The Department of Commerce's Economic Development Administration has warned Auto-Train Corp. that it may rescind approval of a $3 million government loan guarantee because of Auto-Train's troubles with three other federal agencies.
The EDA cited investigations of Auto-Train that are being conducted by the Securities and Exchange Commission, the Interstate Commerce Commission and the Internal Revenue Service.
In a letter to Auto-Train, EDA complained that the Washington railroad had not disclosed its IRS and ICC problems and had lied to EDA about the SEC investigation.
"Auto-Train advised EDA that SEC attorneys had stated that the SEC investigation was concluded on or about July 3," the EDA letter said. "The SEC advised EDA that contrary to Auto-Train's statements, the investigation definitely was not closed and was in fact continuing."
The EDA in late June made a tentative commitment to give Auto-Train a $3 million loan guarantee under a program meant to create or preserve jobs.
On July 18, however, EDA threatened to rescind that commitment because of the three investigations and other problems with the Auto-Train application.
EDA gave Auto-Train 15 days to clear up problems with the loan guarantee application. An EDA press officer said yesterday the railroad has submitted responses to EDA's letter, but EDA has not yet determined whether the Auto-Train's answers are sufficient to keep the loan alive.
The snag in the EDA loan has not been revealed to stockholders by Auto-Train. EDA made public the letter to the company after The Washington Post asked about the status of the loan guarantee application.
If the EDA loan falls through it could seriously hamper Auto-Train's three-part plan to get new financing and keep the railroad running.
The ICC earlier this week threatened to block the other two aspects of the plan because of what it called Auto-Train's "intolerable misuses of funds it owes the public."
The railroad has kept more than $800,000 in refunds due passengers and used the money to pay operating expenses. The ICC said that until the passengers are paid back, it will not permit Auto-Train to issue a $3 million note to an insurance company or to issue $7 million in new stock.
Auto-Train senior vice president Richard Goldstein said this week the railroad hopes to use the EDA loan money to pay the refunds.