It was early 1999, in the waning days of the Schmoke administration, when an accountant, still on probation for cheating his clients, formed a new corporation and went to the Baltimore Community Development Financing Corp., looking for money to underwrite a new enterprise.
The application gave no hint of a fact that would take nearly three years to emerge. Leslie L. Pototsky, the accountant, was acting on behalf of the politically connected Blatterman family, and they would soon take over the company.
When it was all over, that company, New Millenium Properties, walked away with loans totaling $625,000 to purchase properties that cost the company $360,000. And it wasn't the first time the same family, with close ties to the administration of former Mayor Kurt L. Schmoke, benefited from a city loan program.
In a deal that later became controversial, another Blatterman family company got a $250,000 loan in a transaction made possible by a dead man's signature.
The New Millenium loan story began in 1999 when the company, then headed by Pototsky, got the money to buy three city properties from the city-created loan agency. The loans exceeded the $360,000 purchase price by $215,000.
A year later, the CDFC lent Millenium another $50,000.
In December of last year, the real story behind the loans began to surface. The CDFC, now under new management with the election of a new mayor, filed suit against New Millenium and won a judgment of $827,838.55 including interest and legal fees. In court papers, CDFC attorneys charged that New Millenium was in default on the loan because it had failed to make required payments.
Five months after the judgment was recorded, the CDFC initiated foreclosure proceedings against the New Millenium properties at 407 S. High St., 915 Fawn St. and 5538 Newbury St.
It was only after that foreclosure suit was filed last spring and a deposition was taken in a separate court case last summer that officials found out that New Millenium was not what it appeared.
Instead of Pototsky, the court records show, the president of New Millenium was listed as Giovanna Blatterman, the operator of a Baltimore City beauty salon, and an active fund-raiser and supporter of Schmoke. Blatterman, in a deposition taken three months ago, said the company was owned by her two sons, who at the time of the loans were city employees.
Schmoke had appointed Blatterman to the city zoning board, a post she held for eight years ending in 1996. The former mayor said he had no knowledge of the loans or the company.
"I had nothing to do with loan approvals," Schmoke said.
Pototsky, a longtime friend of the Blatterman family, had gained notoriety of his own by the time he applied for the loan. The accountant for a number of bars and strip joints on Baltimore's infamous Block, he had entered a guilty plea in late 1996 to charges that he misappropriated $232,180.97 from his clients. He also admitted to filing false tax returns.
Investigators from the state attorney general's office had uncovered Pototsky's misdeeds while poring through financial records seized in a well-publicized 1994 raid on Block establishments. After his guilty plea, Pototsky was given a five-year suspended sentence and ordered to serve 18 months in home detention.
While the CDFC says the loan problems of New Millenium have been resolved and payments are current, the history of the loans provides some surprising insights into the operation of a city program.
The foreclosure suit is pending in Baltimore City Circuit Court, records show.
Proposed by the former mayor and created by an act of the City Council in 1989, the CDFC was designed to provide financing to promote neighborhood development and residential housing.
Pototsky declined to answer questions about his involvement in the loan transactions.
Blatterman did not respond to several telephone calls, nor did her attorney.
Sworn testimony in two civil suits shows that from the beginning of his dealings with the CDFC, Pototsky was acting on Blatterman's behalf. The accountant testified in a Sept. 9, 2001, deposition that throughout the process he was acting under instructions from Blatterman. Ultimately, he said, he regretted doing so.
"I'm a dummy," Pototsky said during one deposition when asked to explain why he agreed to act on behalf of the newly formed corporation.
State corporation records show that New Millenium was incorporated Jan. 11, 1999, with Pototsky listed as the president, secretary and sole director.
Pototsky also testified that CDFC officials "didn't seem to care" who really owned the company.
Asked how he became involved with New Millenium, Pototsky said, "She [Blatterman] asked me to."
He said in the deposition that at Blatterman's request he filed an application in early 1999 with the CDFC for a loan and was later summoned to go to an agency attorney's office to sign the loan agreement.