AGA Today
Accusations of
Agency Error in Disaster
By
RON NIXON and LESLIE EATON
The New York Times
Published: February 27, 2007
Last September, the
Small
Business Administration, which
provides most long-term rebuilding aid to disaster victims, accelerated
its lending to homeowners and businesses in the Gulf Coast, responding
to criticism that it had been slow to respond to Hurricanes Katrina and
Rita of 2005.
But now federal investigators are looking into
accusations that in speeding up its work, the agency made thousands of
loans without following its own rules to avoid fraud. Current and former
employees of the agency have told investigators that agency workers
failed to secure proper proof that borrowers owned the houses they were
supposed to rebuild or had the required insurance.
Caroline Pankove, who worked as a lawyer for the
disaster-loan program at the agency from June through December of last
year, complained to the agency’s managers and its inspector general that
employees were improperly pressured to approve loans quickly.
Loan policies were applied inconsistently, Ms. Pankove
said, and disaster victims’ paperwork was often misplaced or mailed out
with errors.
“The rush to disburse loans put everyone at risk: the
taxpayer, the agency and especially the borrowers,” Ms. Pankove said in
an interview. “The people that we needed to serve the most were the ones
getting hurt the most.”
Her complaints were echoed by Brian Cook, who worked at
the agency as a paralegal last year, and by others who spoke on the
condition that their names not be used because they were still employed
by the agency at the disaster loan office in Fort Worth.
A spokesman for the agency’s inspector general confirmed
that his office was looking into the accusations but said he could not
comment on a continuing investigation.
Agency officials said that they were taking the
complaints seriously, but that the problems described by Ms. Pankove and
others were isolated, not systemic.
“We never pushed for disbursement to be made without the
proper documentation,” said Steven C. Preston, who promised to reform
the troubled disaster loan program when he was appointed administrator
of the agency last summer.
The agency was trying to empower managers to make
case-by-case judgments about loan documentation, Mr. Preston said,
adding, “We can’t have a cookie-cutter approach.”
Mr. Preston also disputed the possibility that efforts to
speed the process had opened the door to abuse. “Of course we want to
get the disbursements out faster,” he said, “but it’s very dangerous to
assume that this would lead to fraud and losses to the taxpayer.”
When Mr. Preston took over the agency in July, he
inherited a huge backlog of loan applications, which had grown to 94,000
by September, according to the agency. Since then, 51,000 people have
received all the loan money they qualified for, 19,000 have gotten some,
and 24,000 have canceled their applications.
The agency has made more than $5 billion in
hurricane-related disaster loans, more than half of them since Mr.
Preston took over, said Sean Rushton, the assistant administrator for
communications.
One way the agency reduced its backlog was by rewarding
the employees who got money into the hands of the largest number of
borrowers. E-mail messages obtained by The New York Times promised cash
bonuses and overtime to the most productive workers, even though at
least one supervisor acknowledged that this emphasis made people
uncomfortable.
“I will be honest,” a supervisor, Michael V. Cremer,
wrote in an e-mail message in October. “Disbursements = cash awards &
overtime opportunity. I don’t like it, you don’t like it... but it is
what it is.” The message continued, “Work with your people to make these
numbers look good.”
Mr. Cremer did not respond to voice mail messages left at
his agency office in Texas.
Leaders of the House and Senate committees overseeing the
agency said they were concerned about the accusations of improper
lending.
“I’m worried that there may have been too much of a focus
on quotas over quality of service for disaster victims,” Senator
John Kerry,
Democrat of Massachusetts and chairman of the Committee on Small
Business and Entrepreneurship, said in a statement.
“And if that’s true, it’s unacceptable,” Mr. Kerry said.
“If in a rush to get paperwork off their desks the S.B.A. shifted the
burden to borrowers who have lost everything to Katrina, that’s not a
policy, that’s an abdication of responsibility.”
Despite the agency’s new emphasis on speeding the lending
process, disaster victims say they continue to experience problems.
Donna Colosino, whose family owns a small company in Louisiana that
sells power generation equipment, told the House Small Business
Committee earlier this month that more than 20 loan officers had dealt
with her case. And she said she sent the same documents to the agency
more than a dozen times.
“Working with S.B.A. after a disaster is like having a
second job,” Ms. Colosino said. “I swear to you on my father’s grave
that this is the story. I am not an anomaly.”