CEBO problems: Tales of two defaulters Companies get loans, collapse, fail to repay.

May 03, 1991|By Joan Jacobson | Joan Jacobson,Evening Sun Staff

In 1983, politician-turned-businessman Robert L. Douglass needed a loan for his struggling business, Baltimore Electronics, Inc.

Douglass, a former state senator and city councilman, turned to the Council for Equal Business Opportunity, just as many other minority businesses have done over the past two decades.

CEBO lent the company $30,000 that year. But most of the money never was repaid.

Three years later, the company needed help again, and CEBO stepped in to guarantee a $76,094 loan from a bank.

None of that loan was repaid because Douglass' company went bankrupt in 1987, and today the total outstanding debt from the two loans is $125,246 in principal and interest.

Samuel T. Daniels was executive director of CEBO at the time the organization was helping Douglass.

Daniels, who retired in 1989, recalls that the second loan amounted to a "bailout" to help Douglass pay off other creditors and complete a contract with the military.

The only collateral CEBO had from Douglass was a performance contract for military communications equipment. The contract later was canceled because the company did not deliver the equipment on time, says Douglass.

Though his company had defaulted on the 1983 loan, CEBO helped him in 1986 because Douglass was "a responsible businessman," says Daniels.

"It was a decision I supported," he says. The loan committee was not enthusiastic, but they did approve the loan. At no point was Bob Douglass' political stature a factor."

CEBO also wanted to protect jobs at Douglass' company, Daniels says.

Douglass recalls that his company had already begun laying off some of its 175 workers in 1985 -- a year before the last CEBO loan -- and the company had only 15 to 20 workers when it filed for Chapter 11 bankruptcy in 1987.

D8 Now, says Douglass, the business no longer operates.

During the late 1970s, Baltimore lawyer Robert F. Dashiell worked for CEBO, filing 20 to 30 lawsuits against businesses for not repaying loans.

He recalls that the organization recovered "a minimal" amount from the suits, if anything.

"Most of the cases were extremely old," Dashiell says. "The businesses had filed for bankruptcy and some of the loans were in default as long as three to four years."

In 1983, the lawyer's own company, R.F. Dashiell Construction Co. Inc., borrowed $50,000 at 6 percent interest from CEBO and then defaulted on the loan.

The company filed for bankruptcy in April 1985 -- and was sued a month later by CEBO.

A total of $5,676 has been repaid but the company still owes CEBO $49,532 in principal and interest, according to court records.

The company defaulted on the loan after a construction job for a church went over budget, Dashiell explains.

Dashiell sees no conflict of interest in his obtaining a CEBO loan, since he had stopped doing legal work for the organization before he applied for help.

"There was no conflict. We went through the conventional process. I don't even know who was on the loan committee," Dashiell says.

Asked why he received a 6 percent loan when many other businesses paid 9 percent interest to CEBO, Dashiell said, "I had no reason to believe the rate in interest was different than anybody else's."

He confirmed that his wife, June Dashiell, also worked for CEBO during the 1980s. But she did not work in CEBO's minority contractors technical-assistance program, where Robert Dashiell's company obtained its loan.

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