Lorain Development Corp- the revolving- evolving story!

April 12, 2016 at 3:06 pm 12 comments


FBI probes loan program by Lorain Development Corp. ran for city

A further update: Lorain cuts the cord with Lorain Development Corp:
UPDATE: The President of the Lorain Development Corp states the Board view


A year ago April 15th, 2015 I wrote the post “Money for Old Rope – A Taxpayers Question”
I had once again been to a City Council Meeting and I didn’t like the report being given to City Council on a loan with regard to the Lorain Development Corporation

The exchange between council and Director Rangel can be found here- page three
3-16-15regmin https://thatwoman.files.wordpress.com/2015/04/3-16-15regmin.pdf

“Unfortunately I remembered $100,000 dollars with much hoopla being given to Prime Industries. http://www.loraincounty.com/manufacturing/feature.shtml?f=12666
prime_industries and media success stories such as the Morning Journal article October 2010- ALL “SOUNDED” VERY PROMISING

Local customers include amusement park Cedar Point, which turns to Prime Industries for safety harnesses for its gravity-defying rides.
In addition to making new parts for Cedar Point, Prime Industries refurbishes safety harnesses after thousands of roller-coaster passengers have worn them out…..
… Other local customers include Invacare Corp., in Elyria; Bettcher Industries, in Florence Township; Nordson Corp., in Westlake; and Latanick Equipment Inc., in Huron. Prime Industries also makes parts for missiles built by Lockheed-Martin for use by U.S. armed forces in Iraq. With more than 500 customers, the company started as a division, called Advanced Foam and Plastics, of Kindt-Collins Co., based in Cleveland
The headline is a bit misleading( prospers???) because halfway through the article the history states:

Advanced Foam and Plastics was created to serve the foundry industry, but by 1984 it was known as Prime Design.
In 1997, Prime Design received $292,000 from Lorain to relocate here from Cleveland, creating 22 jobs.

A $100,000 loan from the city in 2000 helped expand, but by 2002 Prime Industries was up for sale
First, Rich and Joe Persico paid off the $292,000 loan from 1997, and then put up $145,000 of their own capital.

“Then” the city of Lorain loaned them $400,000 and a Warren bank also loaned them $400,000 in 2002 Prime Design became Prime Industries.
In May 2008, Lorain loaned the company $100,000 to gain new contracts. That is $600.000 by my calculations we have had some back in the employee income tax but still money for old rope imho.

Eight months earlier, August 28th Lorain appointed a new Director of Building, Housing and Planning Department- Leon Mason .

The name of the department had changed from Community Development Dept (headed for decades by Sanford Prudoff) to Building Housing and Planning

In three decades under former director Sanford “Sandy” Prudoff, Community Development grew into a overly large department with too little accountability to city leaders and providing too little benefit to Lorain, Ritenauer noted…………..
Prudoff controlled the agenda of how to spend CDBG money in the city with the administration and council seemed to have little say about what projects the city should do or skip, Ritenauer said.

Those determinations were “completely opposite of chain of command and hierarchy,” Ritenauer said.

It appeared the department grew to maximize the salaries for administering federal CDBG money granted to Lorain, Ritenauer said.

30 years , missing paperwork, things getting lax, housekeeping by the way side, the paperwork is either non-existent or “lost”, not complete in some cases.And it appears certain developers( who shall remain nameless in case I am accused of chasing him out of town again) 😉 getting a great many trips to the ATM that was seemingly Lorain ? How many jobs have been created???

speak the truth
Trust– comes into play here , in my humble opinion:

TRUST– the employee that his “boss” knows what he is doing and is aware of legal ramifications !

TRUST – by volunteer boards the items brought before them are “above-board!

TRUST – by the Administraton -their departments heads, hired for their expertise, know what they are doing and are working with one goal in mind to better the City of Lorain!

TRUST by a City Council they can act upon the advice of those department “leaders”.

One area breaks down in that circle of trust and the ripple effect finally hits the shore with a great crashing sound, as it did last night in City Council Chambers .This morning’s headlines read :
Lorain Council Rips into Business Loan report by Rick Payerchin – Morning Journal

and ” Lorain revolving loan program has $600,000 in write-offs- by Katie Nix”

Lorain revolving loan program has $600,000 in write-offs

As Mr. Mason stated, the issues with the revolving Loan fund came to him from the State Auditor

I got an email from the state auditor who wanted to know why the city of Lorain had over $600,000 in loan write-offs,” department director Leon Mason said. “My response was that I didn’t know what he was talking about, and when he sent me the information, I was able to pinpoint some of the loans, but I did find some that were troubling, to say the least.”
Mason said one that stood out to him was a $250,000.01 loan to the South Shore Community Development Corporation.

Lorain works to save center, and its tenants

South Shore took ownership of the St. Joseph facility in 1997 after St. Joseph Hospital merged with Lorain Community Hospital to create Community Health Partners. An $800,000 federal grant was used to get the building ready for its new tenants. Additional grants and loans were secured to bring it to its current condition.
The state has $1.4 million in loans invested in the community center, while the county and the city each have $700,000 in loans tied to the center. If South Shore files for bankruptcy, the state, county and city will be on the hook for those loans. Gilchrist said the city’s payments on its loan would be about $50,000 a year. Lorain is currently $1.3 million in the red.

After the loans are repaid by recipients, the money is intended to go back to another business.

With the notoriety gained by the Federal Investigation of Sanford Prudoff and Lorain Community Development is it any wonder the State and Federal Government are “checking” what has been happening?
Prudoff sc

Lorain works to save center, and its tenants

Federal Funds have certain rules which must be adhered to and Lorain has to be stringent in following those rules- other wise we are in trouble.

Should Lorain have to pay back those monies in question then the General Fund takes a huge hit and we can’t afford even that one dollar hit!
Hopefully, the program changes, the rules are followed and the “iffy factor” becomes totally transparent.

Although, due to a possible investigation in the loan for South Shore Development Corporation,
not a lot was said ( under the Krasienko/ Gilchrist era) that money $250,000,and ONE dollar would give our General Fund a huge hit. Let us hope the Administration, Law Dept. and City Council will support each other on this and get to the very bottom of the “pot of gold- for some”

I remember under the Foltin Administration and Prudoff those “allowable ???” expenses paid to wine and dine the Shawnee and Capital One “tribe” initially, before I asked questions and then after??? well it was rolled over into a bond and I could no longer get the breakdown of all the monies spent but this country club of cash sure sent my red flags flying at the time- Dinner was literally on us!!!!!!

Casino expensesre

Lorain Development Corporation did respond to my post last April and it can be found here :

1)I prepare a loan write-up that provides a background of the project with financial information and the justification for approving the loan.

(2)Once I have completed, I provide this to the loan board for their review and approval.
We do this process just like bank’s credit teams do and have discussion and if everything is okay, loan approves the credit. They can also reject loan requests or modify them though these do not happen too often.

The loan board are various professionals in insurance, banking, law, small business owners, etc. who all live in, work in or own businesses in the City of Lorain. This board has been a self-appointing board since its inception and they are not appointed by administration or council. Board tries to keep a mix of professionals on board so it is not all bankers or attorneys but a mix. They are an all-volunteer board and most of these individuals have been on board from a few years to one person who has been on board since inception over 25 years ago.

Once the board approves the loan credit, all loans are submitted to Board of Control for approval as they will eventually sign for the loan.

Once board of control approves, we move to documentation of loan with all documents reviewed and approved by City’s Law Department. At that time, we also open a purchase order to commit money and submit check requests when we receive necessary documentation requesting funds.
Loans are derived from two sources, one through HUD http://portal.hud.gov/hudportal/HUD and the other through the Economic Development Administration.

You can find the PDF files of Director Mason’s report here:
Economic Development Final
LDC Conflict of Interest Policy
LDC Subrecipient Agreement
Portfolio Quality Report
EDA Title IX Plan


Entry filed under: a Cow -elle opinion, city of lorain, hell is other people, notorious opponents of exactitude. Tags: , , , , , , , .

Plump Lady Plummets – and the housing trip continues Lost faith in the system! Oh Her Again!! Lorain

12 Comments Add your own

  • 1. Ladalang  |  April 13, 2016 at 9:24 pm

    Leon Mason has been on the job for a year. Is he trying to say the City’s loan program of which he is responsiblehas never come up until the Auditor e-mailed him? Did he not see the letter sent to Council by Dave Yost, Auditor of State in November of 2015 regarding the irregularities with the City’s loan program? Letter: https://app.box.com/s/7yitfbc0rhia8k4waujwvpmwhjzyur1z
    You attended that meeting Loraine, you saw the reactions of Council members bordering on shock and disdain. Yet they got this letter four months ago. Mason’s own brother worked With Lorain Development Corporation for six months prior to February 2016 to get a loan for the Kudos Wine Bar (Per Doug Rangel) and he wasn’t aware of this loan program or its guidelines? I’m not buying it!

  • 2. thatwoman  |  April 13, 2016 at 10:54 pm

    Thanks for the link re the auditors letter – I will have to read it through. Yes I saw the looks on city council- to be fair some of them weren’t on council and they have to play a lot of catch-up with regard to the funds and loans- how they work – As I said in the post Council has to trust what is coming before them has been researched and is correct. Are most of them going to do their own probably not – one or two maybe. and it is a mire … not excusing anyone – others weren’t there ….

    I can’t speak for Mr. Mason as to what he knew or didn’t know – I do know I sent the original post to all council and administration as to “Money for Old Rope.”. should have sent a warning shot across their bows 😉 but again not sure they read it 🙂 although Doug Rangel did give to me a reasonable explanation in his OP ED should I have pushed more – probably …

    I believe and this is just my take – BHP knew/knows the way the program should work, what the Federal Regs are regarding those loans – what funds are used and the ORC for those loans . I presume with the other issues with the Com Development dept debacle ( remember Rey Carrion took over after Sandy and he didn’t see red flags or question and he worked in Com Development for quite a few years) 20 years with the city…. Why didn’t he spot these things? He was also aware of LDC etc.

    and there are some strange things with these funds……

    For instance. Rental Rehab fund ( at the time of the Shawnee fiasco) I questioned how can rental rehab funds be used to buy the food and dine the these guys…
    1. Apparently after the loan in that fund- rental rehab ( which were federal were paid back) that money no longer had federal strings attached ( except they couldn’t pay for the booze they drank – Scotti Campana paid for that) so the city(Foltin and Co) could use it at their discretion …

    I know that as soon as the city looked into what was happening they shut down the LDC and did the audit……. Again I can’t speak for Mr. Mason and his brother/ sister whatever. That is something to be asked of him –

    The trouble also with South Shore ( imho) was Gilchrist was on their Board, Safety Service Director and therefore on the Board of Control – but my understanding is Mr. Riley said it was alright (I will have to find the exact minutes. and if that is the case I personally would have said NO.

    Again this is in my opinion a mess and has been for 30 years … At least now it has been brought into the light I just hope we don’t have to pay the feds back.

  • 3. Ladalang  |  April 13, 2016 at 11:12 pm

    I was only referring to the reactions of Fallis, Gates and Arredondo; the ones who would have received the letter. The newbs are off the hook on this one. You would think when this letter from the State Auditor came in, the mayor would have sent a copy to all department heads as an FYI. It clearly shows things aren’t being done correctly in the City of Lorain when it comes to the financials. I would imagine the Auditor called Mason as a follow up since he heard nothing after he sent his “Management Letter”. Almost as if the City ignored his grave warning. I like how the letter cites the law and then explains how the City violated it. Very clear and concise what our weaknesses are. To his Credit, Councilman Flores is the only one I heard express any angst about this letter when he first got it months ago. He brought it to Mason’s attention then. He was in shock and that probably was a spearhead to the meeting on Monday. At least he’s paying attention.

  • 4. thatwoman  |  April 13, 2016 at 11:20 pm

    Well Yes I agree shouldn’t have come as a surprise to those gentleman … Do we know the Mayor etc didn’t send out the letter ??? Well again … imagine ?? we would have to ask what happened … what you or I would do isn’t necessarily what government does 😉 Yes there are a lot of questions and hopefully answers will be forthcoming –

    we shall see………

  • 5. thatwoman  |  April 14, 2016 at 11:22 am

    It was Geoff Smith ( no longer with the city)that approved the loan agreement for South Shore-

    I can’t find any letter to council supporting LDC loans by Mr. Mason-

    the Kudos wine bar committee meeting minutes found here

    http://destinyhosted.com/loraidocs/2015/COMM/20151214_49/49_12.14.15%20Fed%20Prog%20Minutes.pdf the Committee re the Kudos wine bar sent this to full council

    and you will find in the council minutes for Dec 14 where Mr. Mason sent a letter to council declaring a conflict of interest with that loan

    http://destinyhosted.com/loraidocs/2015/CCREG/20151221_48/48_12-21-15regmin.pdf note on page 8 Given supported by Flores sent it back to Administration for further study etc.
    Ayes, Given, Flores DeTillio, Kozuria, Faga and Thornsberry Nays Gates, Howard Argenti and Edwards

  • 6. Dr. Tammy  |  April 18, 2016 at 3:07 pm

    I just read the letter, if we ran our budget’s like this, we would be in foreclosure…..oh, wait a minute, Lorain is a capital of foreclosure. Stopping the loan process didn’t just happen, as I noticed, there was a shot of the bow to Mr. Mason. As you see by one of the recommendations!

    “We recommend all existing loans be reviewed for potential conflicts of interest. Potential conflicts of interest should be investigated and resolved before any loan applications are approved. We recommend all employees be required to read and sign a Conflict of Interest Policy each year. Employees involved with these federal programs should receive continuing education specific to the program compliance requirements.
    This has also been referred to the Ohio Ethics Commission.”

    So Mr. Mason did know and he knew what is still to come!!

    Another interesting note, just about all of the departments were running in the negative in 2014 (based on this audit), so the slippery slope had already started back then. It’s amazing the negative budget wasn’t greater than 3 million in 2016, or maybe it is!!

  • 7. thatwoman  |  April 18, 2016 at 3:38 pm

    I think that has to do with South Shore if I am guessing correctly you see Gilchrist was on the BOD of South Shore , Board of Control and also SS Director ..

    Mr. Mason knew from my understanding the issues with South Shore – were you ever on that Board? and it was looking into that that opened up further questioning and the shutting down for the audit….

  • 8. Dr. Tammy  |  April 18, 2016 at 5:12 pm

    Yes, I was on that board before it was taken over by the city. I also rented space there for our consulting business.
    South Shore or poor loans, doesn’t really make a difference, the point I was making was the city knew long before any announcement was made about the issue.

  • 9. thatwoman  |  April 18, 2016 at 6:10 pm

    Yes they had til March to do a “full” audit ( re the state) – that is why the shut down – they didn’t just arbitrarily come to City Council and say “looky here” – I think maybe the time line is confusing as to what happened when … they were looking at South Shore when the other money issues re loans came to light…….

    I knew there was an issue with the South Shore situation when Krasienko was in office……. government wheels turn slowly as you know…… that building has had money and more money sunk into it ……. starting with the initial 800,000 never should have been dealt with the way it was ….. thought so back in 1997 and still think so ……..

  • 10. Dr. Tammy  |  April 19, 2016 at 3:40 pm

    The premise of South Shore was a good one. Bring all of the social agencies into one location (one-stop), LCCC and the VA facility came in too. The problem was, no one from the city, county or state bothered to discuss it with the various agencies. The other BIG problem was the utilities and maintenance of the HVAC to keep that place running. Cost of utilities was astronomical and maintenance was constant!! There are just some buildings that can’t be saved, and St. Joe’s is one of them. The Spitzer building is another one. No one (for profit business) is willing to invest the millions it would take to save either of them.

  • 11. thatwoman  |  April 19, 2016 at 4:41 pm

    Once upon a time there was a big hulk of a building that had issues and the state and federal government decided these old hospitals deserved to be re purposed ( 1996-1997) so they got together grant monies to enable local folks to re purpose and so a non profit was set up with a BOD and they had so many years to do that with the help of the government – a case of there is money available how to we make the fit to the money instead of how to we get the money to make this happen properly…. hence the money pit that became St. Joes. and the lets hire directors that eat into that profit because the funders tell non profit oh you have to have a paid staff in order to get the grants and then they move on once the grants dry up 😉 so the problem is that hulk of a building got worse and worse whilst grants were looked at and money thrown at it. And also the problems you cited……. and then came Gilchrist……….

    Actually the Broadway Building- had better have something done with it as those historic tax credits run out in July….. there maybe something forthcoming in a couple of weeks.. but again that has to be a developer picking up the tab because any deal would have to be a private business deal between Spitzer and whomever…… watch this space 🙂

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