The director of the Tennessee Multicultural Chamber of Commerce received a $574,000 loan in 2008 from an institution whose board included her longtime former boss and the daughter of a Chamber co-founder and on which she herself had a seat.
Further, the loan request was presented to the board of the Chattanooga Community Development Financial Institution by another Multicultural Chamber co-founder, records show.
That $574,000 loan is now in arrears and the Chattanooga Community Development Financial Institution, known as CCDFI, is threatening to foreclose on two of five properties the Multicultural Chamber owns on M.L. King Boulevard.
Altogether, the Chamber obtained almost $1 million in loans and grants to build a business center that never materialized, records show.
The Multicultural Chamber has been under fire since a city review described its possible financial mismanagement, extravagant salaries and travel expenses and questionable land deals. The review was spurred after a Chattanooga Times Free Press investigation showed discrepancies in the Chamber's requests to the city and county for financial support.
The U.S. Department of Housing and Urban Development is demanding to know what happened to a $545,000 grant it gave to the Chamber for the business center, and the FBI last week asked CCDFI officials about the loan.
Sherrie Gilchrist, executive director of the Multicultural Chamber, did not return calls seeking comment Thursday or Friday.
Neither did six other people who were on the nine-member CCDFI board when the loan was approved.
One of those is Irvin Overton, Gilchrist's longtime boss at Erlanger hospital, where he was executive vice president and CEO.
Another is Cheryl Key, whose father and brother, John Franklin Sr. and John "Duke" Franklin Jr., served on the Chattanooga City Council. The younger Franklin was one of the founders of the Multicultural Chamber in 1999.
The other CCDFI board members at the time were Chairman Sam Jones with First Bank; former Chattanooga Neighborhood Enterprise official Sandra Williams; Anthony Sammons, deputy administrator of Neighborhood Services with city government; and Hugh Sharber, an attorney with Miller & Martin. Two other members then, Robert Geibert and Ken Dyer, could not be reached last week.
Eli Cameron, the former Chamber board member who made the loan request, also could not be reached last week. He was and is a commercial lending specialist with Chattanooga Neighborhood Enterprise, the parent organization of CCDFI.
The Times Free Press left messages for 14 members of the Tennessee Multicultural Chamber of Commerce last week seeking comment.
Only Multicultural Chamber board member Jerry Hanner Sr., owner of Hanner Construction Co., responded.
Hanner defended the Chamber and Gilchrist. He said the Chamber complied with HUD guidelines on the grant and that the organization is not the only one with debt after the recession.
"If it's about whether or not we owe a bill, I can say I should be looked at, too, because I owe bills," Hanner said Friday. "What we're looking at is that nothing has been done illegally. There's no fraud or embezzlement involved."
The minutes of the Sept. 29, 2008, meeting where the loan was approved outline the request for $574,000 at 8.5 percent interest for 24 months. During that time, the Chamber would pay only interest on the loan, with the balance due at maturity.
The minutes note that Cameron outlined the purpose of the loan: to buy two lots in the 400 block of East M.L. King Boulevard.
The land would be added to other parcels where the Chamber intended a developer to build a Business Solutions Center that would provide office space for the Chamber and tenants. The proposal noted that the Chamber expected to receive a HUD grant to repay about half the loan and use lease income for the rest of the debt.
Only six board members were present for the meeting - Sharber, Geibert and Dyer were absent. Gilchrist was required to recuse herself from voting.
Overton made the motion to approve the loan, minutes show, and the vote among the remaining five board members was unanimous. The whole meeting took 33 minutes, records show.
David Johnson, now president of CCDFI and CNE, said the board doesn't have regular meetings and convenes only to approve loans.
Johnson said Cameron acted as the loan originator and business developer and submitted documentation for the Chamber's loan, as well as presenting it to the board.
According to documents that Johnson provided, the CCDFI's policy requires the board to consider "both the collateral value and cash flow" of projects before making a loan.
The policy also states that the CCDFI "will assess the borrower's capacity to repay the loan based on analysis of key human, industry, strategic and financial variables."
The minutes of the meeting don't report what, if anything, Cameron told the CCDFI board about the Chamber's finances.
In fact, according to City Auditor Stan Sewell, the Chamber was in a financial hole at the time. In a recent review of audits and financial statements, Sewell said the Chamber's negative equity for unrestricted activities - more liabilities than assets outside earmarked revenues and expenditures - grew from a little more than $80,000 in 2007 to more than $130,000 in 2008.
When the economy collapsed in the Great Recession, the Chamber couldn't attract any developers or investors to build the center and repay the loan, Gilchrist told City Council members last week.
The minutes of the board meeting don't note that the loan amount of $574,000 was more that twice the tax appraised value of the properties - $211,800 - or that the CCDFI board did not require a new appraisal.
Chamber officials have said they paid about $507,000 for the property and used the rest of the loan to pay interest while seeking a developer.
Last week, HUD officials wrote to the Chamber to ask what happened to a $545,000 grant from 2006 and 2007.
According to Sewell, the Chamber used $200,000 to buy three properties on M.L. King for the Business Solutions Center and $106,400 for planning and development. The remaining $238,600 is unaccounted for, the review states.
Gilchrist and Chamber board member John Taylor appeared before the City Council to defend the transactions.
Also last week, Thomas Loafman, purchasing director for Chattanooga's Volkswagen plant, resigned from the Chamber board.
In his resignation letter, Loafman said he had asked other board members to begin an investigation into the Chamber's finances and temporarily to suspend Gilchrist during the procedure.
"Unfortunately, the [Chamber] board decided against these steps, which further jeopardizes the future viability of this needed and valued organization," Loafman wrote.
Hanner said the members plan to meet to discuss the organization's future.
"We're looking at the means with which we can come up with funding. We've got to keep the Chamber in place because there isn't anybody else," he said.
The only other Chamber board member who responded to Times Free Press messages last week was Elizabeth Appling, diversity director at Erlanger hospital.
"I have served on the board of the Tennessee Multicultural Chamber of Commerce for the past one and a half years and plan to remain on the board at this time," Appling said in a email.