More than $190,000 in the hole, the Tennessee Multicultural Chamber of Commerce in 2009 literally mortgaged the furniture to get a second loan on property it bought the year before with $579,000 in borrowed money.
In exchange for a $150,000 loan from SunTrust in October 2009, Multicultural Chamber officials not only used the two lots on M.L. King Boulevard for collateral, they also signed over rights to everything the organization owns, from office furniture to flowerbeds, as well as income from renting or leasing property, according to county property documents.
That loan apparently financed a line of credit that Multicultural Chamber Executive Director Sherrie Gilchrist used to pay for operations, according to a city review of the organization's records.
Gary Hathaway, who was the Chamber's finance chairman when the SunTrust loan was made and who signed the loan documents, would not comment Friday.
"My understanding is we're under investigation," Hathaway said. "I don't feel it's proper to give any comments to anyone other than the ones we're being investigated by."
The Multicultural Chamber is at least two months behind in its payments to the primary lender, the Chattanooga Community Development Financial Institution, which is threatening to foreclose on the two properties. It's not clear whether or how SunTrust might recoup its loan.
SunTrust officials did not respond Friday to requests for comment.
Questions about the Multicultural Chamber began when the Chattanooga Times Free Press pointed out discrepancies in its annual budget requests to Chattanooga and Hamilton County. The local governments canceled $75,000 allocations for the Chamber, though City Council members have set aside the sum for another entity to advance the mission of stimulating minority business in Chattanooga.
After the Times Free Press story, City Auditor Stan Sewell reviewed Chamber financial documents and cited extravagant salaries, high travel expenses, fiscal mismanagement and discrepancies.
For instance, Sewell's review showed Chamber officials claimed to city and county leaders that the organization budgeted $1,200 for travel in both 2008 and 2009. Actual travel expenditures were $26,105 and $27,132, respectively, Sewell noted.
The Chamber also didn't budget any interest expense for debt on the $579,000 loan from the Chattanooga Community Development Financial Institution, the review noted.
Though the Chamber has received about $2.3 million in local taxpayer support since 1999 and claims nearly $1 million more in grants and fundraising since then, the review shows it has operated in the red for at least five years, from 2005 to 2010.
The FBI and the U.S. Department of Housing and Urban Development have been asking questions about the 2008 CCDFI loan and a separate $545,000 HUD grant from 2006-07. The funds were to be used on a $4 million Business Solutions Center on M.L. King Boulevard that has never been built.
Previously, Gilchrist said the project lost steam when the economy collapsed and no developer or investor stepped forward.
But Sewell's review noted that $238,000 of the HUD grant is unaccounted for. He noted that the M.L. King properties for which the Chamber paid $507,000 were appraised for tax purposes at just $211,000. Sewell's review also said the Chamber owes far more than its assets are worth.
The Times Free Press asked to see loan documents the Chamber submitted for the CCDFI loan. Through an attorney, the CCDFI denied the request, saying financial documents were exempt from disclosure under state law.
David Johnson, president of Chattanooga Neighborhood Enterprise and the CCDFI, said in an email Friday the agency didn't know the Chamber had taken out a second loan on the M.L. King properties. He didn't respond to a question whether the second loan violated the financing agency's rules.
On July 20, Johnson said the CCDFI board could meet "within the next few days" to decide what to do about the nonperforming Chamber loan.
Friday, he said no board meeting has been scheduled.