New twist in loan tiff

The mother of a Columbia City Council member says she will repay a city loan she used to buy an office building for her daughter's law firm.

Veronica Isaac, mother of Councilwoman Tameika Isaac Devine, used a $280,000 loan from the city to help purchase an office building at 1419 Richland St. Isaac rents the building to her daughter for her law firm, Jabber & Isaac.

Federal housing officials questioned the loan last month during a review of how the city spends federal grant money. They asked city officials to pay the money back because it didn't meet loan guidelines for creating jobs. They also raised questions about a potential conflict of interest.

"I don't know if (the city) would have the money or whatever, and that's not fair for them to have to pay it back for us," Isaac said. "This whole thing is just so distressing. I guess I'm just not used to being in the spotlight like this and so it's kind of unnerving."

The loan to Devine's mother was one of several concerns laid out by officials with the Department of Housing and Urban Development.

The review asked city officials to explain how two of its loans - the other being a $179,000 loan to CamBry Inc. to purchase a restaurant owned by City Councilman Daniel Rickenmann - did not violate "federal, state and local conflict of interest guidelines."

The loan money came from the federal government but was administered by Columbia as part of the Sumter-Columbia Empowerment Zone - a federal program designed to create jobs in economically depressed areas.

In a response letter to HUD, Allison Baker, Columbia's senior interim assistant city manager, wrote that the Sumter-Columbia Empowerment Zone adopted a conflict of interest policy Nov. 6, 2008.

The policy states: "Any interested parties, including employees, committee members, and borrowers, may not receive any direct or indirect financial or personal benefits in connection with the approval and awarding of a loan."

Devine has an informal opinion from Cathy Hazelwood, an attorney with the state Ethics Commission, saying the loan posed no conflict. And Isaac stressed that her decision to repay the loan does not mean she thinks the loan was improper.

"This has nothing to do with who we know or who we're related to," she said. "We're citizens of Columbia. We know what goes on in Columbia. We know what's available, and it didn't have anything to do with our daughter. It's really a shame that politically, I guess, somebody feels that this would hurt her in some way."

Baker said the empowerment zone would provide training to all personnel and loan committee panel members to "ensure and safeguard against any instance of a conflict of interest in its loan program."

Also, Baker said he would amend the policy to include a "Conflict of Interest/Code of Ethics Signature form for each committee member and staff to sign as verification that they received the information and will adhere to those requirements."

"The SCEZ believes that these policies and procedures are adequate and meet all requirements under Federal, State and Local laws," Baker wrote. "If HUD deems that such policies and procedures are deficient, the SCEZ will address those deficiencies by amending the EZ Loan Policies and Procedures."

Attempts Tuesday to reach HUD officials were unsuccessful.

While federal officials had concerns about a possible conflict of interest, they asked city officials to repay the loan to Isaac because they believed the loan violated federal standards about job creation.

By moving an existing law firm into the empowerment zone, HUD officials argued, the city was not creating jobs with the grant money - which is what they are supposed to do.

Baker said that while city officials recognize the loan might not meet federal standards, they plan to ask HUD for an exception.

"If the request for an exception is not approved by HUD, the borrower has made arrangements to return the original amount of the loan," Baker wrote.

But Isaac said she plans to repay the loan anyway, regardless of what HUD decides.

"I just, I don't want to fool with it, in all honesty," Isaac said. "I don't want the city to have a bad mark."

Isaac said she and her husband have not decided how they will repay the city loan - either by getting a second loan to cover it or using their own money to pay it back.

The other loan HUD officials questioned was $179,000 to CamBry Inc., which later purchased a restaurant from Rickenmann.

Rickenmann disputes HUD's finding that the loan involved a potential conflict of interest, saying at the time the restaurant deal closed, CamBry Inc. did not have a loan from the city.

In January, CamBry Inc. filed for Chapter 7 bankruptcy, and the Empowerment Zone lost the balance of the loan. That prompted HUD officials to question the city's policies and procedures for approving loans.

"Underwriting and internal processes were adhered to and federal provisions relative to internal control measures were implemented when reviewing and approving the loan," Baker wrote HUD. "The life of this loan was short-lived due to other factors outside of loan underwriting."