Anne Arundel County officials vowed yesterday to better safeguard the county's small business lending program from conflicts of interest after learning that several fund directors profited from loans they approved.
The Anne Arundel County Economic Development Corp., a nonprofit group that is funded with tax dollars, has a $3.8 million loan fund to help residents, especially minorities, launch new businesses.
In at least a half-dozen cases over the past six years, board members at the corporation approved loans to businesses that were linked to them financially, according to an article in the Baltimore Sun yesterday.
In one instance, the corporation lent $300,000 to an Annapolis veterinary clinic that had hired a board member, Scarlett Breeding, to design its $1 million offices. In another, directors lent $190,000 to help open a Glen Burnie bowling alley that was partially financed by M. Willson Offutt, a lawyer who was working for the development corporation at the time. Breeding continues to serve on the board.
County Executive Janet S. Owens (D) reacted with "shock, dismay and disgust to the apparent insider dealing on the economic development board," said Andrew Carpenter, her spokesman.
William A. Badger Jr., whom Owens named to head the county's economic development office this summer, promised yesterday that he would demand stricter oversight of the loan program.
In a prepared statement, Badger said he would ask the board to draft a formal ethics policy and that he would recommend that members require disclosure forms from staff attorneys. Also, he said, corporation directors met Tuesday to revise their bylaws so loans to members would be prohibited.
"Since I was named president in August of this year, I have taken action to remove even the appearance of conflict of interest in all [development corporation] business," he said.
Though the group receives virtually its entire budget from the county, Badger has contended that most of its documents should not be subject to public scrutiny because that might deter private companies from seeking assistance from the agency. Recently, under pressure from Owens, he has released some financial records.
Over the course of this year, a number of accounts of inside dealing and apparent conflicts have dogged the corporation.
In August, four members of the volunteer board acknowledged steering corporation business to their own companies, charging the agency thousands of dollars for stationery and computer software and billing it more than $60,000 for accounting and legal help. Only one of the four, Leonard A. Blackshear, remains on the board. He returned the roughly $2,000 paid to his software firm.
Then, last month, a former board member disclosed that an $11,000 loan proposal he brought to the board for approval in 1997 was headed for a charity he helped run.
These revelations have come as county leaders have been aggressively trying to market the economic development office as reborn.
"Ms. Owens feels like this is a blot on the record of a past board and a prior administration," Carpenter said.
Since Owens took office in December, she has replaced five of nine board members and she has required all members to submit financial disclosure forms.
Council member Daniel E. Klosterman (D-Glen Burnie), a critic of the corporation and the sponsor of a measure that required the agency to submit to its first-ever county audit, said he thinks the problems are in the past.
"I think we've got a good board on there now, and I think they realize these self-dealings and conflicts can't exist anymore," Klosterman said. "We won't stand for it, and the public won't stand for it."