Mystic - The Department of Economic and Community Development gave $150,000 in state aid to a Waterford man to open a now-closed burrito shop here, even though there were two foreclosure actions and a collections case pending against him in state courts that totaled $728,000 in debt.

The three cases against Tyler Gilbertie, who is the principal in Gilbertie's Restaurant LLC of Colchester, were all filed in state courts and as such would have been listed on the state Judicial Department website before the funding was announced in June 2012.

In Gilbertie's application for the $49,502 grant and a $100,398 loan under Gov. Dannel P. Malloy's Small Business Express Program, he was asked if he was involved in any "pending, outstanding or expected litigation." Gilbertie checked the "No" box.

The application states that making a false statement on the application is a Class A misdemeanor punishable by up to one year in prison.

Asked Thursday about filing criminal charges against Gilbertie, DECD Deputy Commissioner Ronald Angelo said the agency "would pursue all remedies if and when they are needed." First, he said, the agency would conduct a full investigation, which he hopes Gilbertie will cooperate with. He said DECD reached out to Gilbertie after The Day reported the Lazy Burrito closure earlier this week.

He added that DECD will take possession of the equipment in the closed fast food shop and either reuse or sell it.

In January 2012, five months before Gilbertie received the state funding, JP Morgan Chase began the process of foreclosing on a $417,000 loan he obtained in 2008 to buy a seven-room home in Fairfield but on which he had not made payments. By the time the court granted the foreclosure in May 2013, he owed the bank $482,000.

In September 2011, nine months before the state gave Gilbertie the funding, Wells Fargo Bank began the process of foreclosing on a $200,000 loan he had obtained in 2006 to buy a three-family home in Bridgeport and then failed to make payments on. By the end of the case, he owed $236,000, which the bank said he paid in May 2013.

In May 2011, 13 months before he obtained the state funding, American Express filed a collection action because Gilbertie had failed to pay his $10,498 credit card bill. In March 2013, the company said the debt had been satisfied.

In 2013, JP Morgan Chase also began foreclosure proceedings on Gilbertie's home at 7 4th Ave. in Waterford for failing to make payments on almost all of a $189,600 loan.

Angelo said DECD was not aware of the foreclosure and collection actions against Gilbertie but said the agency based its decision on the application and an in-depth review of Gilbertie's limited liability company, which involved checks with various state agencies such as the departments of labor and revenue services.

"We stick to the business aspect," he said. "Individuals at times will have certain business or personal setbacks but they can go on to run a successful business."

Gilbertie, who filed for bankruptcy in November and could not be reached Thursday at the phone numbers listed on his application, has not only closed his store in the Mystic Factory Outlet, but also his other Lazy Burrito outlets in Colchester and Niantic.

Gilbertie had not paid back any of the loan, which carries a 3 percent interest rate, and last September received a one-year deferral of his loan payments until June 2014.

Earlier this week, DECD said all Business Express projects undergo a financial review prior to funding, and an audit has shown all state funds were spent appropriately.

In June 2012, when Gilbertie received the money for the burrito shop, DECD said the money was being used "to support smaller, family-owned businesses that are performing well and growing jobs." His application stated the shop would create three full-time jobs.

When DECD announced the aid in 2012, it included a statement from state Rep. Linda Orange, D-Colchester, the town where the first Lazy Burrito was opened in September 2011.

She called Gilbertie's "the definition of a family business," and added that "this injection of state funding will help this longtime local business expand and grow." According to Gilbertie's LinkedIn page, he has run Gilbertie's Restaurant LLC since 2009.

On Thursday, Orange's spokesman, Todd Murphy, said she had no involvement in obtaining the grant or the application process, which was handled by DECD. He said Orange was approached by Malloy's staff to participate in the announcement of the Small Business Express awards and was happy to hear a local business was receiving funding.

"Rep. Linda Orange is disappointed DECD does not appear to have done its due diligence on this application. DECD handles the application process and disbursal of funds under the Small Business Express program. This application should have been denied if there was public information available that clearly showed financial red flags," Murphy said.

He added that Orange, the deputy speaker of the House of Representatives, "is calling on DECD to strengthen its vetting process to make sure only qualified applicants receive funding."

j.wojtas@theday.com