Most companies interviewed about the government-backed Sept. 11
loans they received have told investigators they weren’t hurt by the
suicide attacks and didn’t know they were getting terrorism assistance,
an internal government investigation found.

The Small Business
Administration’s inspector general also reported Wednesday that lenders
who doled out billions of dollars in such loans failed — 85 percent of
the time — to document that recipients were actually hurt by the
terrorism attacks and therefore eligible for the federal aid.

IG, the agency’s internal watchdog, concluded only nine loan recipients
in the 59 cases sampled appeared to be qualified for the special
disaster loans. The report said SBA officials told lenders they would
not be questioned on how they gave out money.

“We believe these
communications were intended to, and did, send a message to lenders
that the agency would not question lender eligibility determinations,”
the inspector general reported.

The investigative report
substantiates key findings of an Associated Press story in September
that found similar problems with the SBA’s Supplementary Terrorist
Activity Relief (STAR) program.

The AP found that terrorism
recovery loans went to businesses including a South Dakota radio
station, a Virgin Islands perfume shop, a Utah dog boutique, and more
than 100 Dunkin’ Donuts and Subway sandwich shops in various locations.

Meanwhile, small businesses near Ground Zero in New York couldn’t get the assistance they desperately sought.

Administrator Hector Barreto put the best face on the findings, saying
the audit did not find that loan recipients were unqualified for the
program, although he did note that lender documentation could have been

His statement, however, was contradicted by Sen. Olympia
Snowe, R-Maine, chairwoman of the Senate committee that oversees the
Small Business Administration.

“These initial findings are
troubling and the committee … will continue with its own
investigation of the STAR program to get at the truth and inform
Congress for the future,” she said.

Snowe, who heads the
Committee on Small Business and Entrepreneurship, said if abuses are
discovered, “many questions must be answered by the parties involved,
beginning with: How and why was this allowed to happen?”

The IG’s report found:

  • Only 2 of 42 borrowers interviewed were aware they had obtained a STAR loan.
  • In
    cases where eligibility could not be established, 25 of 34 borrowers
    interviewed said they were not adversely affected by the terrorist
  • Thirty-six of 42 borrowers questioned said they were
    not asked, or could not recall if they were asked, about the impact of
    the attacks on their businesses.

The report said IG investigators
were told by lenders that their participation originally was low
because of unclear requirements.

SBA officials then embarked on a
vigorous marketing campaign, and lenders interpreted their remarks to
mean “that every small business could claim it was somehow impacted by
the attacks, and therefore, eligible to receive a STAR loan,” the
report said.

© 2005 The Associated Press