BOSTON (Reuters) – Private investment firms that manage the fortunes of wealthy people and their families have been approved for millions of dollars in taxpayer-funded aid loans designed to help small businesses weather the blockade of the coronavirus, according to a review of recently released government data.
Jacob Gottlieb, managing partner and chief investment officer of Visium Asset Management, attends a panel discussion titled “Covering Your Assets: A Crash Course on Investing in a Macro Driven Environment” at the annual Skybridge Alternatives Conference in Las Vegas, Nevada, USA May 8, 2013. REUTERS / Rick Wilking
The companies, often referred to as “family offices,” approved for the Small Business Administration (SBA) forgivable loans, included those that oversee money for the family who is the Sacramento Kings co-owner of the National Basketball Association; the former manager of a multi-million dollar hedge fund firm; and a serial entrepreneur from Las Vegas.
New data from the U.S. Treasury Department and SBA only shows that the loans were approved by the Paycheck Protection Program (PPP), but they don’t say how much was disbursed or whether they were returned or forgiven. However, it was not always clear why families deemed it necessary to apply for emergency cash, generally for less than $ 1 million, given the substantial funds available from having private investment vehicles.
“The PPP was intended for struggling small businesses that cannot operate at their normal capacity,” said Andrew Park, senior policy analyst at Americans for Financial Reform. “This is similar to dipping your hands into a jar of charity.”
Among those approved: Rothschild Capital Partners LLC, a New York-based company that manages money for its CEO, David D. Rothschild and others, got the go-ahead for a loan of up to $ 350,000 to retain eight jobs. The firm managed approximately $ 330 million at the end of 2019 on behalf of the Rothschild family and a group of wealthy investors, according to public documents.
Rothschild’s representatives did not respond to requests for comment.
Family offices identified by Reuters generally applied for SBA loans in March or April, when financial markets were substantially lower or some of the companies in their portfolio were struggling.
The Zarrow Family Office LLC in Tulsa, Oklahoma, confirmed to Reuters that it received a PPP loan and said it used the money to support staff shared with their family foundations at a time when their investments had decreased, allowing continued assistance to non-residents. local. earnings Public data shows a loan to Zarrow of between $ 150,000 and $ 350,000 and 14 jobs held. The Anne and Henry Zarrow Foundation had assets of $ 473 million at the end of 2018, according to a public filing.
“When this national program became available, the stock market had just experienced a significant loss with projections of more to come,” wrote Bill Major, executive director of the Zarrow Foundations, in an email. “The funds were acquired to maintain staff and maximize the funds available to support nonprofits that were in crisis.”
Approximately 2,000 companies that manage money or advise on investments, such as hedge funds or wealth advisers (here), were approved for loans, aimed at propping up payroll and rental costs for small businesses, according to data released last week. In total, the SBA said in a report that insurance and financial firms accounted for $ 12.2 billion in 168,462 loans, about 2.3% of the program’s total loans as of June 30.
Others who were approved for PPP loans include RAJ Capital Management LLC in Newport Beach, California. RAJ is a family office for the Bhathal family, who made their fortune in swimsuits and is now a co-owner of the Kings, among other investments. Public data shows a loan to RAJ of between $ 150,000 and $ 350,000 and 11 jobs held.
Lisa Bhathal Merage, a managing partner at RAJ, said in an email that the PPP funds the company accessed were on the “bottom side” of the reported range.
“Our family is not taking PPP. The use of funds is used to support the staffing of a new commercial company that experienced disruptions, ”he said. “The payroll of this business flows through the RAJ Capital Management umbrella, that is why the PPP was requested and granted under this name.”
According to the information, Yamagata Enterprises Family Office LLC, linked to Las Vegas serial entrepreneur Gene Yamagata, received two PPP loans of up to $ 350,000 from separate banks. A 2019 real estate credit report from the rating agency DBRS said Yamagata’s reported net worth was approximately $ 93 million as of November 2018.
The family office of former high-profile fund manager Jacob Gottlieb, New York-based Altium Capital Management LP, was also approved for up to $ 350,000 to retain eight jobs, according to the disclosure. Until recently, Gottlieb led Visium’s asset management of approximately $ 8 billion before closing amid a financial fraud scandal. (here)
Representatives of Yamagata and Gottlieb did not respond to requests for comment.
Overall, the government loan program protected about 51.1 million American jobs (here), the Trump administration said last Monday, as it revealed how $ 521.4 billion in taxpayer cash was injected into small businesses.
The loans were largely approved in good faith, and borrowers certified their eligibility and the accuracy of the data they provided, meaning that the figures on how many jobs were held have not been thoroughly examined. Loans that appear to violate the letter or spirit of the rules cannot be forgiven. The Treasury plans to carry out a full review of loans of more than $ 2 million, which means that, for now, at least many of the loans to family businesses may go unnoticed.
Reports by Lawrence Delevingne; Editing by Tom Lasseter and Andrea Ricci