The investigation’s findings, first detailed Tuesday on Fox News by former Rep. Jason Chaffetz, a GAI distinguished fellow, provide revelations of the role Abrams had in securing her company’s contracts for government-backed loans while Abrams was serving as Democrat minority leader in the Georgia House from 2011 to 2017.
Abrams, who narrowly lost her bid for governor in 2018 and is now running again, “has been somewhat coy about her role in a sweetheart deal her company inked with the State of Georgia in 2013,” Chaffetz wrote.
Abrams cofounded the financial services company NOWaccount, now known as Now Corp., in 2010 with business partners Lara Hodgson and John Hayes.
NOWaccount’s stated purpose was to help small businesses grow, which it would do by loaning the businesses money upfront for invoices the businesses were awaiting payment on. NOWaccount would eventually secure state contracts in 2014 that allowed it to use federal taxpayer dollars to replenish loans left unpaid, a fact previously reported by the Atlanta Journal-Constitution in 2018.
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NOWaccount had a revenue of $100,000 in 2013, Chaffetz noted, just ahead of it applying for and receiving private lender status from the Georgia Department of Community Affairs (DCA). Its newfound lender status allowed NOWaccount to give out loans through two entities, and those entities would be reimbursed with taxpayer dollars whenever the loans were not paid.
GAI obtained documents, Chaffetz wrote, that revealed “Abrams was an integral part of the application process related to a state government small business loan program that would benefit NOWaccount.”
Abrams was, for instance, touted as a “key manager” on one of the entities’ applications that was submitted to the Georgia DCA, an application that was approved in April 2014.
That entity, called the Small Business Credit Cooperative, also had Abrams listed as an officer on its incorporation document when the entity was created in conjunction with the Georgia DCA.
The private lender status afforded to NOWaccount, in which Abrams had and still maintains a financial stake, was also unique considering that “when NOWaccount later attempted to persuade other states to adopt a similar program – states where Abrams was not in the legislature – no other state would offer the same approach,” Chaffetz wrote.
The special negotiations with the Georgia DCA “put taxpayers on the hook for loans approved by NOWaccount that were not paid,” he continued. “This benefited NOWaccount’s bottom line and Abrams’ investment in the company.”
GAI discovered that Abrams’ business partner wrote in a Harvard Business School case study that the federal loan program allowed NOWaccount “to scale faster because the government is in the first-loss position, not our lenders.” Chaffetz explained of that finding, “In other words, with taxpayers on the hook for bad loans, the company could more easily attract investors.”
The AJC’s initial report on Abrams’ company’s use of state contracts for its loans in 2018 came as Abrams was making her first run for governor and coming under heightened scrutiny.
Abrams told the outlet she was no longer an employee of her company as of August 2016. Abrams also said she was informed verbally by the attorney general, a Republican, at the time that she was not violating any ethics but that she still “walled” herself off from the company’s business dealings with the state.
“I’m proud of what NOWaccount did,” Abrams said. “I went to a Republican attorney general to make certain I was not in violation of even the spirit of the law. After being told there was no conflict of interest, I still walled myself off” from NOWaccount’s dealings with the Georgia DCA.
As GAI found, however, Abrams could not have been entirely “walled” off while the Democrat lawmaker’s name was featured throughout the process of securing state contracts, the same contracts that later allowed federal funds to pay off her business’s defaulted loans.
The federally funded loan program ended in 2017, Chaffetz noted, but Abrams’ company, which she still maintains a stake in, appears to be growing as two investment companies just poured $29 million into the business, presently known as Now Corp.