Nevada tanning salon gets 9/11
loan
Yahoo News/Reuterss
By Jim Wolf
December 29, 2005
WASHINGTON (Reuters) - A Texas golf course, a Nevada tanning salon and an
Illinois candy shop were among small businesses that may have improperly
received U.S. subsidized loans intended for firms hurt by the September 11
attacks, an internal government watchdog has found.
The Small Business Administration's inspector general said in a report made
public on Wednesday that in 85 percent of the sample of loans it reviewed, a
company's eligibility to receive the money through the program could not be
verified.
A leading Senate Republican called for further investigation, but the Small
Business Administration said the program was properly implemented.
The one-year, $4.5 billion Supplemental Terrorist Activity Relief, or STAR,
program offered loan guarantees to small businesses adversely affected by the
September 11 attacks.
However, the Small Business Administration had failed to properly oversee
lenders to make sure that only eligible borrowers obtained STAR loans, the
watchdog's report found.
Money "may have gone to businesses that were not adversely impacted by the
terrorist attacks of September 11th or their aftermath," wrote Robert
Seabrooks, assistant inspector general for auditing.
Congress authorized the program in January 2002, and set aside $75 million
to cover potential defaults. The program was operated through the Small
Business Administration's main loan-guarantee program and the loans were made
by participating banks. In all, 8,201 loans were approved totaling $3.7
billion, but only 7,058 were actually paid out.
Of 42 STAR-loan recipients interviewed by the inspector general's office,
just two said they were aware they had obtained a such a loan. In cases where
eligibility could not be established, 25 of 34 borrowers interviewed stated
they were not adversely affected by the attacks, the report said.
GOLF COURSE
The report's examples included the Texas golf course, whose owner was cited
by a lender as saying "people were more interested in staying home and watching
the attack on television than playing golf." However, the course was owned by
someone else when the attacks took place and the justification for the $480,000
in loan guarantees did not apply to the new owner, the report said.
The tanning salon's lender blamed the September 11 attacks for hurting the
Las Vegas casino industry which employed many of the salon's customers.
However, the inspector general found the salon's business had grown by 52
percent in 2001 and 32 percent in 2002 and said there was no evidence the owner
could not borrow outside of the program. The SBA guaranteed $437,000 in loans
to the salon, which were used to expand.
The Illinois candy shop received $21,250 in guarantees but could not back up
its claim that the attacks had delayed the shop's opening, the report said.
Senate Small Business Committee Chairwoman Olympia Snowe, a Maine
Republican, said her panel would look into the program.
"If abuses are discovered, many questions must be answered by the parties
involved, beginning with how and why was this allowed to happen," she said in a
statement.
SBA said it has told lenders it will not honor guarantees on defaulted loans
that fail to document the September 11 link.
"SBA implemented the STAR program as Congress intended," Administrator
Hector Barreto said in a statement.
The inspector general said it appeared qualified borrowers were not shut out
of STAR loans.
(Additional reporting by Diane Bartz)
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