Morgan resigns from EDC

Abrupt action follows weeks of scrutiny at development agency

Loan program questioned

County auditor preparing study of group's finances

July 16, 1999|By Matthew Mosk and Laura Sullivan | Matthew Mosk and Laura Sullivan,SUN STAFF

The president of the Anne Arundel Economic Development Corporation abruptly resigned yesterday, just as the agency is facing increasing pressure to make public a more detailed accounting of its operations.

Richard J. Morgan handed his letter of resignation to County Executive Janet S. Owens during a brusque encounter at the groundbreaking for the Arundel Mills Mall -- a public event that didn't allow Owens the time or privacy to seek an explanation.

For two years, Morgan has led the agency, a private corporation that receives public funds and is overseen by a board controlled by the county. But his resignation capped weeks of scrutiny that occurred out of public view, and several months of growing tensions between his agency and top county leaders.

Last week, state economic development officials offered a blunt critique of the organization's operation during a private meeting with Owens and her chief advisers.

Also recently, Morgan faced scrutiny about the under-performance of loans brokered by the agency, according to a corporation insider who declined to be identified. Simmering questions about the loan program recently prompted The Sun to send Morgan a formal request to produce relevant financial records.

More attention was expected in coming weeks. The county's auditor is preparing to release a study of the agency's finances this month. And Owens said the corporation's policy of keeping its work private -- even from her -- would change shortly, when she makes her final three appointments to its board of directors.

During a brief interview yesterday morning, Morgan did not explain his decision to leave. And the corporation's spokesman, Bill Badger, was on vacation and could not be reached.

But Morgan's friends and supporters said he recognized that, with the departure of former County Executive John G. Gary, who appointed him in 1997, his performance under a new boss was being monitored.

"He knew that there was a problem between him and the new administration," said County Councilwoman Pamela G. Beidle, a friend who at one time sat on the development corporation's board.

"I think he's truly been hurt, and personally offended by all that's happened. And I think [his departure] is going to be a great loss to the county," she said.

Owens said she never asked for, or expected, Morgan's resignation.

"I think it's about change," she said as she returned from the groundbreaking, with Morgan's letter still in her hand. "Rick knew I wanted to exercise more control over the board, and make my own appointments, and that was about to happen."

Even in Owens' earliest days in office, Morgan was forced to accept a new style of leadership that called for greater accountability.

Owens' transition team called for the routing of the development corporation's monthly reports to the county auditor.

The County Council proposed a full audit, and during the budget process attempted to cut $300,000 from the agency's budget. About $150,000 of that was later restored.

Council Chairman Daniel E. Klosterman Jr. said the panel made no requests of Morgan that it would not have made of any other official.

"That's not anything more than we do for any other department that uses public funds," he said.

Some on the corporation's board said Morgan had no objection to the inquiries.

"He recognized that [Owens] had a different style, and I think he did a great job during the transition," said Ermis Sfakiyanudis, a board member Ownes appointed in June.

In an interview with The Sun last month, Morgan touted the organization's successes, including luring Opus, a giant retail warehousing company, to Odenton, and brokering loans for such successful businesses as The Ram's Head, a popular Annapolis tavern.

Morgan, who had served as president of the Annapolis National Bank for seven years, hailed as successful a partnership with the Small Business Administration that brought those seeking loans a lower rate than they could find at a commercial bank.

Under the agency's loan programs, it could lend up to $300,000 to small businesses or start-up companies that had been denied loans from commercial institutions.

While some of the 41 businesses involved in those programs have succeeded, at least eight are no longer in business, according to state records.

Three business owners along West Street who accepted EDC assistance said last year they were frustrated with demands for large amounts of collateral. They said they received scant business training, other than an instruction seminar. And many quickly fell behind in payments.

Robert Hill, who sits on the agency's loan review committee and is one of the its small-business loan success stories, said he knows of grumbling about the loan portfolio.

"There were always concerns that the loans in the portfolio were under-performing," Hill said. "But [the development corporation] is a lender of last resort. You're going to get deals that everyone else has turned down."

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