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Companies linked to Gov Newsom got nearly $3 million in PPP loans while small businesses suffered

As recall rumors circulate, it has surfaced that a number of companies founded 28 years ago and connected to California Gov. Gavin Newsom have received nearly $3 million in the coronavirus-related Paycheck Protection Program while other small businesses failed to receive funds. That’s more than eight times the amount originally reported. The money from the Small Business Administration-run program was dispersed among nine businesses associated with PlumpJack, a wine business Newsom started in 1992.

Newsom placed his business holdings in a blind trust before he took over the governor’s office in January of 2019. That means he would not have had a part in any of the loan decisions related to the companies. Regardless, the loans raise ethical considerations.

Sean Moulton of the nonpartisan Project On Government Oversight said the companies may have been given preferential treatment “not because the governor asked for it, but because of all the connections that exist.” Private banks administered the loans to speed their distribution.

“It seems to be a small business but it got a lot of money,” Moulton stated. “I’m not sure how the company justifies taking that much money when there were a lot of companies looking to get assistance. You hope they’re using it wisely because there’s an opportunity cost there — that money didn’t get used for another small business that may be out of business now.”

PlumpJack Management Group LLC includes a ski resort, five restaurants and bars, four Napa Valley wineries, a sports retailer, and more.

The business reported earlier this year that they received $150,000 to $350,000 in loans in April and said it used the money to keep on 14 employees.

PlumpJack spokesman Jeff Nead said the money was used for 358 employees spread across all the managed businesses. They used the loans “to protect our workers and keep them employed,” he said. Nead also stated the company followed all federal guidelines.

Villa Encinal Partners Limited Partnership received the lion’s share of the funds… over $900,000. They are connected to a PlumpJack winery in Napa. San Francisco billionaire Gordon Getty is an investor.

The SBA requires that companies who are recipients of PPP loans spend 60% of it on their payroll for loan forgiveness. The company has only 14 employees so that would make the average salary approximately $160K.

“It’s unexpected for a 14-employee organization to get nearly $1 million,” Moulton noted. “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.”

The majority of 14-employee companies have received around $128,000 in loans. Less than one of PlumpJack’s employees.

It’s not clear if the company or its affiliates will seek to have the loans forgiven, if they spent that much on salaries, or if they overstretched on their loan applications in the frantic early months of the program, Moulton said, in part because federal reporting requirements are so lax.

“Before taking office, the Governor transferred title and control of the businesses he founded to a blind trust, a step that goes beyond anything required by law,” Jesse Melgar, Newsom’s communications director, wrote.

Newsom has faced criticism for sending his children to a private school while he is shutting down public schools. He’s also getting nailed for celebrating at a fancy Napa restaurant last month with several others while advising Californians to stay home. No one wore masks and there were a dozen people in attendance.

While thousands of California businesses are being forced to go out of business, Newsom’s businesses are being funded by the federal government to keep their doors open. The governor’s 2018 tax returns show he and his wife made $1.2 million from wages and investments – a majority of which stems from his ventures in wine and hospitality.

PlumpJack Businesses That Received PPP Loans:

  • PLUMPJACK.COM LLC — $138,787
  • SOMA LOUNGE LLC — $87,400
  • SUNSET BAR LLC — $82,391
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