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B-130515(4) 1 (1970-05-19)

handle is hein.gao/gaobabkqb0001 and id is 1 raw text is: 1RESTRICTED - Not to be released outside the General -1,3 Accouating Office except on the basis of specific approval by the Office of Legislative WLaisoD, a record of which is kept by theWASH INGTON. D.C. 2034,029 t N w,.,....o~.:,. RELEASED B-1 30515(4) ELA MAY 1 9 1970 Dear Mr. Minshall: As requested in your letter dated April 6, 1970, and our later discussion with Mrs. Judith Rush of your office, we are presenting the following information on bank loans made to Namax Builders, Inc., and the Bland Construction Company under the Contractor Loan Guarantee Program administered by the Hough Area Development Corporation of Cleveland, Ohio. These two contractors have defaulted on loans received under the program. The loan guarantee program is one of a number of projects administered by Hough Development under grants totaling $3.1 million from the Office of Economic Opportunity (OEO) under the Special Impact Program provisions con- tained in title I, part D, of the Economic Opportunity Act of 1964, as amended (42 U.S.C. 2763). We obtained the following information in discussions with Hough Devel- opment officials and from the limited documentation available at Hough Development. A Hough Development official told us that the documentation developed prior to January 1969 relating to the approval of the loan guar- antees for Namax and Bland was destroyed by fire. Additional information pertaining to Namax was obtained from Mr. Carl Character of the law firm of Stokes, Character, Terry, and Perry, We have not examined the financial records of Namax or Bland. By Hough Development's guaranteeing loans which banks would otherwise be unwilling to make, construction organizations, owned and operated by persons of minority groups, are able to obtain high-risk working capital. Hough Development had OB0's approval to use $225,000 of the grant funds to operate a revolving fund under the loan guarantee program. Of this amount, Hough Development had budgeted $212,000 for the program. Loan guarantees made by Hough Development do not require OEO approval as long as the out- standing amounts guaranteed do not exceed, in the aggregate, $225,000. The part of a loan to be guaranteed is subject to agreement between the bank and Hough Development. Through March 1970, the bank had required Hough Development to guarantee the entire amount of all loans made under the program. Hough Development's eligibility requirements under the loan guarantee program provide that the contractor must agree that (1) two-thirds of his employees will be residents of the Hough area of Cleveland, (2) he will train Hough residents in construction skills, and (3) he will develop a plan for hiring subcontractors from the Hough area. Hough Development pre- fers, but does not require, that the contractor be a Hough area organization.

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