Monday - November 14, 2005

How Pork Becomes Dough, Lesson #911

If you aren’t mad yet about wasteful spending in Washington, be prepared. This one will knock your socks off, kiddies. It seems there has been some diddling with the federal relief funds for 9/11 victims and somehow, thanks to bureaucrats at SBA who deny all knowledge and bankers who refuse to reveal details, we have doughnut shops in Georgia getting loans at sweet interest rates to “help them recover from 9/11”. I say we string all the varmints up from the nearest tree and march on Washington with flaming torches and pitchforks. Are ye with me, lads ...?

IT’S A HOLE LOT OF 9/11 DOUGH
November 14, 2005
WASHINGTON (NY POST)

More than 25 Dunkin’ Donuts franchises far from New York City were granted federally guaranteed loans at sweet interest rates under a program that was supposed to help businesses recover from 9/11, The Post has learned. The franchises, located in distant places such as Ohio, Georgia and Vermont, got loans totaling $20 million. The Small Business Administration’s inspector general is probing whether banks pushed the loans to make big profits.

Why so many Dunkin’ Donut shops got the loans — which were provided to businesses ranging from hotels to muffler shops — is one of the mysteries surrounding the troubled program. Taxpayers aren’t the only ones who got dunked. Dunkin’ Donuts franchise owners around the country say they had no idea they were benefiting from a 9/11 program, called STAR because it was part of the Supplemental Terrorist Relief Act.

“We just took the loan to remodel the place,” said Mnosh Vsava, the manager of a Dunkin’ Donuts in Berwick, Pa., who got an $870,000 loan from New York City-based CIT Small Business Lending Corp. “It wasn’t 9/11 things or anything. No one ever explained nothing,” said Bobby Patel, who got a $558,000 loan for his Willoughby, Ohio, franchise. Bruce Herold, the loan officer from Bank One (now JP Morgan Chase & Co.) who approved Patel’s loan, claimed he didn’t know his bank issued a 9/11 loan.

“I have never done a STAR loan here that I knew of,” he said. “This was just an SBA deal.” Yet businesses are supposed to prove they were “adversely affected” by the attacks to get the loans, and banks are required to keep the information on file. Herold said he couldn’t provide such documents because he wasn’t aware he had made a STAR loan. Jeff Gentile, who owns a franchise in Cabot, Pa., said it was “silly” that he got a $120,000 loan under the program.

“I wasn’t harmed in any way by [9/11]. My business wasn’t,” he said. Tony Silva, who manages a Dunkin’ Donuts in Essex Junction, Vt., was the only proprietor to say his business was hurt by 9/11. “Instead of getting probably a large coffee and a couple doughnuts, [customers] were getting probably a small coffee and a doughnut,” he said. “They were spending less money.”

Banks had an incentive to hype the loans because the government reduced the traditional fee — saving some of the biggest lenders millions. The federal guarantee shields the banks from losses. Rival chain Krispy Kreme didn’t get any loans under the program. “It doesn’t make sense to me that people with a Dunkin’ Donuts in Kansas would say, ‘Hey, I can get some 9/11 money,’ “ said Sen. Hillary Rodham Clinton (D-N.Y.), suggesting banks or the administration pushed the loans.

Dunkin’ Donuts, owned by French liquor distributor Pernod Ricard, is close to being sold for $2 billion and reported more than $3 billion in revenues last year. Dunkin’ Donuts and CIT each denied pushing the STAR loans, even though CIT was the program’s top lender, giving out $422 million, including loans to almost every doughnut shop. “It’s not something that we promote or advocated,” said Andrew Mastrangelo, spokesman for Massachusetts-based Dunkin’ Brands Inc.

Chris Lehnes, a vice president for small-business loans at CIT, said in a statement issued to The Post, “Like many lenders, we do offer STAR loans, and we believe that we are in compliance with all SBA guidelines regarding the STAR program.” CIT declined requests for an interview. SBA administrator Hector Barletto said his agency wasn’t at fault. Congress put that legislation forward. It wasn’t us that put it forward.”

geoff.earle@nypost.com

Posted by The Skipper     on 11/14/2005 at 09:24 AM   
Filed Under: • Porkbusters •  
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