Many Who Received Sept. 11 Loans Did Not Qualify

Investigators say many of the government-backed loans made to small businesses after Sept. 11 went to recipients who may not have qualified for the terrorism-recovery program. And many of them didn't know they were tapping into funds from an effort to help businesses affected by the terrorist attacks.

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A federal audit has found that many of the government-backed loans made after 9/11 went to small businesses who may not have been qualified to receive them. The loans were part of a special Small Business Administration effort to help businesses get back on their feet after the attacks. But many of the recipients told investigators they weren't harmed by 9/11 and they didn't even know they were receiving terrorism recovery assistance. NPR's Jack Speer has the story.

JACK SPEER reporting:

Seven thousand businesses received loans totaling $3.7 billion under the one-year program implemented by Congress. They included several dozen Dunkin' Donuts franchises, a Georgia liquor store, even a Utah dog-grooming business. Glenn Harris is counsel with the SBA's office of the inspector general. He says after reviewing some of the loans issued under the program, his agency discovered a number of problems.

Mr. GLENN HARRIS (Counsel, Small Business Administration): We did a random sample of 59 loans and found that nine of those 59 loans--we could tell from a review of the lender's loan files that the borrower had, in fact, been adversely affected by the 9/11 attacks, either directly or indirectly. But we were not able to determine for 50 of the loans, which is about 85 percent, whether, in fact, the borrowers were appropriately qualified to receive those loans.

SPEER: Harris says his office's investigation did not determine how many of the total loans were improperly granted, though he says investigators were surprised by the fact so many of the businesses questioned had no idea their assistance was in any way related to the attacks, with just two of 42 borrowers interviewed aware they were part of the program.

Mr. HARRIS: So it's curious to us as to how the lenders are--were able to determine and justify these loans when, in some cases, they apparently hadn't even discussed it with the borrowers.

SPEER: The investigation also found many businesses said they weren't harmed by 9/11, but the Small Business Administration denies the agency did anything wrong. Mike Stamler, an SBA spokesman, says instead much of the responsibility falls to the lending agencies who participated in the program.

Mr. MIKE STAMLER (Spokesman, Small Business Administration): The loans were made by lenders and partially guaranteed by the SBA. The lenders were made responsible for determining whether there had been an adverse impact because the SBA, frankly, didn't have the staff to do that.

SPEER: Stamler also says Congress played a role because in the early days of the loan program, it urged the SBA to get more money out to small businesses. And, he adds, many people have forgotten how significantly the economy slowed after the terrorist attacks.

Mr. STAMLER: The economy was frightening people. It wasn't doing very well. The effects were widespread across the country, and that's exactly what the Congress meant this program to deal with.

SPEER: Republican Senator Olympia Snowe, who chairs the committee on small business and entrepreneurship has called the inspector general's findings `troubling.' Snowe and other lawmakers have said they will call for additional investigations of the program. Jack Speer, NPR News, Washington.

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