Why won’t federal investigators take a serious look at the seemingly fraudulent documents provided by Ace, in apparent cooperation with the lending bank NCB, that induced him to take out a $1.85 million SBA-backed loan and toss in $930,000 of his own? For almost a year, the case has been on the desks of the Small Business Administration, seemingly a victim itself, and the Office of the Comptroller of the Currency, which regulates banks such as NCB. Neither agency has taken any action, but NCB took action: It ordered Fischer to shut down.
Here are some key documents in the case that you can examine yourself. First, here are the cover sheets for three “pro-forma” projections prepared by Ace, to demonstrate both to Ewers and NCB (and the SBA) that adopting Ace’s “Vision 21” program would be a winner for Fischer. But the first pro-forma showed a loss in the first year. The bank didn’t like that. So it was changed, somehow, to show a profit. Though no one could quite explain to him how the numbers suddenly changed, Ewers signed off on the second pro-forma in October 2008. But NCB still denied him the loan. Then the pro-forma was changed again in November 2008. Ewers never saw the third pro-forma, which was approved by NCB.
Here is the signature sheet for the Ace Hardware pro-forma, which Ewers signed in October 2008 after seeing the second pro-forma. But it was submitted with the third pro-forma in November 2008 without his knowledge. Out of the blue, an NCB officer called him that month and told him he’d been approved for the loan. Ewers didn’t know it was even under consideration.
And here are three e-mails from Ewers, reaching out to both Ace and NCB. After initially asking Ace for their pro-forma projections in E-Mail 1, Ewers receives a call from NCB’s Joann Haines, reflected in E-Mail 2. She has seen the Ace pro-forma, even though Ewers has not. In E-Mail 3, Ewers is seeking answers from Ace.
The pro-formas project a first-year loss of $186,000 in the first one, to a first-year profit of $198,000 in the third one, a $384,000 swing. No one with Ace ever told Ewers how the store’s projections suddenly swung without any changes in rent or further investment.
But Ace is being accused of crafting unrealistic financial projections in several pending lawsuits, including Ewers’ fraud suit in Illinois, and one of the suits is seeking class action status on behalf of dozens of similarly aggrieved Ace owners. Ace’s attempt to have Ewers’ fraud allegations dismissed in Illinois was rejected by a judge there. While all the litigation is pending, and federal investigations continuing, NCB ordered Ewers to shut down Fischer Hardware until it’s all sorted out.
“The question to the OCC and the SBA,” Ewers said, “is why hasn’t this been turned over to the Department of Justice? There is enough physical and factual evidence. I have let go 51 employees now on unemployment. I feel that the SBA needs to get off their duff and take this to the inspector general and get this to the DOJ.”
So what are the feds up to? They don’t comment on their ongoing investigations, though they have confirmed to local Congressmen that they are looking into the case. They’ve had the case for a year, and in that time an institution closed.