The USDA's Losing Effort

"The snowmobile industry is vital to Maine's winter economy," said Michael W. Aube, the USDA's rural development director based in Bangor. "It has a tremendous economic impact on local communities."

Aube cited figures from the snowmobile clubs stating that the grants would "impact" 342 businesses, "equating to 115 jobs created, 708 jobs saved." Maine officials have not done their own research into the claims. Aube said the businesses affected included nearby gas stations, convenience stores, motels, restaurants and clothing outlets. "My guess is most of these jobs are going to be at minimum-wage level," he said.

Still, he said, the grants are "critical" to help the towns survive the tough Maine winters. "There's not a lot of economic activity in some of these local communities for the people hanging around in winter," Aube said. "We've done those families a big favor."

Since 2001, the enterprise grant program has awarded more than $265 million nationally. Money has gone to a maple-sugar trade group in Vermont, to repair docks near Mystic Seaport in Connecticut and to a beach resort in New Jersey.

Borrower's Checkered Past

Over the years, thousands of businesses large and small have lined up to take advantage of the USDA's generous grant and loan programs for rural America. Few have been busier than Erwin David Rabhan, a colorful 81-year-old entrepreneur with a long and checkered career that stretches from his family farm in Georgia to Swaziland to Iran.

In the 1960s, Rabhan operated a string of nursing homes and day-care centers. A pilot, he ferried Jimmy Carter around in his private plane during Carter's campaign for Georgia governor in 1970 and later was a guest at the governor's mansion.

In 1978, Rabhan was indicted on securities fraud charges. But the case was put on hold after Rabhan was accused by Iran of being a spy, an allegation he denies, and was jailed in that country in the early 1980s. He was in prison for nearly a decade until he was released with Carter's help.

Many of Rabhan's ventures ran into trouble: A fish-protein company went out of business, a bank foreclosed on his nursing homes and day-care centers, his plan to build an infant-formula plant in Africa stumbled. Nevertheless, Rabhan easily succeeded in getting the USDA to back two loans totaling nearly $15 million.

Rabhan quickly defaulted on the loans, and the government has paid off millions in guarantees to the banks that lent him the money. In 2002, Rabhan pleaded guilty to conspiracy to commit bank fraud involving a $5 million guaranteed loan to build a catfish-processing plant in Georgia. He spent 4 1/2 years in federal prison. In 2006, Rabhan was indicted in Mississippi on charges involving a $9.5 million USDA-guaranteed loan to purchase a catfish farm near Inverness. He denies the charges and is awaiting his trial, scheduled for March.

On at least two occasions, lower-level USDA employees questioned Rabhan's business activities but were ignored by their superiors, records show. Agency officials did no due diligence on their own, relying exclusively on the banks to investigate Rabhan. At least one of the banks failed to uncover Rabhan's 1978 indictment and business struggles.

Even though top USDA officials were aware of allegations involving Rabhan's past, they decided to back his loans. "We were hoping the bank had the expertise to make all of these investigative inquiries," said Howard Franklin, a former director of USDA business programs in Georgia.

Foreign Farmworkers

In Glennville, Ga., the USDA backed a $17 million loan for a farm that the Justice Department later accused of turning away American workers.