Marta Mossburg: ACORN isn't the only organization fleecing taxpayers
By: Marta Mossburg
Examiner Columnist
September 15, 2009
Thanks to two intrepid young people, millions now know the counseling techniques of ACORN. They include thorough, friendly, and nuanced advice about how to evade tax laws and run a sex trafficking business with underage girls.
The two Baltimore staff members of the community organizing group whose behavior was caught on video were fired. Good. But the more important issue is how to prevent an organization supported by taxpayer dollars from committing fraud in the first place.
Transparency is the best solution. Right now, Maryland taxpayers don't have it.
No one can find out which nonprofits or for-profit businesses receive taxpayer grants, how much, and how they use the money. State legislators passed a bill (HB1192/SB556) this year requiring state agencies to submit reports to the Department of Budget and Management on their grantees receiving $50,000 or more each year.
Reports were due Sept. 1, but an O'Malley spokesman last week said the administration will not collect them because of budget cuts.
This is important not just because of Association of Community Organizations for Reform Now, which remains on a preferred list of foreclosure prevention counselors for the state. The issue is important because the state delivers more than $900 million each year in grants to nonprofits and for-profits to do the state's business.
That sum is likely low, because it is a tally of organizations receiving $100,000 or more from state agencies. Other groups likely receive smaller grants.
Jacqui Lampell, the spokeswoman for the state Department of Housing and Community Development, said that ACORN receives no state funds from DHCD. She described as "inaccurate" a state Web site outlining how the state "supports" community organizations, including ACORN, with $5.68 million over the past two years.
But information obtained by The Examiner shows that a lack of oversight of just one agency -- DHCD -- is costing Maryland taxpayers millions. An earlier column showed how DHCD extended an additional $378,000 in 2005 and 2006 to Tom Kiefaber, then-owner of the now-defunct Senator Theatre in Baltimore City, when he had already defaulted on the agency's original loan of $385,000.
It also mentioned how taxpayers lost when a $250,000 loan to a restaurant in Baltimore City defaulted. An agency lawyer refused to disclose why Kiefaber received such favorable terms or the interest rates on any of the agency loans.
Last month DHCD said that its total portfolio of delinquent loans is $2.6 million. But new research shows that figure is likely higher.
In addition to the two businesses mentioned above, at least three more in Baltimore City alone were made to businesses apparently no longer operating. And Gary Pierpont, owner of the property listed in DHCD documents as "Cannery Square AKA Miller's Court," a so-far undeveloped real estate tract in the Canton neighborhood of the city, said he did not know about a $700,000 loan supposedly directed to his property that closed Oct. 3, 2008. If the owner did not get the money, then who did?
Baltimore City businesses potentially in default include Bediboo, a children's clothing and toy store at 4321 Harford Road. DHCD documents show that a business at that address received an $85,000 loan on Sept. 28, 2007.
Bediboo's Web site said it closed in February. Phone numbers for the business and for the owner, Gretchen Pike, were disconnected.
Maggie Moore's restaurant in west Baltimore received a $500,000 loan in 2005. The restaurant has since been sold to one of the original partners in Maggie Moore's according to a report in the Baltimore Sun and renamed Lucy's Irish Pub. The phone number for Lucy's is disconnected and the Web site says the restaurant is closed for the summer.
The status of a $72,986 loan made to 1121 Marshall St. is also in question. A business named Nurses Now!, owned by Ben David according to a report in the Daily Record, is listed at that address but its phone number and Web site do not work.
The losses beg the question of how DHCD selects its loan applicants and at what rates it extends money. Taxpayers deserve to know who they are subsidizing and why.
One can only wonder if some of the loans would be made at all if information about them were made public. The same goes for grants extended to the potentially thousands of other organizations in the state who still do not have to disclose anything about how they use taxpayer dollars and if they are fulfilling their stated missions.
Exposes like the ACORN video serve a great public service, but they are no substitute for good public policy. Lawmakers must enforce the transparency law they passed this year.
Examiner Columnist Marta Mossburg is a senior fellow with the Maryland Public Policy Institute and lives in Baltimore.
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