BOSTON, July 13 (Reuters): Private investment firms that manage the fortunes of wealthy individuals and their kin were approved for millions of dollars in taxpayer-funded relief loans designed to help small businesses weather the coronavirus lockdown, according to a review of recently released government data.
The companies - often referred to as "family offices" - approved for the forgivable loans from the Small Business Administration (SBA) included those that oversee money for the family that co-owns the National Basketball Association's Sacramento Kings; the former manager of a multi-billion dollar hedge fund firm; and a serial Las Vegas entrepreneur.
The new data from the US Treasury Department and SBA shows only that the loans were approved from the Paycheck Protection Programme (PPP) but does not say how much was disbursed or if they had been returned or forgiven. Still, it was not always clear why the families found it necessary to apply for emergency cash, usually for less than $1 million, given the substantial funds available implied by having private investing vehicles.
"The PPP was meant for struggling small businesses who aren't able to operate at normal capacity," said Andrew Park, senior policy analyst at Americans for Financial Reform. "This is akin to dipping their hands into a charity jar."
Among those approved: Rothschild Capital Partners LLC, a New York-based firm that manages money for its chief executive, 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 filings. Representatives for Rothschild did not respond to requests for comment.
The family offices identified by Reuters usually applied for the SBA loans in March or April, when financial markets were substantially lower or some of their portfolio companies 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 shared staff with its family foundations at a moment when its investments had declined, allowing for continued assistance to local non-profits.
The public data shows a loan to Zarrow of between $150,000 and $350,000 and 14 jobs retained. The Anne and Henry Zarrow Foundation had assets of $473 million at the end of 2018, according to a public filing.
"When this national programme became available, the stock market had just experienced a significant loss with projections of more to come," Bill Major, the executive director of Zarrow's foundations, wrote in an email. "The funds were procured to maintain the staff and to maximize the funds available to support non-profits who were in crisis."
About 2,000 firms that manage money or advise on investments, such as hedge funds or wealth advisors (here), were approved for loans, meant to shore up payroll and rent costs for small companies, according to the data released last week. All told, the SBA said in a report, finance and insurance firms represented $12.2 billion across 168,462 loans, about 2.3 per cent of the programme's total lending as of June 30.
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