Ozy Media employees failed to receive $5.7 million in PPP loans: ex-employees

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

Kimberly White | Getty Images

Several former Ozy Media employees say there is no evidence the millions of dollars the company received through a federal Covid relief program to protect paychecks were ever used to save jobs or increase wages .

Ozy, which came under scrutiny after numerous reports of questionable business tactics, applied for two loans through a program called the Paycheck Protection Program, or PPP. according to the Small Business Administration website.

Ozy’s first $3.75 million loan was approved in April 2020, one month after the US government passed a $2 trillion Corona relief bill. The company was approved for an additional $2 million in February 2021.

It’s unclear how Ozy used the PPP funds. Ozy Media co-founder and CEO Carlos Watson did not respond to multiple emails asking specific questions about how the company used the money or who decided how the money was used. He also didn’t answer a question as to why Ozy had applied for the second loan. The company complained had sales of $50 million in 2020. Earlier this year, several employees were laid off and salaries cut.

Ozy announced last week that it was closing its doors after a series of reports cast doubt on the company’s business practices. The New York Times details an event from February — the same month that Ozy received its second PPP loan — where co-founder and chief operating officer Samir Rao posed as a YouTube exec on a conference call with Goldman Sachs in hopes of securing a $40 million investment .

During an interview on syndicated radio show The Breakfast Club on Tuesday, Watson said he asked Rao to step downalthough it was claimed the incident stemmed from a “mental health theme.”

While it wasn’t unusual In order for media companies to participate in the PPP, Ozy specifically earmarked its loans for payroll. Full-time employees who worked for Ozy told CNBC they had no idea where the money went and that it was not used to restore their salaries after they took pay cuts.

“No one to my knowledge and I speak to at least 10 people. Nobody got anything back in salary after getting those PPP loans,” said a former employee who left Ozy earlier this year.

“I must have followed Samir [Rao] four to six times,” said another in reference to salary reinstatement. “It was discouraging. You work so hard and give your life to this company only to be fired and disregarded.”

The former Ozy employees who spoke to CNBC worked in different departments at the company. They spoke on condition of anonymity to discuss private matters and to avoid retribution.

watson said Axios in January 2021 — a month before raising the second PPP loan — that his company was profitable for the first time in 2020 after raking in $50 million in revenue. The times first reported that Ozy inflated his traffic numbers and has a history of exaggerating its success. Watson told CNBC earlier this week that Ozy overmarkets about 20% of the time.

“It’s on me and I own it” said Watson on Monday.

Axios first reported that Ozy was laid Laid off around 20% of its employees in early 2020. The news outlet also reported that Ozy took pay cuts of around 19%. CNBC has since learned that some employees have made even bigger cuts, including one person whose pay was cut by 35%, according to two people familiar with the matter.

Watson announced on Monday that Ozy plans to keep its doors openonly days after telling employees the company was closing. Also on Monday, LifeLine Legacy Holdings, which claims to have invested $2 million in Ozy Media, filed a lawsuit against the companyaccused of “fraudulent, misleading and unlawful conduct”.

wealth reported Wednesday that Watson reached out to staff and asked them to return to Ozy.

PPP loan status

PPP, initiated under then-President Donald Trump’s administration, raised nearly $800 billion in forgivable credit for struggling small businesses coronavirus pandemic raged.

The SBA website states that Ozy’s PPP loans, officially originated by Silicon Valley Bank, are ongoing and each “has not yet been fully repaid or granted.” For his first loan, Ozy identified his line of business as “custom computer programming services.” according to SBA website. For the second loan, Ozy’s industry is described as “Internet publishing and broadcasting and web search portals.”

Ozy claimed that the majority of the loan money would be used for payroll and that the money helped the company retain 143 jobs, the company said Loan document February 2021. Watson told The Breakfast Club on Tuesday that Ozy had a “75-plus” full-time workforce prior to Friday’s shutdown.

Watson also said in that interview he hasn’t taken a salary to employ more people at his company since the pandemic began.

Representatives for Ozy and Watson did not respond to requests for comment. Silicon Valley Bank officials referred questions about the loans to Ozy and declined to comment further. National Public Radio’s David Folkenflik tweeted Wednesday that Watson’s new spokesman, Phil Singer, resigned after just four days on the job.

Watson has spoken to multiple outlets, including CNBC’s “Squawk box‘ as Ozy’s board told employees the company was closing, but he didn’t respond to multiple requests to comment on this article. CNBC also sent an extensive list of questions to Watson, who did not respond to a request for comment before publication.

A spokeswoman for the SBA declined to comment on the loans to Ozy, but did provide an explanation of how such loans were made.

“The PPP is a delegated lending process in which participating lenders act as government representatives to approve and disburse loans,” Shannon Giles, a spokeswoman for the SBA, said in an email to CNBC on Tuesday. “A participating lender submits to the SBA a previously approved PPP loan application for federal guarantee. The SBA does not have details of PPP loan disbursements. This is a third-party transaction between the lender and the borrower. Each PPP participating lender must implement the program for its borrowers under its rules and program policies established by Congress.

Ozy Fest costs

The 2020 loan came a year after Ozy Media was set to host its annual Ozy Fest in New York on Central Park’s Great Lawn. Although it finally was canceled due to heat in summer, The Times reported that top tickets for the event sold out at $400. The festival would feature music by John Legend, food by celebrity chefs like Rachael Ray and comedy by Daily Show host Trevor Noah.

CNBC’s Andrew Ross Sorkin asked Watson directly in 2019 how much the company had to pay the City of New York to host the extravaganza.

“You just say I’m dating Andrew Ross Sorkin and it’s all working out, so that’s just the way it is,” Watson replied. “One of the things that we really appreciate is that the city has embraced it,” Watson added. He also said in the same interview that they expect 100,000 people to attend the 2019 event.

In fact, Ozy paid the city at least as much as $2 million to use Central Park’s Great Lawn, according to a person briefed on the matter. The company spent a similar amount marketing the festival. It’s unclear what happened to that money after the event was cancelled.

Former baseball superstar Alex Rodriguez, who appeared with Watson in the interview, suggested at the time that at least some festival-goers would be privy to some sort of “swag.” When asked about this year’s “swag bag,” Watson said it contained “unusual VR.” [virtual reality] Headphone.”

Rodriguez members of the press have yet to respond to CNBC’s requests for comment.

Ozy Fest was also the focus of legal headaches for Watson, which raised further questions about his company’s business model long after the matter was settled. Music industry legends Sharon and Ozzy Osbourne sued over the name Ozy Fest in 2017, saying it was too close to the name of their music festival, Ozzfest. The sides finally reached an agreement.

Then, in 2019, Watson claimed live on CNBC that Sharon and Ozzy Osbourne were friends and investors in his company after a year-long legal battle. Sharon Osbourne recently told CNBC they’d never been friends with Watson or any investors at Ozy Media. In an interview aired Monday on CNBC, Watson said there was an agreement that the Osbournes would receive around 50,000 Ozy shares as part of a settlement. Sharon Osbourne also called Watson a “shyster”.

Watson also denied Monday that he called Sharon Osbourne a friend.

“I didn’t say she was a friend. You know what? Then play the tape. Please go ahead and play the tape. You know what, listen to the tape,” Watson said Monday.

The tape reveals that Watson actually referred to the Osbournes as friends during the 2019 interview: “Fun fact: Our friend Ozzy and Sharon sued us briefly and then we decided to be friends and now they’re investors in Ozy.”

WATCH: Ozy Media CEO Carlos Watson calls the Osbournes ‘friends’ during 2019 interview

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