7 PEDP Loan Recipients Never Repaid a Dime to City
Monday, September 10, 2012
Seven businesses that received more than $500,000 in taxpayer-funded loans while Congressman David Cicilline was Mayor of Providence never repaid a dollar before the city wrote the loans off earlier this year, according to information obtained through a public records request.
In June, GoLocalProv first reported that the Providence Economic Development Partnership (PEDP), a quasi-public agency whose board of directors is chaired by the sitting Mayor, was throwing in the towel on 29 loans, most of which were more than 1,000 days past due.
But new details on the city loan fund show that a dozen businesses made three or less payments before defaulting on their loans. Of those loans, records show just $6,670.72 of the $697,160 awarded was repaid – less than one percent.
“The fact that little to nothing was paid back from these loans means that the taxpayers of Providence basically footed the bill for the activities of certain businesses in the city,” said Donna Perry, executive director of the Rhode Island Statewide Coalition (RISC). “At the rate of payback, these look more like taxpayer funded gifts.”
Some of those gifts were quite large.
Davin Inc., a luxury wheel maker, gained international fame about a decade ago when numerous professional athletes and celebrities began purchasing the company’s “spinner” wheel, which had a hubcap that continued to spin even while the car was stopped. But by September 2007, the company filed for bankruptcy having never made a single payment on its $350,000 loan from the PEDP.
Micro loans given by the PEDP didn’t pan out either. Five businesses that received loans of $35,000 or less failed to make a single payment. Three other companies paid just over $1,800 back on $50,000 in loans before defaulting.
Suspend the Loan Programs
When if was first reported that a quarter of all loans were at least 90 days past due, former PEDP executive director Thom Deller agreed that the number of delinquent loans was too high, but both he and the PEDP lawyer Joshua Teverow said part of the reason was because the agency was a lender of last resort for individuals who had already been turned away by at least two traditional banks.
Deller would later resign from his post in the planning department to take a job in Hartford and the city has also hired the downtown firm Moses & Afonso to replace Teverow as the agency’s legal counsel.
But Perry has been a vocal critic of all government-run loan programs like the PEDP as well as the state’s Economic Development Corporation, which came under fire this year after former Red Sox ace Curt Schilling’s video game company went belly up after receiving a $75 million loan guarantee from the state. Perry said the loan programs should come to a halt for the time being.
“In the wake of the many loan program controversies that have surfaced this year, RISC has called for these types of loan programs to be suspended until clearer protocols, far greater oversight, less political interference and more stringent loan structure policies are put in place,” she said.
No Write Off Policies
In recent weeks, Congressman Cicilline has been criticized for his handling of the agency as Mayor of the capital city from 2003 through 2010. Two weeks ago, the PEDP confirmed that Erasmo Ramirez, who volunteered on Cicilline’s 2002 Mayoral campaign, never made a payment on a $103,000 loan he received less than 20 months after Cicilline took office.
In a report released in July, the Department of Housing & Urban Development (HUD), which funds the PEDP loans, said the city failed to “exercise adequate oversight” over the agency. The report noted that approximately 60 percent of the loans awarded between 2002 and 2011 were in default and “we found no written policies and procedures governing underwriting, loan collection, loan modifications and or write off policies.”
Singling out a Mayor Buddy Cianci-era loan that the PEDP had collected just $543 from while paying $7,903 in legal fees, the report suggested “the city has spent an unreasonable amount of legal fees in pursuit of these collections with very little to show for its effort.”
Cicilline campaign manager Eric Hyers did not respond to a request for comment on this story, but in recent weeks he has defended the Congressman’s handling of the PEDP during his time as Mayor of Providence. He has said that all loans were “thoroughly vetted by loan committee of financial experts and community bankers like they approve every loan” and has also suggested that Cicilline helped revamp the PEDP by creating a committee rather than simply signing off on loans himself.
Still, Perry’s whose organization does not endorse political candidates, called Cicilline’s record “troubling.”
"Regardless of the charges and counter charges on other issues that surfaced in this race, this revelation only adds to David Cicilline’s very troubling track record in managing public taxpayer money, whether it was in the handling of the city budget, or these types of loan programs,” she said.
- Providence Stiffed for Millions in Loan Money
- City Writes Off Millions in Economic Development Loans
- Feds Say City Lacked ‘Adequate Oversight’ over Taxpayer-Funded Loan Program
- Former Cicilline Campaign Volunteer Received $103,000 PEDP Loan
- Former Cicilline Campaign Volunteer Never Repaid $103,000 PEDP Loan
- Providence Agency Spent Over $20,000 in Taxpayer Funds on Lunches
- Top Democratic Social Club Received Low-Interest Loan from PEDP
- 18 Taxpayer-Funded Loans are Still at Least 500 Days Past Due
- Troubled PEDP Hires New Lawyers
- Cicilline & Gemma have Ties to Controversial Providence Loan Fund
- Controversial South Side Bar Stiffed City for $330k on PEDP Loan
- Providence Loan Fund Created Few Jobs Under Cicilline
- City Officials Withheld Information About Controversial Loan Fund
- City Used Business Loan Fund to Help Pay for Skating Rink
- NEW: Providence Councilman Calls for More Oversight of City Loan Fund
- Full Review of Providence Loan Program Coming
- Providence Loan Fallout: Delinquent Organization Received Cash From State Too
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