Prince William County prosecutor Paul B. Ebert failed to adequately check the title to a Woodbridge marina, enabling the firm to improperly obtain a $385,800 disaster loan, the federal government has alleged.
Ebert, one of the most influential officeholders in the Northern Virginia county, did not alert the Small Business Administration to another bank loan the marina had obtained in 1979, shortly before it sought the disaster loan, the government has alleged in a lawsuit against the prosecutor.
Ebert, who has been Prince Willam's commonwealth's attorney for 17 years, was unavailable for comment yesterday. He has denied any wrongdoing in court papers filed in response to the suit in federal district court in Alexandria.
The government's lawsuit seeks up to $530,000, plus interest, in damages from Ebert.
Because of Ebert's allegedly inadequate research, the government said, the SBA approved a $385,800 disaster loan to the marina's proprietors with the marina as security -- unaware that the same property had been pledged four months earlier as collateral on a $500,000 credit line from United Virginia Bank.
Ebert, who was allowed to maintain a private law practice at the time, assured the SBA that there were no other major liens against the Woodbridge business, the government alleged.
After the SBA loan was approved, the government said, Ebert mishandled $78,900 earmarked by the agency for three individual creditors. They never got the money, the government said, indicating it was used instead to help reduce the bank debt. Ebert's lawyer said yesterday the money did go to two of the creditors.
"He missed a trust through carelessness," Ebert's lawyer, Charles O. Cake of Alexandria, said of the allegedly inadequate title search. Cake said that marina owner Robert B. Hart used some of the $78,900 in SBA funds to pay off two of the creditors, but was unable to settle with the third.
Hart, the president of E-Z Cruz Inc., on U.S. Rte. 1 in Woodbridge, has agreed to plans to pay off both United Virginia and the SBA, according to lawyers involved in the Ebert lawsuit and in a long, complex bankruptcy proceeding filed by Hart in March 1981.
According to bankruptcy court records, Hart and his wife, Susan, were hard-pressed in 1979 to locate funds to finance boat sales at the marina because of high interest rates. They finally succeeded in arranging a $500,000 credit line with United Virginia Bank, using the marina as collateral.
Nineteen days after the bank placed its lien on the marina, the government's lawsuit alleges, the Harts applied for an SBA loan without mentioning the bank loan.
On Feb. 6, 1980, the agency told the Harts that they needed an attorney to certify that the SBA would have the first claim to the property in case the Harts defaulted on the loan.
Ebert supplied that certification on Feb. 21, 1980, and the SBA began its funding the next day, the government said.
As a condition of the loan, the SBA required that a total of $78,900 be made jointly payable to the Harts and the three individuals to whom the marina was indebted.
But on Feb. 27, the lawsuit alleged, Hart asked that the checks be issued instead to the Harts and Ebert. "The SBA granted this request only following numerous contacts with defendant Ebert and representations by . . . Ebert that the funds would be used to satisfy the . . . debts," the government said.
Assistant U.S. Attorney S. David Schiller said Hart testified in the bankruptcy proceeding that the funds were used to reduce the United Virginia Bank debt instead.
Schiller said the government only learned two years later, after the Harts filed for bankruptcy, that the money had gone to United Virginia Bank.