California companies retaining 14 employees was roughly $128,000.” Wineries in California that received more than $900,000 in PPP funding had an average number of 148 employees.
Sean Moulton is a senior policy analyst with the Project on Government Oversight (POGO), a group that tracks PPP loans. To him, the numbers just don’t add up. “It’s unexpected for a 14 employee organization to get nearly $1 million,” he said. “The purpose behind this program was to save entry-level jobs, people going in and working on that paycheck. That was what we put this out there for, to stop unemployment.”
Joan Kautz, co-owner of John Kautz Farms, said “That doesn’t balance out.” They employ 141 people and received a $1.3 million PPP loan. If 60% was used for payroll, as is required for this type of loan, ABC7 analysts estimate the loan amount would only add up to about $5,800 per employee for the three months – substantially different to what the $40,000 Villa Encinal Partners LP employees would receive under the same guidelines.
The Millbrae Pancake House had been in business for 60 years until it had to shut down on Nov. 29. The company employed 53 people and received a $432,400 loan, less than half of what Villa Encinal Partners LP received, although they had four times as many employees. “That seems unfair because there are small family businesses like ours that need that money,” said Erin Burke, the owner of the establishment.
Villa Encinal Partners LP also didn’t have to wait long to get the money. According to the report, the LP got its near million-dollar loan approved on April 14 – just 11 days after the program launched. Small business owners, on the other hand, did not have such an easy go of it. Joe Field, owner of the comic bookstore Flying Colors Comic and Other Cool Stuff said it took nearly a year to complete the process for his $40,000 small business loan.
“It was nine months of attempt after attempt,” Field said. “I tried to apply through four different banks. It wasn’t until that day, with two hours to spare, that we were finally able to get through.”
But Villa wasn’t the only PlumpJack Group company with Newsom ownership that drew concerned brows. The Balboa Café Partners LP, which received its $506,799 loan on April 29, 2020, has major discrepancies in the number of reported employees. In June, a commercial data firm estimated the company employed seven people, however, according to ABC7, the SBA data which is associated with its loan application stated there were 55 employees.
Newsom-Owned PlumpJack Businesses That Received PPP Loans
The news outlet posted a list of PlumpJack businesses, the loans they received, and the number of employees on record. The investigative team found “discrepancies between that company’s SBA data and publicly available records.” The news organization published a list of the businesses, of which Newsom is at least part owner in nine, with data from the U.S. Department of the Treasury.
Villa Encinal Partners LP: $918,720 with 14 employees
CNCML, A California LP: $680,001.15 with 132 employees
Balboa CAF Partners, A California LP: $506,799 with 55 employees
PlumpJack Management Group, LLC: $337,062 with 14 employees
PlumpJack.com LLC: $138,787 with 17 employees
Soma Lounge LLC: $87,400 with 37 employees
Sunset Bar LLC: $82,391 with 15 employees
Pierce Street Partners LLC: $72,059 with 15 employees
PlumpJack Sport LLC: $41,537 with eight employees
Jeff Nead, the spokesperson for the PlumpJack Management Group sent a statement in response to the discoveries:
“Plumpjack Management Group is operating within the federal guidelines created for COVID-19 SBA loan recipients. These funds have been critical in keeping our staff employed and continuing our operations. Any implication that we have done anything outside of the guidelines (or that we have filed for forgiveness on the loan) is irresponsible.”
It is possible that PlumpJack won’t file for forgiveness which means it would only have to pay the loan back at 1%. For those in the business world, however, that is still taking gross advantage – profiting during a pandemic that is leaving so many small business owners without their companies.
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Read more from Kelli Ballard.
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