Technology

Oz Media workers didn’t obtain a $ 5.7 million PPP mortgage: Ex-Staff

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Carlos Watson is taping a television debate for Take On America With OZY at Bently Reserve on October 29, 2018 in San Francisco, California.

Kimberly White | Getty Images

Several former Ozy Media employees say there is no evidence that the millions of dollars the company received through a federal Covid aid program to protect paychecks was ever used to save jobs or raise salaries .

Ozy, 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, a month after the U.S. government passed a $ 2 trillion coronavirus relief bill. The company was approved for an additional $ 2 million in February 2021.

It is unclear how Ozy used the PPP funds. Ozy Media Co-Founder and CEO Carlos Watson didn’t respond to multiple emails with specific questions about how the company used the money or who decided how the money was used. Nor did he answer a question about why Ozy applied for the second loan. The company claimed to have $ 50 million in sales in 2020. It laid off several employees and cut salaries earlier this year.

Ozy announced last week that it would close its doors after a series of reports cast doubts about the company’s business practices. The New York Times described an event in February – that same month Ozy received his second PPP loan – where co-founder and chief operating officer Samir Rao impersonated a YouTube executive in a conference call with Goldman Sachs in hopes of investing in $ 40 million.

During an interview on Tuesday’s syndicated radio show “The Breakfast Club”, Watson said he asked Rao to resign despite alleging the incident was due to a “mental health problem”.

While it wasn’t uncommon for media companies to get involved in the PPP, Ozy dedicated his loans specifically to payroll. Full-time employees who worked for Ozy told CNBC that they had no idea where the money was going and that it was not used to restore their salaries after they made wage cuts.

“Nobody to my knowledge, and I speak to at least 10 people. Nobody refunded his salary after receiving these PPP loans,” said a former employee who left Ozy earlier this year.

“I must have tracked down Samir [Rao] four to six times, “said another, referring to the deferred salary.” It was disheartening. You work so hard and give your life for this company to be fired and not respected. ”

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

Watson told Axios in January 2021 – a month before taking out the second PPP loan – that his company was profitable for the first time in 2020 after generating $ 50 million in revenue. The Times first reported that Ozy had inflated its traffic numbers and overstated its past success. Watson told CNBC earlier this week that Ozy overdid himself about 20% of the time.

“It’s up to me and that’s mine,” said Watson on Monday.

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

Watson announced Monday that Ozy plans to keep its doors open just days after telling employees that the company would close. Also on Monday, LifeLine Legacy Holdings, which claims it has invested $ 2 million in Ozy Media, filed a lawsuit against the company for “fraudulent, fraudulent and illegal behavior.”

Fortune reported Wednesday that Watson reached out to employees asking them to return to Ozy.

PPP loan status

PPP, initiated under the administration of then-President Donald Trump, generated nearly $ 800 billion in forgivable loans for small businesses grappling with the rampant coronavirus pandemic.

The SBA website states that Ozy’s PPP loans, officially granted by Silicon Valley Bank, are still pending and “not yet fully repaid or waived”. For his first loan, Ozy identified his industry as “custom computer programming services,” according to the SBA website. For the second loan, Ozy describes the industry 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 keep 143 jobs, according to the February 2021 loan document. Watson said in an interview with The Breakfast Club on Tuesday that Ozy had “over 75” full-time employees before closing on Friday.

Watson also said in this interview that he has not taken a salary since the beginning of the pandemic in order to employ more people in his company.

Representatives from Ozy and Watson did not respond to requests for comment. Silicon Valley Bank officials asked Ozy about the loans and refused to comment. National Public Radio’s David Folkenflik tweeted Wednesday that Watson’s new spokesman Phil Singer resigned after just four days in office.

Watson has spoken to multiple outlets, including CNBC’s “Squawk Box,” since Ozy’s board of directors notified employees that the company was closing, but it didn’t respond to multiple requests to comment on this article. CNBC also sent Watson an extensive list of questions that did not return a request for comment prior to publication.

A spokeswoman for the SBA did not want to comment on the loans to Ozy, but explained how such loans were granted.

“The PPP is a delegated lending process in which the participating lenders act as the government’s agent to approve and disburse loans,” SBA spokeswoman Shannon Giles told CNBC on Tuesday in an email. “A participating lender submits an already approved PPP loan application for the federal guarantee to the SBA. The SBA has no information on PPP loan disbursements. This is a third party transaction between the lender and the borrower. Each PPP participating lender is required to implement the program for its borrowers within the framework of its Congress-granted rules and program guidelines. “

Cost of the Ozy Fest

The 2020 loan came a year after Ozy Media was scheduled to host its annual New York Ozy Fest on Central Park’s Great Lawn. Though it was finally canceled because of the heat that summer, The Times reported that top tickets to the event were selling at $ 400. The festival was supposed to 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 City to host the extravaganza.

“They just say I’m with Andrew Ross Sorkin and everything works out so it’s easy,” Watson replied. “One of the things we really appreciate is that the city has embraced it,” added Watson. He also said in the same interview that they expected 100,000 people to attend the 2019 event.

In fact, Ozy paid the city up to at least $ 2 million to use the Great Lawn in Central Park, according to one person brought up on the matter. The company spent a similar amount on marketing the festival. It is unclear what happened to that money after the event was canceled.

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

Rodriguez’s press representatives have yet to respond to CNBC’s requests for comment.

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

Then, in 2019, Watson claimed live on CNBC that Sharon and Ozzy Osbourne were friends and investors in his company after years of litigation. Sharon Osbourne recently told CNBC that they were never friends with Watson or an investor in Ozy Media. In an interview broadcast 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 play the tape. You know what, pull up the tape, ”Watson said on Monday.

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

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

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