SBA Loan 9/11 Scandal

As the year draws to a close, we want to give a bah-humbug to the Small Business Administration (SBA) for issuing loans from a program designed to help businesses hurt from the events of 9/11 to recipients not even hurt by the attacks.

In the Business Week article, it stated that most companies interviewed told investigators from the IG, the agency's internal watchdog that they weren't hurt by the suicide attacks and didn't know they were getting terrorism assistance.

85% of the loans failed to document that the recipient were actually hurt by the attacks and therefore eligible for federal aid.

Out of a sample case of 59 recipients, only 9 of them were qualified for special disaster loans. The Associated Press (AP) found that loans were sent to businesses including a South Dakota radio station, a Virgin Islands prefume store, a Utah dog boutique, and more than 100 Dunkin' Donuts and Subway sandwich shops in various locations. For small businesses situated around Ground Zero, they couldn't get the assistance or were denied automatically. In a NY Post article today, Jan Fried, owner of Steamers Landing, an eatery for pizza, pastas, and seafood, was just blocks away from the former WTC site, but her loan application to the SBA, but was denied. The feds demanded that Fried's business partner put up his home for collateral, his condo board wouldn't allow it. She had to go get a bank loan for herself and after spending $600,000, she managed to reopen the restaurant.

SBA Administrator Hector Barreto said that lender documentation could have been better. A ridculous answer. Lenders that participated in the program stated that the requirements were unclear and that the SBA was marketing heavily that almost any small business could "claim" that they were negatively impacted by the attacks, and therefore, eligible to receive a STAR loan.

So how can this program be mis-managed so inappropriately? What was Hector Barreto's previous job before this? He raised a lot of funds for Republican campaigns. According to Hispanic Business, he was one of the GOP's top ten Hispanic fundraisers in 2000. I guess money management was not a "Top Ten" category for him.

The SBA faced a congressional inquiry but when it defended itself saying that it followed the law in issuing nearly $5 billion in loans to small businesses, it distributed an audit report that praised its operations. Unfortunately, it failed to hand out a second report by the same congressional auditing agency that criticized its post-9/11 relief work.

It's a damn shame that businesses around Ground Zero were denied funds while a Subway sandwich shop in Ohio got a loan from the program. With an almost bottomless money barrel, the federal government just doesn't know how much money it is accurately giving out. No wonder why it is so easy to dupe the feds.

Happy New Year!