Small business owners react after companies founded by Gov. Newsom receive nearly $3M in PPP loans

ByStephanie Sierra and Lindsey Feingold KGO logo

Thursday, December 10, 2020

Reaction pours in after companies tied to Newsom get $3M in PPP loans

Reaction continues to pour in following an ABC7 I-Team investigation revealing nine companies part of a group founded by Governor Gavin Newsom received millions in funding through the Paycheck Protection Program.

SAN FRANCISCO -- Reaction continues to pour in following an ABC7 I-Team investigation revealing nine companies part of a group founded by Governor Gavin Newsom received millions in funding through the Paycheck Protection Program.

Newly-released data from the Small Business Administration and analyzed by ABC7 indicates PlumpJack businesses, including wineries, bars and restaurants, collectively received nearly $3 million in federal funding intended for small businesses.

Eight of the companies are partially owned by Newsom.

ORIGINAL STORY: Companies part of group founded by Newson collectively get nearly $3 million in PPP loans, data shows

In 2018, Newsom placed his ownership interests in the PlumpJack Group into a blind trust. This means he would have no knowledge or role in the company's business decisions made during his time in office. However, Newsom is receiving hundreds of thousands of dollars from these companies in gross income, per his 2019 Statement of Economic Interest.

Small businesses respond

Hundreds of small business owners who struggled to access PPP funds are responding to ABC7's data analysis.

"It seems as if a lot of the large companies were being taken care of by the banks first and the small guys like me were kind of left on the sidelines," said Joe Field, owner of Concord-based comic book store Flying Colors Comic and Other Cool Stuff.

ABC7 followed Field's journey to get a PPP loan since the federal lending program first opened on April 3, 2020. Field applied that day, but struggled to get money for months.

"It was a miserable process," he said.

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ABC7's data analysis found one of the PlumpJack businesses, Villa Encinal Partners LP that received $918,720, got their loan approved on April 14. That's 11 days after the lending program launched.

It took Field 90 days to get his roughly $40,000 loan approved.

"It was nine months of attempt after attempt," he said. "I tried to apply through four different banks."

Field got his application approved at the end of June.

"It wasn't until that day, with two hours to spare, that we were finally able to get through," he said.

Villa Encinal Partners LP is one of at least nine companies of the PlumpJack Group that received PPP loans. This particular company raised eyebrows after SBA data disclosed the company received $918,720 to retain 14 employees.

"That doesn't balance out," said Joan Kautz, co-owner of John Kautz Farms, a family-owned winery business in Lodi.

Kautz received a PPP loan worth around $1.3 million and retained 141 employees.

To put that in perspective, ABC7's data analysis found the average number of employees retained for every California winery that received more than $900,000 in PPP loans is 148.

"The point of the loans were to retain as many as possible to help businesses get through this tough time," said Kautz. "It helped us retain our employees."

According to SBA loan data, Kautz retained 141 employees with around $1.3 million. Assuming 60 percent is used towards payroll, a requirement of the SBA, that amounts to roughly $5,800 per employee for a period of three months.

As a comparison, doing the same math, each of the 14 employees at PlumpJack's Villa Encinal Partners LP would've received around $40,000 for a period of three months.

ABC7 reached out to PlumpJack Management Group a second time requesting payroll records to see how each of the 14 employees of Villa Encinal Partners were paid.

We received this statement from Jeff Nead, spokesperson for the PlumpJack Management Group:

"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."

"If somebody ended up with close to $1 million and had 14 employees, the math just doesn't work," said Steve Mayer, an accountant and financial consultant of SD Mayer & Associates.

Mayer has helped more than 200 businesses in San Francisco apply for PPP loans.

"The entire process was a mess unless you were able to figure it out yourself or get professional help," Mayer explained. "The little guy, mom and pop people were completely passed over."

ABC7 made a third attempt to reach the Governor regarding this report, but have yet to hear back.

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