Bitwise Industries, the Fresno-based company in the news this week for its apparent financial collapse, has a $1 million services contract with the city.

Councilmen Mike Karbassi and Nelson Esparza want to end that contract and get the city’s money back.

At a Thursday news conference, Karbassi and Esparza announced they will bring legislation next week to cancel a $1 million contract approved in 2022.

Officials Want to Cancel Contract

The deal, a pass-through grant from federal ARPA funds, allowed Bitwise to create a digital empowerment program — helping small businesses with technology in a post-pandemic world.

Karbassi also wants to halt any business relationship with Bitwise until it sorts out its financial issues.

Bitwise furloughed its 300 Fresno employees and hundreds around the country on Monday night. It also is late in paying county property taxes, faces at least one breach of contract lawsuit, and is having other payroll problems.

City officials say Bitwise received $500,000 of funds from the federal grant so far. In the latest accounting period, they spent $120,000. The next accounting period is due July 14.

Now: #Fresno Councilman @D7Esparza says motion will come to end $1M contract with Bitwise, and end any other business relationships. pic.twitter.com/54YjZ6f6iJ

— David Taub (@TaubGVWire) June 1, 2023

Councilman on Bitwise CEO

When asked if they felt Bitwise co-CEO Jake Soberal and Irma Olguin Jr. may have committed criminal acts, neither Karbassi nor Esparza would weigh in.

“I can’t comment if anyone’s criminal. But I can say in the case of Mr. Soberal, he’s very irresponsible. And no, I would not hire him or the other 54 vice presidents the company has for some reason,” Karbassi said.

“To pass judgment, it’s too soon to say,” Esparza said.

Both councilmen said they barely knew the Bitwise leaders. Esparza said his relationship never went beyond a handshake.

Watch the News Conference

Due Diligence on Funds

City Manager Georgeanne White said the city did perform its due diligence on the Bitwise application.

“At the time that we did do that review, they did have sufficient accounting controls in place in order to be able to account for those dollars, as demonstrated by the first quarter report that we received,” White said.

But, one Bitwise entity, Bitwise Consulting, has not paid its city taxes since September 2021. White said city regulations cap the amount owed, so at most, the company would owe around $21,000.

When asked how a company with a tax delinquency could receive city funds, White said, “I think that’s one of the things that we need to tighten up.”

White said the “worst-case scenario” is for the city to take Bitwise to court.

Help for Employees

Esparza said the furloughs go beyond just the affected employees.

“The impact is already being felt by many employees as well as their families. There is admittedly the potential for that impact to be felt residually within our downtown, within our city at large,” Esparza said.

The city’s economic department is partnering with the Fresno Regional WDB for a workshop for the furloughed employees on how to obtain services like unemployment insurance and other resources.

City Attorney Andrew Janz believes that Bitwise did not comply with the state WARN Act, which requires businesses preparing for plant closings or mass layoffs to give 60 days’ notice to employees, the city, and the state.

Bitwise never delivered such notice.

“I firmly believe Jake Soberal and Bitwise have robbed this city of that time, that critical time,” Councilman Mike Karbassi said.

Janz said it applies to furloughs as well as layoffs. Bitwise could be penalized $500 per day per employee.

Attention Bitwise Employees!
Our Rapid Response Services are designed to help you navigate your recent furlough.
Join us on Friday, June 9th, at 10am or 2pm for an orientation meeting to learn more about these free services. pic.twitter.com/bpyKZeBym7

— Fresno Regional WDB (@WDB_Fresno) June 1, 2023