One Stop Capital Flop 

You'd think the loss of six million dollars would teach Oakland to stop making ill-advised business loans. You'd think.

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Smith would rather that loan had never been made. He fears Bottom will lose the home she put up as collateral. This, he says, is a prime example of where One Stop Capital Shop needs to distance itself from the borrower's perspective. The city is lending Vida money she won't be able to pay back, he says. Even if it goes like gangbusters, her volume won't be enough to keep up with the payment schedule. "And what will we have done then?" asks Smith. "Her business will fail, and we'll have created a 74-year-old homeless woman."

So far, Ralbert Brooks-Hamilton has been spared from homelessness, but things aren't looking good. After his final attempt at a marketing scheme failed, Edmonds headed home and the factory closed down for good in the winter of 1998. The partners by this time had come to near fisticuffs, and Brooks-Hamilton had filed for a restraining order against his business partner, he says. (Edmonds could not be located for comment.) The following year, Brooks-Hamilton's wife left him.

In 2000, Roland Smith investigated the company's books. He found that Brooks-Hamilton had lied on his initial loan application, claiming he'd never filed for bankruptcy when he had in fact done so in 1990. (The applicant claims he misinterpreted the question as pertaining only to past business bankruptcies.) Nor could Smith's office determine whether the initial $150,000 check was indeed used to purchase the warehouse. "The disbursement of these funds from the personal account could not be traced from the documentation available and have not been accounted for to this date," the office reported.

Following up on the auditor's report, the Alameda County Grand Jury looked into the circumstances of the loan. Its final report, issued in June, offered no evidence for bias or corruption -- only ineptitude and political pressures. "Enthusiasm for the One Stop Capital Shop program and the idea of funding entrepreneurs and increasing employment with the city of Oakland overwhelmed good judgement in the awarding of loans," the report states. In the future, "the emphasis must focus on a realistic loan repayment program. The borrower should have specific knowledge of the type of business for which the loan is made. Good ideas do not necessarily translate into profitable business."

Claggett has little to say about the report. "The grand jury was going over old ground. We've fixed up the problems and are moving on." He also says the city recently hired an outside consulting group to increase the number of jobs actually going to Oakland residents and those living within the enterprise zones. "We haven't done a good job of tracking those jobs. Now we'll be able to do that," says the CEDA director.

Feeling he'd been left with no options, Brooks-Hamilton sued the city of Oakland in federal court earlier this year, demanding $6 million, the amount city consultants had predicted he would have collected in gross revenues to date. He has all his documents lined up, ready to demonstrate how the city was ultimately responsible for his failure, but the would-be CEO is uncomfortable talking about the lawsuit. "I love this city, man. I don't want to sue. But what other choice do I have? The city doesn't want to play fair. The city won't just leave me be. They want to come and take my house now. Why? If they want to call it even, fine. I'd be happy with that. Let me keep my house. But without that, I'd have nothing left; nothing left."

City Attorney John Russo says his office has already received a writ of execution to foreclose on Brooks-Hamilton's home, but Russo may be willing to negotiate a payment deal. "It would be a harsh result," he says of taking the home, "but a just result. It's kind of sad for everybody. Nobody wants to see anyone get stuck in the middle like this, but it's our duty to collect, and we've been instructed by the city council to be more aggressive in our collection efforts. The taxpayers of Oakland have a right to repayment."

Russo estimates the city attorney's office has spent about $300,000 to date on outside legal fees to pursue those who have defaulted on the city's loans.

Larry Bush, a spokesman for HUD, says there's no way to determine how Oakland compares with the other cities that have received similar grants to rebuild their inner cities. "Once we send them out, it's up to the city to keep tabs." Each city created its own disbursement policy, dividing the money into programs with varying requirements. For instance, in Philadelphia, where the priority was to lure existing companies to poor neighborhoods, borrowers needed to be in business for at least five years and the minimum loan was set at $250,000. In Atlanta, loans came from the "Empowerment Zone" program, which lent as much as $4.5 million to one contractor. That particular loan, according to the Atlanta Journal-Constitution, was investigated in 2000 by the FBI to determine whether loan-committee members had solicited bribes.

Oakland, for its part, will soon be back to square one. The Small Business Administration is closing down all of its One Stop Capital Shop offices next fiscal year. Mired in its own cash crisis, Congress cut funding for the SBA, and One Stop was the first thing to go. Federal employees who worked in Oakland's office have already been reassigned, and city employees will continue to dole out the remaining funds. Since the money comes from a revolving fund, the lending program will last as long as loans get paid back. Despite its high rate of default, Oakland still has about $6.7 million in the bank.

A few weeks ago, Brooks-Hamilton was doing yard work outside his home in North Oakland. He didn't look anything like the proud salesman in his warehouse who so enthusiastically pitched the U-Wheel-It. He wore soiled work pants that were ripped at the thigh and held up by a weathered belt. His flannel shirt was flecked in white paint. His beard was stubbly and unkempt, and a stroke of dried paint ran from his ear to his neck.

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