The former KC mayor hopes to clean up in Grandview with urban loans.

Clever Cleaver 

The former KC mayor hopes to clean up in Grandview with urban loans.

Businesswoman Denise Hayes would seem to be the perfect candidate for a Missouri Urban Enterprise loan.

She owns Niecie's, a tiny restaurant chain that has served the city's urban core for years at its two locations -- at 59th and Prospect and on Blue Parkway east of Hardesty.

When a potential third restaurant site became available -- at 55th and Troost -- she went to minority-owned Douglass National Bank for a $75,000 loan. Lending officers told her about the state-funded Urban Enterprise program, which in 1997 began offering low-interest business loans in "distressed communities" in Kansas City and St. Louis. But when they typed her restaurants' addresses into the computer, they discovered she wasn't eligible for the program -- her business doesn't fall within the state's targeted areas.

The loan officers were appalled that Hayes' locations in Kansas City's economically depressed east side didn't qualify. They fought the state on her behalf, but after several months of wrangling, Hayes' seller backed out, and she lost her opportunity to expand. Others lost out as well. "I had twenty or thirty people lined up to work," Hayes says.

Yet last week, someone got Urban Enterprise money for a suburban business.

Former Mayor Emanuel Cleaver and his wife, Dianne, have received preliminary approval for a Missouri Urban Enterprise loan to help buy a $1.6 million car wash in Grandview.

Hayes doesn't begrudge them. "I just figure this deal wasn't right for me," she says. "Evidently it was for Mayor Cleaver. But I don't have any hard feelings. I'm happy for him."

Others are less diplomatic. On March 27, members of the local Urban Enterprise board had a heated discussion about the Cleavers' request for $80,000. Although the request was approved, several board members refused to authorize the deal, including Marie Young, president of the Black Chamber of Commerce. "If this doesn't pass the smell test," she says, "I'm not going to be stinking behind it."

Young is concerned that the Cleavers appear to be getting special treatment because of their political clout. "The ... business of a former elected official should not be looked at any differently than the ... business of anybody else," she says, echoing the sentiment of other insiders who spoke privately with the Pitch and who also noted that Dianne Cleaver serves on Governor Bob Holden's executive staff.

Emanuel Cleaver referred questions to his attorney, Harold Fridkin, who says, "That's just flat wrong. If there's any way this man, who is now a private citizen, got any special favors, it is not reflected in the record [of this loan approval process]."

Cleaver is very familiar with the Urban Enterprise program. As mayor, he bragged at a press conference at the Jazz Museum at 18th and Vine in July 1997 that millions of dollars would flow into the historic district and that Urban Enterprise loans would spark a proliferation of small businesses in and around the area. As yet, that hasn't happened.

At the time, the loans were administered by the Kansas City Downtown Minority Development Corporation, an obscure quasipublic entity formed in the late '70s. Cleaver appointed the development corporation's board of directors while he was mayor. (In order to remain a United Methodist pastor, Cleaver didn't accept a salary as mayor.) Near the end of Cleaver's term, a federal audit of the development corporation revealed that borrowers owing nearly $13 million had made only $150,000 in payments over a period of six years.

"There is no question that we are going to seriously and relentlessly pursue funds owed to the development corporation," Cleaver told The Kansas City Star at the time. "These are taxpayer dollars. We have fought the perception that this was free money." (Federal officials tell the Pitch that the development corporation has since solved its collection problems.)

Last August, Missouri state auditors reported that the development corporation had failed to keep the state fully informed about its Urban Enterprise loans and had granted loans in excess of the program's legal limits. Some of those loans defaulted. Shortly after the audit, Douglass National Bank outbid the development corporation to become the new Kansas City administrator of the state loan program. The bank, which has a history of encouraging economic development in Kansas City's urban core, set up the local Urban Enterprise board to review its loans.

Before Cleaver went to Douglass National Bank for his Urban Enterprise loan, he turned to those board members he had appointed to run the development corporation. On October 18, 2001, he requested a $150,000 loan from them. "Since I have been out of city government for two years, I am now eligible to make such a request," he wrote in his cover letter. The letter goes on to describe the car wash as a "sound business" that Cleaver projected would "net more than $300,000" a year.

Because the development corporation no longer doles out Urban Enterprise loans and limits its other funds to businesses in Kansas City proper, Cleaver turned to Douglass National Bank. Cleaver's loan to buy the Grandview Auto Wash is the first to be approved under the new arrangement, according to bank officials. (Ron Wiley, the bank's president, will not comment on the loan arrangement, citing confidentiality restrictions.)

The $80,000 Urban Enterprise loan is part of a $1.5 million loan package that includes a $1.3 million loan from Bank of America guaranteed by the federal Small Business Administration. Cleaver has also received approval for an $80,000 loan from the Kansas City Minority Business Capital Corporation, a privately endowed nonprofit lender staffed by Kansas City government employees. The Cleavers are putting up $161,600 in personal savings, according to documents obtained by the Pitch.

The MBCC was established in the mid-'90s with $225,000 in charitable donations provided by the Civic Council, Kansas City Power & Light, the Hall Foundation and the Kauffman Foundation. Its loan program is administered by employees of the city-run Economic Development Corporation.

According to MBCC's guidelines, its loans must be matched equally by conventional commercial bank loans. (The Bank of America loan doesn't count because it is contingent on the other loans and is backed by federal money.) "A private lender needs to assume a certain amount of risk," explains Kathleen Barney, the EDC employee who administers the program.

But the Cleavers' loan package proposes to use the state-backed Urban Enterprise loan as the matching loan, an apparent violation of MBCC's guidelines. Barney says this is not the way the Cleavers' loan package was presented to her. "That was not our understanding," she says. "I don't believe it ended up that way. It's our understanding it won't go forward in that route."

"That's news to me," says Lloyd Daniel, assistant director of Missouri's Department of Economic Development, who was present at the contentious March 27 Urban Enterprise board meeting. He says that as far as he knows, the local board approved the state-funded loan, which is now pending final approval from state officials.

Now Cleaver's MBCC loan appears to be in limbo. After learning the matching loan doesn't fit MBCC requirements, Barney wouldn't say whether the MBCC loan will be nixed. "We don't know for sure how we're going to work this out," she says.

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