A Sacramento-area card room was closed by regulators in January. Then it got a PPP loan
The federal government’s popular Paycheck Protection Program loans were supposed to be limited to businesses that were clobbered by the shutdown of the economy after the coronavirus pandemic struck in March.
But a Sacramento-area card room obtained a PPP loan even though it had already been closed by California officials because of regulatory violations.
Magnolia House Casino received a PPP loan of between $150,000 and $300,000, according to federal Small Business Administration records. Under SBA guidelines, the loans were reserved for borrowers that were in operation Feb. 15, about a month before the economy went into its deep freeze.
Magnolia House, though, was closed in early January by the California Department of Justice. Attorney General Xavier Becerra said the Rancho Cordova card room “was seriously underfunded, threatening significant losses to patrons and players.” The tiny casino had been unable “to maintain sufficient funds to cover the cost of patrons cashing out their chips,” he added.
Thomas B. Sheridan, a Folsom lawyer who controls 90 percent of Magnolia House’s ownership, declined comment on the loan.
SBA records say the loan to Rancho’s Club Casino Inc., the card room’s official name, was approved May 1 and would be used to retain 35 jobs.
The SBA has lent hundreds of billions of dollars under the PPP program. PPP loans have been coveted by businesses and nonprofits struggling to stay afloat, in large part because the federal government will forgive the debt under certain circumstances. At the same time, the program has come under fire amid revelations that some of the money has gone to companies controlled by wealthy celebrities or borrowers with strong political connections.
The Washington Post reported that borrowers included a law firm that has represented President Donald Trump, a fast-food chain controlled by an Oklahoma congressman and a shipping business controlled by the family of U.S. Transportation Secretary Elaine Chao.
California recipients include PlumpJack Management Group LLC, the winery and hospitality company founded by Gov. Gavin Newsom. His ownership interest in PlumpJack is now held in a blind trust. PlumpJack borrowed between $150,000 and $300,000.
Sheridan has agreed to sell Magnolia House under a deal announced in late May by the attorney general’s office. The agreement gives Sheridan 12 months to find a buyer. It also allows him to reopen the card room during that 12-month period if he follows cash-management procedures and files weekly financial statements with the California Gambling Control Commission.
Even though card rooms were allowed to reopen for several weeks as Newsom relaxed COVID-19 restrictions, the attorney general’s office said Magnolia House was never cleared to resume operations. .Newsom has since ordered the statewide shutdown of card rooms, and many other indoor businesses, as coronavirus infections have surged.
This story was originally published July 16, 2020 at 12:26 PM.