published Sunday, July 31st, 2011

Tennessee Multicultural Chamber got 2nd loan on mortgaged property

Multiple vacant lots are photographed Wednesday in the 400 block of MLK Blvd., leading up to the former Renewal Barber Shop at 423 MLK Blvd., seen in the background.
Multiple vacant lots are photographed Wednesday in the 400 block of MLK Blvd., leading up to the former Renewal Barber Shop at 423 MLK Blvd., seen in the background.
Photo by John Rawlston.
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    Sherrie Gilchrist is the executive director of the Tennessee Multicultural Chamber of Commerce.
    Photo by Tim Barber /Chattanooga Times Free Press.

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.

Probe Ongoing

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.

Federal Questions

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.

about Judy Walton...

Judy Walton has worked 25 years at the Chattanooga Times and the Times Free Press as an editor and reporter focusing on government coverage and investigations. At various times she has been an assistant metro editor, region reporter and editor, county government reporter, government-beat team leader, features editor and page designer. Originally from California, Walton was brought up in a military family and attended a dozen schools across the country. She earned a journalism degree ...

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talkthetalk911 said...

All this could be avoided if the MCC would just raise their debt ceiling (Ha).Seems like the hip theing to do these days when you over spend tax dollars.

July 31, 2011 at 9:37 a.m.
Citizen49 said...

John Taylor - the Money is where the Money is - Show us the money. You got quiet all of a sudden. Money got your tongue?

Payinattention - when are you going to run for Mayor? I'll vote for you

July 31, 2011 at 10:23 a.m.
fechancellor said...

What has bothered me from almost the start is the land valuation accepted by the tax appraised by Chattanooga Community Development Financial Institution (CCDFI). If any home owner or business in this county was forced to sell at that valuation, they would find themselves just as "underwater" as many present homeowners who owe more on their houses than the mortgaged value.

CCDFI during its loan process did not seek any further appraisals, as almost all lending institutions would. The only conclusion I might draw is the loan by CCDFI made at the taxed assessed value allowed the MCC to make the buy with more money available from the HUD loan for discretionary spending.

TFP, is there a way to ascertain the true appraised values of the properties involved?

Second, we had a scam going on here in the early to mid-1980s involving land and building on MLK Blvd. That scam was eventually concluded with the long awaited opening of the Bessie Smith Hall. Any comparisons? If so, why are we going down the same path of shame and folly yet again?

July 31, 2011 at 10:46 a.m.

This scandal is going to hurt the scenic city very badly. It gets worse and worse with few explanations, however littleman is not without error.

July 31, 2011 at 11:58 a.m.
amnestiUSAF84 said...

Like most of the nation, and before the housing market crash, homes and land were being over praised in value, depnding on location. That area of Chattanooga had been targeted for revitalization. To mak it more appealing for businesses to move in and people to return from hiding in the suburbs property value was marked up 1000%. An at one time house valued at no more than twenty or twenty-five thougsand was going for more than two-hundred thousand. These astronomical markups on property were taking place all over Chattanooga. Then, like anything that goes up must come down, the market crashed. At least in part, it seems that's what might have taken place in this situation. Banking and gambling on a future market that didn't materialize. It's Wall Street on a smaller, more local scale.

July 31, 2011 at 12:47 p.m.
eastridge8 said...

Oy vey!....Here we go again...another fine mess you've (Ron & Co., CCDFI, TMCC) got us into...

July 31, 2011 at 3:52 p.m.
chioK_V said...

Can we just leave it at some of these organizations and business receiving federal and other monies are better at stealing than others, because they've been at it longer? Th e ones that get caught are usually the rookies.

July 31, 2011 at 10:09 p.m.
macropetala8 said...

just raise their debt ceiling (Ha).Seems like the hip theing to do these days

these day? Surely you jest! Here's how many times past presidents raised the debt ceiling. Pay close attention to how many times Ronald movie star Reagan raised the debt ceiling and no one even blinked:

Kennedy raised the debt ceiling 4 times for a total increase of 5%.

Johnson raised the debt ceiling 7 times for a total increase of 18%.

Nixon raised the debt ceiling 9 times for a total increase of 36%.

Ford raised the debt ceiling 5 times for a total increase of 41%.

Carter raised the debt ceiling 9 times for total increase of 59%.

Reagan raised the debt ceiling 18 times for a total increase of 199%.

George H.W. Bush raised the debt ceiling 9 times for a total increase of 48%.

Clinton raised the debt ceiling 4 times for a total increase of 44%.

George W. Bush raised the debt ceiling 7 times for a total increase of 90%.

August 1, 2011 at 11:40 a.m.
talkthetalk911 said...

macropetal...it was a joke filled with sarcasim!!!but thank you for your wealth of knowledge!

August 2, 2011 at 9:35 a.m.
chet123 said...

WHO IS SHERRIE GILCHRIST????? SOMEONE PLEASE TELL ME....IS THIS A GOOD OLD BOY/GAL SYSTEM?????

WHY DIDNT THE MULTI-CULTURE CHAMBER RUN A OUTSIDE SEARCH BEFORE HIRING HER....I DONT UNDERSTAND???? NOONE TALKING....SHE IS FROM THE PROJECT HOMES OF EMMA WHEELER...WAS SHE EVER QUALIFIED???..WHAT THE BIG MYSTERY??? IS THIS THE ONLY SCANDLE SHERRIE GILCHRIST BEEN IN.....IF NOT WHY WOULD THE BOARD RETAIN HER!!!!!!PLEASE...SOMEONE NEED TO ANSWER THESE QUESTIONS....DO THEY TAKE TAX PAYER AS FOOLS....

August 2, 2011 at 1:04 p.m.
chet123 said...

THERES A PATTERN HERE WITH SHERRIE GILCHRIST.....CHECK INTO HER PAST......NOTICE EVERYBODY NAME IS CALLED BUT SHERRIE GILCHRIST.....Hmmmm...VERY INTERESTING...VERY INTERESTING.....SHES GOOD AT SLIPPING OUT OF THE JAWS OF DEFEAT LOL LOL LOL..SOMETHING TELL ME THIS IS NOT HER FIRST SCANDLE....I FAULT THE BOARD WITH OVER LOOKING HER PAST......THIS IS WHERE THE BOARD IS TO BLAME

August 5, 2011 at 1:35 p.m.
RichardPhuket said...

When a business has been managed so badly, and the finances are so obviously bad, it makes no sense to continually lend them money. They will only continue running the organization to the ground.

June 13, 2012 at 5 a.m.
RichardPhuket said...

If the Tennessee Multicultural Chamber of Commerce was forced to close, its lenders would probably have no other way to recoup its loans. Selling off the property might help, but who would be interested in buying it? Richard - http://propertyforsalephuket.co.uk

July 2, 2012 at 12:24 a.m.
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