Stacey Abrams goes from debt to millionaire
'Outnumbered' panelists discuss how activist and Georgia gubernatorial candidate Stacey Abrams went from being hundreds of thousands of dollars in debt to reporting a net worth of $3.17 million.
Just three years after it was reported that taxpayers bailed out bad loans made by Stacy Abrams’ financial technology company NOW Corp.(previously NOWaccount), the company that Abrams helped start managed to secure $29 million in new financing from a private equity firm in late 2021.
Interestingly, in 2018 Abrams' net worth was reported to be just $109,000. However, just as NOW Corp.’s fortunes changed in three years, Abrams reported her net worth increased to $3.17 million during the same period.
While most media reports attribute Abrams' significant increases in net-worth to speeches and advances for book projects, her investment in Now Corp. has received little attention, even though she still has a financial stake in the company.
STACEY ABRAMS NOW A MILLIONAIRE AS SHE AIMS TO TAKE GOVERNOR'S OFFICE
What happened with Now Corp. while Abrams was serving as an elected official in the Georgia House of Representatives has been painstakingly pieced together by the Government Accountability Institute, where I serve as a distinguished fellow, through the review of record requests and financial documents.
Stacey Abrams speaks onstage during the 2021 Robert F. Kennedy Human Rights Ripple of Hope Award Gala on Dec. 9, 2021, in New York City. (Slaven Vlasic/Getty Images)
Abrams, who is running for Governor of Georgia again and who has openly acknowledged her plan to run for president by 2040, has been somewhat coy about her role in a sweetheart deal her company inked with the State of Georgia in 2013.
Abrams told a reporter in 2018 that she "walled myself off" from the relationship between her company and the state government office that was doing business with NOWacount. However, according to documents reviewed by GAI, Abrams was an integral part of the application process related to a state government small business loan program that would benefit NOWaccount.
In 2013, when NOWaccount had just $100,000 in revenues, the Georgia Department of Community Affairs (DCA) helped the business tailor a federal loan program which figured to make the company more profitable. 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.
STACEY ABRAMS-LINKED GROUP PARTNERED WITH ATLANTA PUBLIC SCHOOLS ON ANTI-VOTER ID LESSONS
Essentially, Abrams' company was permitted to act as a private lender and to implement NOWaccount's unique business model.
NOWaccount’s model was to purchase receivables from businesses that have not yet been paid for service provided. NOWaccount provided the business with cash in return for the right to collect funds due, charging the business a fee. The financial success of Abrams’ company was, in part, based on minimizing the number of customers that defaulted on the loans.
And this is where the relationship with the Georgia DCA helped NOWaccount.
The unique relationship with the Georgia DCA put taxpayers on the hook for loans approved by NOWaccount that were not paid. This benefited NOWaccount’s bottom line and Abrams’ investment in the company.
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Abrams and her partners in 2013 and 2014 used two entities to facilitate the use of the federal loan program signed into law by President Obama to help out small business after the Great Recession. The program distributed $1.5 billion to state governments to create loan programs that were guaranteed by the federal government.
One of the NOWaccount’s entities was backed by nonprofit credit unions and another was backed by "a major private equity firm." Presumably, the second entity would need to earn higher returns to attract private equity.
These entities – created and controlled by NOWaccount - would be reimbursed by the government program with taxpayer funds when loans defaulted.
Not surprisingly, the entity funded by private equity, Small Business Credit Cooperative (SBCC), reported three times the amount in loan defaults as the other entity, Trade Credit Guaranty Corporation (TCGC), which was funded by non-profit credit unions. One explanation for the discrepancy may be a willingness to take on riskier (and more profitable) loans to satisfy private equity.
Abrams’ business partner admitted in a Harvard Business School case study that NOWaccount’s use of the federal loan program "allows us to scale faster because the government is in the first-loss position, not our lenders." In other words, with taxpayers on the hook for bad loans, the company could more easily attract investors.
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According to state officials, the program was terminated by the Georgia DCA in 2017 before the program officially ended, due, in part, to mounting losses.
Now, as Abrams ramps up to run for governor again, her campaign website promotes her priority of "putting money back in the pockets of families." But it's apparent that during her stint as a Georgia legislator she was successful in devising schemes to put money back in the pockets of herself and her partners.
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