An Unscrupulous SBA Side Deal for a Woman-Owned Business

YES inspirador front sign

The only deal known to the SBA and the woman-owned business was straight forward and simple.  The 504 Loan would be used to purchase commercial real estate and complete construction to launch her start-up business of a wedding and event facility.  A $2.3 million project.  She would need to contribute approximately 20% ($510,000) and the lenders would split the remaining 80% as 50%/30%.  Additionally, the woman-owned business would be required to complete all of the conditions of the loan as approved in the SBA Authorization including receipt of a $250,000 grant awarded for the completion of the construction on the historic property.  The grant would be required to be reserved for mortgage loan payments and working capital for the start-up.

The woman-owned business performed all of the conditions of the loan according to the lender’s certifications to the SBA.  She contributed more than $510,000 of her family’s life savings into the project.  She completed construction and was ready to launch her business.  Unfortunately, the lenders had a secret side deal that they needed to complete before she could begin.

It took four highly experienced bankers to foster the secret side deal. designed to induce the U.S. Small Business Administration to guarantee a loan on a multi-million dollar project; while simultaneously setting up the woman-owned business for certain and immediate failure.  The side deal between BBVA Compass Bank and Robert D. McGee (Bob McGee), President of Southwestern Business Financing Corporation (SBFC) appears to have been meticulously designed to do three things:

  1. mislead and induce the the SBA into guaranteeing a small business loan
  2. secretly seize an additional $250,000 grant plus $50,000 in borrower’s cash from a start-up business
  3. quietly take a highly desired piece of commercial real estate from a woman-owned business

Ultimately, what makes a side deal work is industry experience in a complex transaction that would be a challenge for any lay person to unravel.  The efforts in this side deal demonstrate an absolute disregard for the public policy purpose of the SBA 504 Loan by two premiere SBA lenders. 

The four highly experienced bankers who were also considered SBA 504 experts in their field included:

  1. Robert D. McGee, President
    Southwestern Business Financing Corporation (“CDC”)
  2. Teresa Mandelin, Senior Vice President
    Southwestern Business Financing Corporation (“CDC”)
  3. Burton L. Messick, Senior Vice President
    Compass Bank (“SBA Lending Division”)
  4. Michael Monterrubio, Senior Vice President
    Compass Bank (“SBA Lending Division”)

The irony here is that none of these players were the original loan officers on the transaction.  None of these players had ever met the woman-owned business prior to their efforts to form the side deal.  Instead, two other loan officers originated the transaction.  Both were circumvented  from the transaction and avoided in communications regarding the loan changes and the side deal.  In an effort to prevent internal scrutiny into the side deal both were eventually removed of their roles and in the long run blackballed from ever seeking employment in their field ever againThey were “out of the way”.

The new “foursome” agreed to write-up an internal memo about the structure of the dealThis time they would write it not on company letterhead, not using an SBA form and without a trace of approving signatures.  The internal memo would become their only paper trail.  Their “story”.  On the header of the memo it states:

“Policy exceptions requiring approval” = NONE 

The foursome had taken it upon themselves to circumvent their own credit approval policies and worked in tandem to push the side deal structure through their systems — QUIETLY.

The memo also stated that a “written agreement with the borrower will be a condition of the loan” and “the $250,000 city grant funds would be handed over by the borrower to (in theory) pay down the BBVA Compass Bank first lien from $1,400,000 to $1,150,000.”

Compass Credit Memo_Page_1Compass Credit Memo_Page_2

The memo was emailed from Monterubbio to Mandelin at the CDC for review and approval.  Mandelin and McGee responded that they had reviewed and were “okay with the changes” to the structure.  They agreed to proceed with a formal request to the SBA for final approval through a 327 Stamp Action.

teresa email

The problem with the CDC’s concurrence to the changes was that it would require disclosure of at least three substantial and  material changes to the original SBA Authorization among many others.

  1. Disclosure that the lenders intended to force the borrower to contribute an additional $300,000 cash into the project for a total borrower contribution of $760,000
  2. Disclosure that Compass Bank had increased their first lien note to $1,400,000 without SBA approval and without an amended appraisal to support the value on the common collateral. Combined liens were already at 90% LTV
  3. Disclosure that the bank wanted to take the only verified source of working capital for the start-up business in the amount of $250,0000 to pay down its own first lien note in front of the SBA

In more than 14 known certifications to the U.S Small Business Administration the lenders jointly mislead and concealed the material details of their side deal.  No written, verbal or agreement of any kind with the woman-owned business  was established.  In reality a written agreement with the borrower was required by the banks own Deed of Trust.  However, such an agreement would have left an unwanted paper trail and the foursome evaded their own loan condition and failed to secure such an agreement.

Without a written agreement the only mechanism to secure the $250,000 grant was coercion and a threat to foreclose the property in the event she didn’t cooperate.

Experienced bankers understood that seizure of the grant funds would have left the woman-owned business with no resources to make the first mortgage payment or start her business. Additionally, the seizure would have forced the woman-owned business to automatically and immediately default on her SBA guaranteed loan with no financial resources to fight a legal battle to prove otherwise.  The completed commercial real estate valued at $2.9 million with more than $1 million in equity sitting idle would have gone back to the lenders to be handled “accordingly”.

Staff at BBVA Compass questioned the lack of disclosure of the city grant to the SBA.  Bob McGee confessed in an email that “If I had included the city piece it would have materially changed the injection, etc.  Since it’ll be gone before we fund, the approved structure makes it work.”

itll be gone

With no written agreement for the borrower to agree to “hand over” the $250,000 grant it appears to have left the BBVA Compass staff in a quandary on how to “handle the borrower”.  A string of emails demonstrates their conundrum to regroup, strategize and “meet for a game plan”.

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The banker’s side deal works if the unwitting woman-owned business simply goes along with the direction of the “experts”.  In the event she didn’t cooperate the banker’s were prepared with a well thought out and  premeditated cover up plan.

*If you or someone you know has had an unfair experience or inexplicable experience with an SBA 504 Loan please contact us at: kellerian1963@gmail.com 

Posted in BBVA Compass, Inspirador, SBA 504 Loan, Southwestern Business Financing Corporation | Tagged , , , , , , , , , , ,

How To Submit False Statements To The SBA

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Third Party Lender Agreement

In the world of SBA 504 Lending a series of certifications or promises to the U.S. Government are required before a government guaranteed loan can be issued. Essentially, SBA Lenders need the permission of the SBA before they can make any changes to a loan. At all times the lenders are promising that they have verified any information submitted through them and that they are not submitting anything that could be considered misleading.

These certifications are strictly between the U.S .Government and the SBA Lenders entrusted to administer the program. None of the certifications or submissions are seen by the Borrower. The first promise looked at here is the Third Party Lender Agreement.  This certification is jointly signed by the Bank (BBVA Compass Bank) and the CDC (Southwestern Business Financing Corporation).

It is important to note that anything in excess of the Third Party Loan amount cannot be secured by a lien on the Common Collateral (commercial real estate).  Unless it is disclosed to the SBA and in a subordinate position.  In other words what we see in this transaction was outside of the SBA Authorization and misleading.

The “Amount of the Third Party Loan” as of April 25, 2007 was $1,400,000 as seen in the Modification to Promissory Note.  However, by November 27, 2007 both the bank and the CDC conceal this material fact from the SBA.   Instead, they jointly mislead the SBA by stating the loan was only $1,150,000.

On the same date of November 27, 2007 when the false statement was submitted to the SBA; BBVA Compass Bank admitted in its letter to Southwestern Business Financing Corporation that the

“Note is actually $1,400,000”  

actual note 1.4 letter

The letter appears to be another confirmation of the on-going secret “Side Deal” that BBVA Compass and Bob McGee were concealing from the woman-owned business and the SBA.

There are several promises made in the Third Party Lender Agreement.  Two in particular are written to deter lenders from attempting to manipulate the safety and soundness of the SBA 504 Loan Program.  The only check point that could intervene or correct false statements from being submitted would be the CDC.

  1. Amount of Third Party Loan is fully advanced and does not and will not exceed the amount allowed in the Authorization
  2. Accurate Information lender warrants and represents that all information provided is accurate and has not withheld any material information.

In this certification BBVA Compass Bank and McGee concealed the fact that the Third Party Loan/First Lien was increased to $1,400,000.  The amount allowed in the SBA Authorization was only $1,150,000 A difference of $250,000 would be considered “material” and a “false statement” to the SBA.  This excess amount of $250,000 by SBA rules can not be secured in the banks first lien. 

In the certifications false statements were submitted to the SBA to induce the funding of a government gauranteed loan.   The Side Deal to seize the $250,000 grant funds from the woman-owned business would in theory resolve the false statement.   However, in the event the side deal failed the lenders were prepared with a secret Cover Up plan to prevent any scrutiny into their false statements.  (Side Deal and Cover Up…coming soon)

*If you or someone you know has had an unfair experience or inexplicable experience with an SBA 504 Loan please contact us at: kellerian1963@gmail.com 

Posted in BBVA Compass, Inspirador, SBA 504 Loan, Southwestern Business Financing Corporation | Tagged , , , , , , , , , , , , ,

How To Destroy The Evidence!

The Freedom of Information Act is a federal law that provides the right to access information held by the federal government.  The law provides that any person has a right to access records of federal agencies. There are exceptions but the law is designed to keep citizens in the know about our government.

In the case of Inspirador an “SBA 504 Authorization for Debenture Guarantee” was assigned with an official SBA Loan Number: 24404960-08.  Once a loan number was assigned the records and documents of the loan file became accessible through the Freedom of Information Act (FOIA)

It appears from a letter written by Robert D. McGee (“Bob McGee”), President of Southwestern Business Financing Corporation had a seemingly desperate need to protect Ms. Wood’s SBA loan file and would only release it with a “valid subpoena”. 

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On April 16, 2008 BBVA Compass received two letters of cancellation for Ms. Wood’s SBA loan from McGee’s offices.  It is noted that the letters are “contradicting”. 

Destruction of Evidence_Page_01

One letter states that the “the CDC has cancelled loan”

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while the other letter states that the “borrower has cancelled their loan”. 

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Both letters are sent from Southwestern Business Financing Corporation on the same dayThe letter reflecting the CDC had cancelled was signed by a closing officer.  The letter reflecting the Borrower had cancelled was signed by Bob McGee.  McGee had no consent from the Borrower and he did not disclose the letter.

Ms. Wood had taken numerous opportunities to obtain her SBA Loan file through FOIA.  Access to the loan file would have been the only way the woman-owned business or legal counsel could fully understand what transpired in the loan transaction.  Without access to the loan file any small business borrower would forever be left in the dark.

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According to an SBA FOIA  response letter to Ms. Wood’s requests her “loan file record was destroyed” due to the “status of the loan”.  The April 16, 2008 cancellation letter McGee secretly submitted on behalf of the borrowers created a new “loan status”.  By fabricating a change in the status of the loan McGee triggered the SBA records retention and destruction procedures to kick in.  It’s a kill switch of sorts to,

Destroy the evidence.

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The SBA 504 loan agreements were binding.  McGee could not cancel the SBA Loan after the Borrower had cleared all of the conditions of the loan including  her contribution of  $510,000 towards the Total Project Costs.  BBVA Compass Bank appeared to have performed on their end by funding both loans.

However, it was the concealed side deal between McGee and BBVA Compass that had them trapped in a transaction that could only end if the woman-owned business failed.  She never did!

By secretly claiming the “borrowers have cancelled their loan request” the SBA sees it as a voluntary withdrawal from the loan assistance program without conflict and has no reason to look any further.

It is difficult to believe that any borrower would pay $510,000 into any loan transaction to: purchase real estate, complete construction, launch their start-up business and then cancel their loan. 

 *If you or someone you know has had an unfair experience or inexplicable experience with an SBA 504 Loan please contact us at: kellerian1963@gmail.com 

Posted in BBVA Compass, Inspirador, SBA 504 Loan, Southwestern Business Financing Corporation | Tagged , , , , , , , , ,

Former SBA Insider Reveals Bank Fraud: Part 1

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I first met Dilia Wood through a referral source in the spring of 2006. My name is Kevin Howard, I was the original Loan and Business Development Officer on her loan.  I was working for Southwestern Business Financing Corporation (“SBFC”). We were a non-profit Community Development Corporation (“CDC”) that provided SBA government guaranteed loans for local small businesses.

Wood had dreams of starting an event planning business. Her project fascinated me because it would be the largest start-up financing in my career, and despite the obvious risks, Wood had really done her homework preparing a high-quality business plan. After a few meetings with her, I knew that her business would be a success and my company approved the financing for the project.

Inspirador was a poster child for the SBA 504 program
and she embodied the American dream.

I also knew that no one would provide $2 million in financing for a start-up business without the support of government-guaranteed financing. If Inspirador was successful, the new business would employ seven to 10 permanent staff and keep about 250 temporary employees employed throughout the year. The City of Chandler was so excited about the project that they agreed to reimburse Inspirador $250,000 from their Historic Facade Grant Program at the end of the project.

I knew getting the loan approved would be difficult because we would have to base our loan repayment on the strength of Inspirador’s financial projections. A key strength was her willingness to invest $460,000 of her families life’s savings into the project. When assessing loan risk, bankers need to know the borrowers have significant cash invested in the deal. 

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Let me take a moment to mention how impressed I was to know that two young professionals in their mid-30s had been able to save more than $500,000, and were willing to invest it all to make their dream of owning a small business come true.
It was deals like this that inspired me to be a banker in the first place.

In June 2006, I wrote my presentation credit memo for distribution to the SBFC Loan Committee. Under our credit policy, all loans for start-up businesses required approval by the all members of the SBFC Loan Committee.

Our loan committee was comprised of experienced credit officers from Wells Fargo, Bank of America, Western National Bank, and other financial institutions in the greater Phoenix metropolitan area.

“The entire loan committee unanimously approved the financing for Inspirador.”

There was a special condition to the approval: Prior to our loan funding (which occurred after the projects completion), Inspirador needed to receive a minimum of $250,000 from the city of Chandler grant. These funds had to be deposited into a restricted account, half to be used for loan payments and half to be used for operational working capital. This was a non-negotiable condition.

 The SBA approved an initial loan structure in September 2006 based on the
“Total Project Costs” of $2,079,900.00.

This was the only structure I knew about and the only structure to my knowledge that the loan committee knew about.  In early 2007 there was a change to the project costs due to a serious change in the cost of construction. My boss Bob McGee, President of Southwestern Business Financing Corporation handled the modification to the change

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It was how Bob McGee handled the modification
that turned an ideal SBA 504 loan into

a bankers worse nightmare

This SBA government guaranteed loan was tragically manipulated and destroyed by my boss, Bob McGee and BBVA Compass Bank.  To fully appreciate the nuances I will walk you through an insider’s view – the banker’s view of the transaction.

In a three part blog series I will walk you through:

  1. how the loan was approved
  2. how it was modified
  3. how it was tragically destroyed

 Bankers arent known for divulging insider details of loan transactions like this one here.
It’s a career killer!

I have risked my banking career by giving full fact based disclosure here because I believe in the value of the SBA loan programs. I was shocked to learn how my boss, Bob McGee mislead the SBA and the public policy purpose to offer loan assistance to a Minority Woman Owned business.

See my next blog (coming soon): Insider View: How the Loan Was Approved

Posted in BBVA Compass, Inspirador, SBA 504 Loan, Southwestern Business Financing Corporation | Tagged , , , , , , | 1 Comment

How to Destroy a Woman-Owned Business. {PART 2: The Extortion Method}

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It was from the moment the broken roof trusses were discovered that BBVA Compass and McGee worked in a seemingly calculated manor to conceal the fact that on April 25, 2007 BBVA Compass increased their first lien to $1,400,000 from the SBA.

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It was after the loans were increased when Dilia was unexpectedly called into a meeting by two BBVA Compass Senior V.P. loan officers she had never met before: Burt Messick and Michael Monterrubio.

It was in that long and heated meeting that Messick divulged that BBVA Compass never ordered the structural engineer report and she later learned they never ordered the second appraisal she was charged for either.  BBVA Compass had a $2.6million project with an old $2.3million appraised value and no evaluation of the structure.  Not good for a bankers career.

Messick and Monterrubio wanted to shift their failure to perform their due diligence onto Dilia to fix their problems.  They tried an intimidation tactic where they demanded she agree to,

“hand over the $250,000 city grant funds to pay down Compass’s  first lien plus $50,000 cash up front.”

 She was shocked and it was a request that would be intimidating for any small business.

BBVA Compass, a premiere SBA lender, wanted to seize without disclosure to the SBA the same grant funds that were required of Dilia by the SBA to be used for her working capital and mortgage payments?  Their gruff demand was clearly a blatant attempt to force her start-up business into predestined failure out of the gate.  She declined.  Her answer was NO.

Dilia later received an email from the BBVA Compass SBA Lending Division notifying her to provide only the $50,000 contribution to cover her 20% of the project cost increase, which she did.  Her borrower’s contribution was by then $510,000.

50kcash 50kcash check

In the email BBVA Compass did not mention the $250,000 Messick and Monterrubio wanted her to turn over.  McGee moved on his end to get the SBA’s approval for the loan increases through a “327 Stamp Action,” an SBA formality to request a change to the Authorization.

In the 327 and more than 14 documents
Robert D. McGee, President of
Southwestern Business Financing Corporation
MISLEADS the SBA about the project

    • Construction costs increase = $220,000
      (actual increase $471,000)
    • BBVA Compass first lien (Third Party Lender Loan) = $1,150,000
      (actual lien = $1,400,000)
    • Total Project Costs = $2,300,000
      (actual total = $2,600,000)
    • Borrower’s Contribution (Dilia) = $460,000
      (actual contribution = $510,000)
    • Borrower’s Contribution Percentage = 20%

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The 327 was a blatant lie to the SBA about this 504 loan.  It was later discovered that this 327 concealed more than $300,000 of unreported cash to the SBA; while the woman-owned small business was left in the dark.

Construction was completed by October 2007 and the subject of the grant funds never came up again.  She had successfully cleared all of the conditions of the SBA 504 loan and everything was ready to complete the SBA funding process.

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However, it turned out that even though she declined to hand-over the $250,000 city grant funds; Messick and Monterrubio internally went ahead and underwrote the loan increases with the condition that she would and without her written consent.

It appears from email strings that BBVA Compass took calculated steps to make sure there was no written or signed agreement for the BBVA loan condition

The BBVA Compass Deed of Trust requires written consent.  No written agreement would perhaps prevent any trace of evidence that they planned to seize the only verified source of working capital for her start-up business.

According to an email McGee sent to BBVA Compass regarding the $250,000 city grant;

“Since it’ll be gone before we fund”

the side deal would work and the SBA would never be the wiser about the “material change”.  The woman-owned business would never know what hit her.

McGee Email under

In January 2008 Dilia was formally awarded the grant from the City for completing the historic renovation project.  It was an exciting and thrilling moment because it meant she could officially get her business truly started, hiring staff and hosting those one of a kind weddings she had dreamed of.

Then, Messick popped up again.

He knew somehow, without notice from her, that she received the grant.  He wanted it.  He demanded it. He confessed he didn’t care what the SBA knew or didn’t knowHer original loan officer from the CDC instructed her not to give up her working capital.  She was stuck.  Only one of three things could happen:

  1. If she gave him the money she feared she would default on her SBA guarantee
  2. If she didn’t give him the money he threatened to default her on the BBVA Compass loan
  3. If she gave him the money her start-up business would have no working capital or a way to make the first mortgage payment.

She couldn’t win.  It was do or die.

In a panic, Dilia tried calling her original loan officer from the CDC for help.  However, it was too late SBFC President, Bob McGee had mysteriously issued a company-wide gag order restricting any employees from speaking with her and even her loan officer was prohibited from assisting her.

The entire situation had her terrified and by that time, she had $510,000 of her family’s life savings invested in the Inspirador project that was going terrifyingly awry.

In the midst of this crazy meltdown, Dilia was summoned to the Mayor’s office to discuss the city’s interest to use her property for their new $74 million City Hall project.  Apparently, Inspirador was the perfect location to run a public pedestrian breezeway from old town to the new city hall.  The entire City Hall project had been designed with this north/south alignment through Inspirador in mind and approval from City Council to allow the budget would hinge on this design idea.

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Turns out this old property had more interested parties than she could have ever realized.

During this time in 2008, BBVA Compass and McGee demonstrated a relentless desire to take ownership of the property, seize the grant funds and leave her start-up business in a position of intentional default.

BBVA Compass was creating a foreclosure where one was not needed.  When she didn’t “hand over the $250,000 grant funds,” McGee was in a quandary.  He had already lied to the SBA over and over again.  In order to save himself, McGee pulled the SBA funding at the final hour leaving BBVA Compass holding the bag for both loans.

McGee secretly used that time to clean up his mess and he very busily manufactured a malicious cover-up scheme that would forever ban her from qualifying for an SBA loan ever again — just in case.

Since McGee never funded his portion of the loan one would think his interest in the property would dissipate with that as well. Not so with McGee, he found ways to keep his hands in the pot along with BBVA Compass for all those years.

In her efforts to obtain her SBA loan file Dilia submitted a formal request  through the Freedom of Information Act (FOIA)only to find out that it had been cleverly destroyed by McGee when he secretly wrote a letter on her behalf to cancel the loan!

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Dilia called his offices directly to obtain a copy only to receive a certified letter from McGee explaining that the files were his property to protect and he would release them only if “ordered by a valid subpoena”

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McGee conveniently never removed his unfunded liens of $579,000 and encumbrances from the property title.  In 2011 Dilia was forced to sue McGee to: remove the unfunded liens from her property title and finally obtain a copy of her “protected” SBA loan file

McGee was receiving annual notices from the property insurance company as an “additional insured”.  By September, 2011 BBVA Compass secured an updated property appraisal for themselves and McGee (3 years after McGee pulled funding).

appraisal for mcgee

For all these years Dilia was never privy to the long string of banker shenanigans being played by BBVA Compass and McGee.  They concealed every bit of it from her and the SBA.  No one would have been the wiser had her small business failed

0382_IceHowever, business was doing well, well enough that for almost five years she was making those mortgage payments of $12,850.00 in good faith.  McGee had saved himself, left BBVA Compass to fend for themselves and Dilia got tagged with a Hobson’s Choice:

“Take a 3-year balloon on the second lien and prove you can make the monthly payments or we’re taking ownership of the property”

What she also didn’t know was that the their secret cover-up scheme to ban her from qualifying for all of time from an SBA 504 loan gave them assurance that no other banker in the market would ever touch the loan for a refinance.

Every calculated step was BBVA Compass and McGee’s personal guarantee that they would eventually gain ownership of the property.

BBVA Compass Bank in fact did take ownership of the property on April 17, 2013 at 10:00 a.m.  and forced the viable and popular Inspirador business to CLOSE unnecessarily.

She was making regular monthly payments of $12,850 and had paid more than $650,000 in principal and interest and $510,000 of her families life savings — all in good faith.  However, BBVA Compass wanted nothing short of her paying off McGee’s portion of the loan and gaining ownership of the property.  They REFUSED to term out the loan she proved she could service.  A civil litigation is pending.

Now that BBVA Compass OWNS the INSPIRADOR the public aftermath and local media frenzy that took place after has become an even bigger tragedy.  Now the dreams of many more good and decent people have been crushed at the hands of BBVA Compass Bank. 

*If you or someone you know has had an unfair experience or inexplicable experience with an SBA 504 Loan please contact us at: kellerian1963@gmail.com 

Posted in BBVA Compass, Inspirador, SBA 504 Loan, Southwestern Business Financing Corporation, Uncategorized | Tagged , , , , , , , , , , , | 1 Comment

How to Destroy a Woman-Owned Business. {PART 1: The Beginning}

“Minority Woman-Owned Business” is a very specific title that fits a public policy purpose by a Congressionally-mandated program to support economic growth in our country.  The United States Small Business Administration (SBA) is the catalyst known for being highly regulated with the intention of making credit accessible.  For entrepreneurs and those who dream of owning a small business, the SBA provides hope of achieving the American dream.

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Inspirador was a small business idea, a dream and the passion of a “Minority Woman-Owned Business.”  The owner and creator, Dilia Wood had a vision of building a venue to inspire one-of-a-kind weddings and to provide a unique service model concept to manage all the details of each couples dream day.

It was a start-up concept, which is known for being extremely difficult to find funding for.

After extensive research and planning for nearly two years before seeking funding, Dilia, along with her family’s life savings, embarked on a life-changing experience of her entrepreneurial dreams.

Her American dream.

Through the SBA 504 loan program, her American dream became a reality allowing her to build the location and service model she had envisioned.  During her research, The SBA 504 Loan program was touted as a loan assistance program that was heavily regulated, leaving no room for shenanigans or tricks.  It seemed like a safe and sound program to leverage as a novice borrower, or so she thought.

As a “minority woman-owned business” of African-American and Hispanic descent, to the banks she was the poster child for an SBA loan. The reality was, without the SBA her chance of starting her dream business would have been restricted.

However, the truth is because of the SBA, her dream was callously stolen by the very individuals trusted to administer the program!

How?  Well, Inspirador (Spanish for inspiration) was growing year after year and creating jobs in the community.  Her concept was in practice.  Her theory of a business idea had proven to work.  Despite one of the worse economies in history; Inspirador was an SBA success story!

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It was ready to grow and expand, but at its peak Inspirador was swiped out from underneath her by the very individuals she thought wanted her to succeed.  She was wrong.

Unfortunately, other small business owners across the country have been wrong too.  The difference is that those small businesses ended up in bankruptcy and failure as a result and had no idea what hit them.

In the case of Inspirador there is real evidence backing up the allegations.  Marie McDonnell, a credentialed Certified Fraud Examiner recognized for her findings in the infamous robo-signing scandal featured on 60 minutes; reviewed the documents in the Inspirador case. From the 96 page report (excerpt below) the preliminary findings concluded that:

Compass Bank has no right to foreclose the Property because it has dirty hands and should not be allowed to profit from its bad faith and fraudulent activities”

Pages from Expert Forensic Mortgage Fraud Examiner Findings_Page_3

Many of the documents, emails, letters and government certifications made available by a court ordered subpoena are shared on this blog which,

PROVE

BBVA Compass Bank and Southwestern Business Financing Corporation (SBFC) colluded to manipulate the SBA 504 Loan program for their own nefarious motives.

To fully understand all of the intricacies of this harrowing story, let’s go back to

The Beginning:

To create Inspirador, it was necessary for Dilia to own the real estate and not just lease it.  With this in mind, the SBA 504 Loan was presented to her as the ideal solution.

It would be an old 12,000 square foot junk shop in a distressed downtown district that she dreamed of rehabbing for the Inspirador project.  It was not for sale at the time.  The owner made it clear to her that he had no intentions of selling his property to anyone in the local community.  It could have been because she was an outsider and new to town, or maybe because of her dream, but he eventually agreed to sell it to her for $1,350,000.

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It was an intriguing property because it –

  • Was located in the heart of downtown
  • Was listed on the historic registry (originally the O.S. Stapley Hardware Co.)
  • Included four lots and air rights
  • Had potential to continue to grow with the business.

But since it was originally built in 1916, the property needed a great deal of work.

Dilia hired a structural engineer to determine if the location could be salvaged for the Inspirador project.  Everything came back in good condition except the report noted:

“Engineers highly recommends another inspection of the roof structure”

structural report

The property qualified for a city grant to renovate the exterior to its historic characteristics.  It was estimated that the grant could be at least $250,000 and as much as $400,000.  The city was excited to see revitalization taking place and supported her project fully.  Dilia was excited to be a part of the downtown revitalization.

The Funding Began:

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BBVA Compass Bank stepped in to fund the project through an SBA 504 loan, partnered with a non-profit lender known as a Certified Development Corporation (CDC) who is licensed by the SBA to administer these loans.

BBVA Compass would not provide funding without the SBA guarantee.

compass wont wo cdc

There were only two CDCs in town and Southwestern Business Financing Corporation (SBFC) was the CDC of choiceA bank and a CDC are both required.

Dilia went through the laborious and daunting task of applying for the SBA 504 Loan and was approved based on the condition that she contribute 20% of the total project costs in the amount of $460,000.  She had what a banker calls “skin in the game” and a lot of it.

The financing would be based on “total project costs” divided between the three parties (50% + 30% + 20%):

  • BBVA Compass would provide 50% secured by a first lien
  • SBFC who represents the SBA would provide 30% secured by a second lien that would be 100% guaranteed by the SBA
  • Dilia would contribute 20% as “borrower’s equity” in the amount of $460,000

The original Total Project Costs were $2,079,900.00 –and may have been the largest start-up SBA 504 in Arizona history.

The value of an SBA loan to a borrower is that you receive better than market interest rates with longer terms, no balloons, no early calls, etc.  In Dilia’s case she would receive a 20-year note on both loans.

Robert D. McGee, President of SBFC imposed an additional and unique condition on Dilia’s SBA 504 loan application.  He required that “Prior to funding, establishment of a restricted working capital account, with minimum proceeds of $250,000.  Half of the required proceeds will be used as a payment reserve and half will be used for project related working capital needs.” The city grant of $250,000 was the only verified source to satisfy this condition and the SBFC Loan Committee approved the condition.  Dilia agreed.

workcap.

When you are approved for an SBA 504 Loan you are issued an “SBA Authorization for Debenture Guarantee, establishing the terms and conditions of the loan agreement. Dilia received her Authorization and her official SBA Loan #24404960-08 in September 2006.

Following that, BBVA Compass began its due diligence of the project and secured a $5,000 fee from Dilia to conduct their version of an appraisal and an additional structural engineer report due to the age of the property.  This additional review of the structure would address the concerns that her engineer had regarding the roof trusses.

Based on the purchase price of the property of $1,350,000 plus estimated construction costs of $547,000, the appraisal came back with an “as-if completed” value of $2,300,000.  Loan closing was scheduled.

SBA 504 financing is unique in that it requires the first lien lender, BBVA Compass, to advance 80% of the project up front at closing.  30% of their advance would be reimbursed by SBFC if the project was completed as approved by the SBA.

BBVA Compass was bound to the rules, regulations and the Authorization of the SBA.

SBA 504 Loan Approved:

The property was purchased November 14, 2006 -Both loans closed and everything seemed to be going normally and smoothly until…

Broken Truss-3

  • Early 2007 when 6,000 square feet of roof trusses were found broken and splintered beyond repair.
  • The necessary repairs increased the construction costs by an additional $471,000
  • April 24, 2007 BBVA Compass approved the full increase when they submitted their Modification to the Promissory Note increasing both loans.
  • BBVA Compass increased their first lien from $1,039,900 to $1,400,000

and BBVA Compass CONCEALED
these material changes
from the SBA

Construction proceeded and an extortion method to seize the $250,000 grant from the woman owned business was then put into play by both lenders.  See Part 2: The Extortion Method and later The Concealment Method

*If you or someone you know has had an unfair experience or inexplicable experience with an SBA 504 Loan please contact us at: kellerian1963@gmail.com 

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Open Letter to BBVA Compass Bank President and Board of Directors

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Open Letter to BBVA Compass Bank President and Board of Directors

Dear Mr. Manolo Sanchez and Board of Directors,

Please accept this formal invitation to the blog that reveals how your SBA Lending Division lied to the SBA in signed documents, government certifications, letters and emails to fund a $2.6 Million loan for a minority/woman-owned start-up business.  The blog is simply to inform you Mr. Sanchez and your board of directors and to drive awareness to other small businesses considering an SBA 504 loan.  Sadly, your organization participated in an SBA 504 Loan fraud scheme that unnecessarily destroyed a viable minority/woman-owned small business, jobs and the dreams of many including those of the brides and grooms who got caught in the middle and lost their dream wedding at the hands of BBVA Compass.  No one from your organization has stepped in to fix this tragedy.

The signatures, emails, documents and certifications from your organization in this single transaction is hopefully unacceptable to you and your board of directors.  The documents were obtained through a court ordered subpoena in an Arizona civil litigation filed in 2011.  The truth is Mr. Sanchez the entire country is fed up with banks taking advantage of good and decent people and this is an opportunity for you as the leader of your bank to step up, step in and do something.  Anything.  An entire dialogue and library of your companies documents has been prepared for release to share with you exactly what took place.

*If you or someone you know has had an unfair experience or inexplicable experience with an SBA 504 Loan please contact us at: kellerian1963@gmail.com  
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