It hasn’t been a good week for the Brown Administration. City loans and assistance provided to failed restaurant One Sunset has turned into a full blown scandal and criminal investigation. Mayor Brown says he didn’t order his staff to offer preferential treatment to the Gates Circle restaurant but that is what owner Leonard Stokes was served.
Michelle M. Barron, vice president of neighborhood economic development, was sacked on Thursday after a special report by Buffalo Comptroller Andrew Sanfilippo determined $90,000 of the $160,000 in public money that was spent on the restaurant cannot be accounted for.
Barron had an active role in the restaurant’s operation according to details in The Buffalo News:
The News found that Barron and other agency staff members provided One Sunset with $110,000 in loans and grants after an agency committee of bankers rejected a $120,000 loan request. The bankers considered the business too risky and Stokes too inexperienced.
Barron, working with Ellicott Common Council Member Brian Davis, shifted block grant funds earmarked for his district to assist the restaurant, which was in the Delaware District.
Barron also encouraged a subsidiary of the Erie County Industrial Development Agency to lend the restaurant $50,000 without disclosing it was in deep financial trouble, The News found.
The News also revealed Barron, who earned $76,323 a year in her city job, played a hands-on role in the restaurant’s operation, including handling cash receipts, paying bills and trouble-shooting assorted problems, including vendors demanding payment for overdue bills. She even painted bar stools and decorated a bathroom.
This could get uglier. The Erie County district attorney’s office is considering a probe and the FBI is already looking into the matter.
The Sanfilippo audit found no evidence of the Mayor being involved in the loan approval process. The same cannot be said of Deputy Mayor Donna Brown.
Despite financial statements showing that the business was in poor financial shape in July 2008, Deputy Mayor Brown, Barron and Eric Gadley, a member of the Erie County Industrial Development Agency’s (ECIDA) minority grant and loan committee, pushed for a $50,000 loan from the agency’s Minority Entrepreneurs Grant and Loan program. The loan was approved and $50,000 was given to Stokes in August 2008. The restaurant closed two months later.
According to the Sanfilippo report:
“Anxious to make loans to qualified minority enterprises, ECIDA supposedly screened the business and judged it by their own criteria. The positive media coverage also left a good impression. Whether BERC personnel made ECIDA aware that the business was in trouble is in dispute. Nonetheless, proper due diligence the ECIDA should have uncovered the business’ problematic history.”
ECIDA Chief Operating Officer Al Culliton says Leonard Stokes’ loan request was given the same stringent review as the other applicants.
“In the last 30 years, this agency has approved more than $100 million in loans to over 520 businesses. Due diligence is a way of life for us,” Culliton said.
“Mr. Stokes’ credit report was better than some of the other applicants,” Culliton added. “We made a loan decision based on the best information we had at the time.”
The ECIDA executive said the agency will comply fully with all investigations involving public financial aid given to Stokes’ business.
“By its nature this is a high-risk venture that provides operating capital to people who are not able to qualify for traditional bank financing,” Culliton said. “There are going to be business failures, and unfortunately, that was the case with One Sunset.”
One Sunset, was one of 70 minority and woman-owned Buffalo businesses which applied for loans in 2008. Ultimately, 10 of those companies received low-interest loans totaling $370,000, through the pilot program, which is administered by the Regional Development Corporation, the ECIDA’s loan arm.
Despite the Stokes default, Culliton said the minority entrepreneur loan program is a success, with nine of the 10 2008 participants in compliance and going strong. The list of companies that benefited from the 2008 minority entrepreneur program includes: Jericho Demolition, Inc.; Kerns Avenue Bowling Center; Mars Nails & Spa; Affordable Scrubs & Stuff; Donnie’s Smokehouse; ABC Cleaning Services; Serenity Hair Boutique; and, Singleton Construction Services and Tastings.