At face value, the Supplemental Terrorist Activity Relief Act (or STAR Act), passed shortly after Sept. 11, 2001, was a good idea. Countless businesses were badly hurt by the terrorist attacks, and the STAR Act was a federal loan program designed to help businesses avoid bankruptcy and recover. This same program is still in place and will be used to help make low-interest loans available to companies affected by Hurricane Katrina.
But, in what seems like a story that could become a fairly serious scandal, abuse at the federal loan has been rampant. Indeed, while some businesses in New York struggled to get back on their feet, the Small Business Administration was making loans through the STAR Act to companies that weren’t even affected by terrorism — and in some cases, didn’t exist on 9/11.
The government’s $5 billion effort to help small businesses recover from the September 11 attacks was so loosely managed that it gave low-interest loans to companies that didn’t need terrorism relief — or even know they were getting it, the Associated Press has found.
And while some at New York’s ground zero couldn’t get assistance they desperately sought, companies far removed from the devastation — a South Dakota country-music radio station, a Virgin Islands perfume shop — had no problem winning the government-guaranteed loans.
It’s quite a list. Funds that were set aside to help with 9/11 recovery went to a guy remodeling a Dunkin’ Donuts shop in western New York that was unaffected by the terrorism. A company in Wyoming offering air-testing services got $158,500 through the program, despite the fact that the company wasn’t created until after 9/11. In all, of the 19,000 loans approved fewer than 11 percent went to companies in New York City and DC.
It’s not the business’ fault. In each instance, they applied for a routine Small Business Administration loan and had no interest in the terrorism-relief funds. But for some reason, the SBA used money from the STAR program.
It’s raising a few eyebrows on the Hill.
Congress will investigate the “flagrant abuse” of a federal loan program designed to help businesses recover from the September 11 attacks and make sure such problems don’t occur with Hurricane Katrina relief, a key Senate Republican announced yesterday.
Sen. Olympia J. Snowe, Maine Republican and chairwoman of the Senate Small Business and Entrepreneurship Committee, announced the investigation in response to an Associated Press report Thursday that showed the federal program was so loosely managed that it gave low-interest loans to companies that didn’t need terrorism relief or even know they were getting it.
“The apparent widespread abuse of loans provided through the Supplemental Terrorist Activity Relief Act is nothing short of an outrage,” Mrs. Snowe said.
What’s more, John Kerry is suggesting there was a “cover-up.”
“This was a deliberate attempt to cover up White House budget gimmicks that left the SBA’s largest loan program underfunded and on the brink of shutting down,” Mr. Kerry said. “The administration asked SBA employees to bend the rules and steer regular loans through the program aimed at helping businesses impacted by 9/11.”
There are plenty of scandals swirling around the administration right now, but this one seems to have caught the eye of enough lawmakers on the Hill that it might stick around for a while. Keep an eye on this one; it might get interesting.