Small business aid program needs scrutiny
Revelations that the state Department of Economic and Community Development provided $150,000 in state aid to a small restaurant business without doing a basic background check are cause for concern. If DECD officials had bothered to check the state's Judicial Brach website, just a few clicks would have revealed that owner Tyler Gilbertie faced foreclosures totaling $728,000 in debt.
The Gilbertie case raises the obvious question as to whether this lackadaisical approach is typical of the Small Business Express program. State records show the DECD has parceled out about $115 million in low-interest loans and grants to about 850 small businesses, with the intent to help them retain and expand jobs.
Based on figures provided by the benefitting businesses, the state investment program is creating about 3,000 jobs.
Mr. Gilbertie, who lives in Waterford, told the state that its investment in his Lazy Burrito restaurants in Mystic, Niantic and Colchester would allow him to maintain seven jobs and create three more. Instead, all three restaurants are closed. His company, Gilbert Restaurant LLC of Colchester, is in bankruptcy and the DECD will have to line up with other creditors to try to collect some portion of the $100,398 loan it provided to the business. The rest of the award came in the form of a grant.
The company should never have received DECD approval for loans and grants. At the time state officials signed off on giving him the money, Mr. Gilbertie was the defendant in two state foreclosure actions for failing to pay mortgages on properties in Bridgeport and Fairfield, the first for a debt of $236,110, the second $492,032.
The financial problems have continued with more foreclosures and other debt problems.
On his application for state aid, Mr. Gilbertie checked "no" on the question whether he had any "outstanding, pending or anticipated litigation."
DECD Deputy Commissioner Ronald Angelo told Day Staff Writer Joe Wojtas - who brought the business closure to the state's attention - that in assessing Mr. Gilbertie's application the agency focused on the limited liability company, not on his other personal and business dealings.
That approach is hardly sufficient. The purpose of utilizing a limited liability company is to limit financial risk and exposure, but the state, in assessing whether to provide aid, does not have to play along by ignoring the other dealings of the principal owner of an LLC.
This newspaper has had reservations about this small-business assistance program from the start. While helping small businesses seems noble, the lack of discernment in parceling out state aid is troubling. There is no attempt to focus the state investment on small businesses with the greatest growth potential and likelihood of creating well-paying jobs. Instead, much of the money goes to businesses with the prospects of creating a few jobs at best. Often they are low-paying jobs, as in the case of the Lazy Burrito restaurants.
Mr. Angelo called the program successful, contending DECD has documented only nine business failures out of hundreds helped. That assessment needs greater scrutiny. Taxpayers also deserve to know if the lax review the Lazy Burrito application received is typical of the program. The office of Comptroller Kevin J. Lembo should consider reviewing a representative sampling of the Small Business Express applications to see if debt problems were missed in other cases.
At least one other troubling case has surfaced, that of Earl O'Garro Jr.
Mr. O'Garro was late making payments on a state loan that he received to expand his company, Hybrid Insurance Group, months before the DECD approved a second loan, documents obtained last week by The Hartford Courant showed.
Mr. O'Garro, 31, is a target of a federal investigation over a City of Hartford insurance contract. He has defaulted on his two state business loans totaling more than $350,000. The FBI is investigating Mr. O'Garro for allegedly collecting money from clients, but failing to pay insurance premiums, including on policies for the City of Hartford. Allegedly, Mr. O'Garro did not forward $670,000 in premiums to two of Hartford's insurance carriers in July 2013. There are also questions whether Mr. O'Garro landed the Hartford business because of political connections.
To view a searchable list of all businesses receiving state money through the Small Business Express program, click HERE.
The editorial board is composed of the publisher and four journalists of varied editing and reporting backgrounds. The board's discussions and information gained from its meetings with political, civic, and business leaders drive the institutional voice of The Day, as expressed in its editorials. The editorial department operates separately from the newsroom.
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