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Phunware, Trump campaign data firm, defends nearly $3 million small business loan

Controversy over pandemic stimulus allocation
Controversy over pandemic stimulus allocation... 02:53

A company working with President Donald Trump's re-election campaign is defending a nearly $3 million loan it received from the federal coronavirus relief fund for small businesses, responding to criticism and a lawsuit accusing it of receiving preferential treatment.

Phunware was eligible for the low-interest loan through the Paycheck Protection Program, which is aimed at businesses with 500 or fewer workers. The digital data company said in a news release Monday that on March 27 it furloughed 34 full-time employees and three interns, leaving it with 54 full-time employees and one intern.

Phunware's $2.85 million loan was nearly 14 times the current PPP average of $206,000. 

Former JPMorgan executive Blythe Masters became Phunware's board chair on March 30. The company said in its statement Monday she was not involved in the PPP loan application. Phunware also said it has had a relationship with JPMorgan Chase since April 2017. It applied for the PPP loan through the bank on April 8 and received the money two days later.

"The company was pleased to have completed the application process with its lender without needing her involvement and has not compensated her, nor any other director for this outcome," the Phunware statement said. "During this period, all board member cash compensation has been halted."

Billionaire Barry Diller says "no chance" of ... 06:11

The Austin American-Statesman reported Friday that Phunware tried several other banks before securing the loan through Chase, citing Phunware Chief Operating Officer Randall Crowder as its source for the information.

"While the company will work with its advisers to ensure its eligibility given changing guidelines, it currently believes that it remains fully eligible and compliant," Phunware said Monday of its low-interest PPP loan.

Phunware also said it "expects to have to repay its PPP loan at maturity, with loan proceeds in the interim being used for payroll costs, rent, utilities and employee retention." An expectation of repayment at loan maturity suggests Phunware may not meet one of the government's key requirements for complete loan forgiveness: using 75% of PPP loan funds to rehire furloughed workers and keep the employees on a company's payroll for eight weeks. 

Phunware was named in a federal lawsuit filed Friday in Illinois by a small business named Sha-Poppin Gourmet Popcorn, which applied for, but did not receive, a PPP loan. The suit accuses the company of receiving "the white glove treatment from Chase." The lawsuit also names Ruth's Chris Steak House and JPMorgan Chase.

Ruth's Chris, a national restaurant chain, initially accepted a $20 million PPP loan, but announced last week that it was returning the funding. JPMorgan Chase declined to comment on the lawsuit. 

Small businesses struggling to secure funding... 02:07

In its press release, Phunware said it "intends to defend itself vigorously against the frivolous lawsuit claiming that by virtue of a privileged banking relationship it somehow harmed an unsuccessful applicant." 

"Phunware had no control over any decisions of its lender, nor the SBA, in accepting its application," the company said.

Phunware CEO Alan Knitowski declined to comment to CBS MoneyWatch on the Sha-Poppin lawsuit. Instead, he pointed in an email to development work he said the company has done for a division of CBS. Investor presentations made by the company list such corporate clients as Fox Networks, the WWE and the NFL as well.

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