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Home > Leadership > City Comptroller > Press Releases > Comptroller Calls Loans Irresponsible

Comptroller Calls Loans Irresponsible,Says Accountability Of Funds,Inventory Are Major Concern

Contact:  Tony Farina, 851-5255


Buffalo City Comptroller Andrew A. SanFilippo said today a city developmental agency helped funnel $160,000 of public monies into a Delaware Ave. restaurant that was a bad risk even for a lender of last resort and had been properly turned down in its first try for money by the agency’s Large Loan Committee.

“These were bad loans, and never should have been approved,” said Comptroller SanFilippo in discussing the filing of his preliminary audit report with the Common Council on the failed One Sunset restaurant venture that received a total of $80,000 from the Buffalo Economic Renaissance Corporation (BERC) in two $40,000 loans; $30,000 in a BERC grant courtesy of Ellicott District Councilmember Brian Davis, and also $50,000 from the Erie County Industrial Development Agency even as the business was foundering.

"The bad loan scenario gets even worse,” said Comptroller SanFilippo, “because at this point, based on information available to the auditors, we could not account for a significant portion of the public money that went to One Sunset and more than $38,000 in missing inventory.  We do not have their bank records to reconcile the loan money that went into the business and what went out.”

Comptroller SanFilippo said Leonard Stokes, Jr., the president and owner of One Sunset at 1389 Delaware Ave., to this point has not provided bank statements to city auditors making it impossible to close the circle on the public monies pumped into the restaurant which opened in December of 2007. It should be noted that when One Sunset closed December of 2008, it still had bills outstanding totaling nearly $90,000.

“I have consulted with Erie County District Attorney Frank A. Sedita, III regarding this matter,” said Comptroller SanFilippo. “I will continue to be in contact with the District Attorney as our audit continues.  It may be necessary to have the District Attorney’s help in trying to track the public dollars that went into One Sunset.”

Comptroller SanFilippo said his auditors have found no documents suggesting Mayor Brown was personally involved in helping push through the One Sunset loan with BERC, and the mayor also denied under questioning that he had any personal or indirect role in the loan process.

“Mayor Brown was questioned by City Auditor Darryl McPherson and my assistant for communications, Tony Farina, and indicated that while he knew Leonard Stokes, Jr., and Stokes’ father, he did not intercede with BERC staff to help get the loan for the restaurant,” said Comptroller SanFilippo.  “He said he told Stokes that ‘if everything was in order that hopefully he would get the loan,’and that he told then-BERC president Tim Wanamaker ‘see if you can be helpful,’ in reference to the Stokes loan application.”

Stokes initially applied for a $120,000 loan under BERC’s Business Loan Program for the $260,000 project but he was turned down by agency’s Large Loan committee because his application was insufficient even by the lower standards of a lender of last resort, like BERC.  The project was under-capitalized, Stokes’ lacked restaurant experience and had a poor credit history, and there was a lack of technical support.

“That’s where it should have ended,” said Comptroller SanFilippo.  “But instead, BERCs Micro Loan program took over and Michelle Barron, the agency’s vice president of economic development, ushered the loan application through the process and started the ball rolling, even though the Micro program had a jurisdictional limit of $25,000.  The loan was allowed on an exception basis, one of many exceptions made for One Sunset.”  There was also an exception made for the $30,000 grant One Sunset received which required a matching contribution by the applicant.  The match was waived by the Matching Investment Fund Review Committee.

SanFilippo said the exact amount of the investment by Leonard Stokes, Jr., cannot be verified, adding he never established a $5,000 escrow account as required and did not provide monthly financials that were required after the second $40,000 BERC loan.  The $79,000 equity injection he claimed before the initial $40,000 loan can barely be proven up to $63,751.  There are known expenditures of $37,495, a $23,000 cashier’s check to an individual without any documentary justification, and another $3,256 with no documentation at all.

 At the present time, Comptroller SanFilippo said his auditors do not have the financial records necessary to provide a true accounting of what really happened to $160,000 in loans to One Sunset.  The audit currently underway is a review of BERC’s loan to One Sunset and is not a true audit of the business itself.  The documents and records reviewed by the Comptroller came from BERC files, recovered deleted e-mails and information from One Sunset’s bookkeeper.  Mr. Stokes did not provide financial data to support his position, despite many requests.

The comptroller said records show that proceeds from the first $40,000 BERC loan went into the business and the $30,000 grant is supported by invoices and two-party checks going directly to One Sunset vendors.  The second $40,000 BERC loan, sought by One Sunset to pay vendors and stay afloat, is a different matter.  “We don’t have any records to know if the money was actually used to pay vendors or if it was used to pay Mr. Stokes for his out-of-pocket expenses,” said Comptroller SanFilippo.  “We just don’t know.”

Comptroller SanFilippo said the $50,000 ECIDA loan is unaccounted for with no invoices or documents to show how the dollars were spent.  After the ECIDA issued the check in September of 2008, when One Sunset was deeply in the red, we have not seen whether any vendors have received payments. 

The comptroller faulted BERC’s  Deputy Mayor Donna Brown, BERC’s chief financial officer Eric Gadley (also a member of the ECIDA’s loan committee), and Ms. Barron for pushing through the  ECIDA $50,000 loan in July of 2008 even though Ms. Barron admits she had advised Stokes to close the faltering business before seeking the new money.  The ECIDA approved the $50,000, with notes from the meeting saying that One Sunset “looks to be a good business,” when it actuality it was deep in debt and experiencing a cash flow nightmare.

“Obviously they did not do their due diligence,” said Comptroller SanFilippo, “and  $50,000 was approved despite the fact the business was going down the drain.  There is clearly fault on both sides here.”

One Sunset stopped receiving customers in October of 2008 and officially closed in December.  It is estimated, based on preliminary financial statements that One Sunset ended with a net loss of $169,525.91.  Liens for unpaid sales taxes, outstanding vendor invoices and government loans were filed in 2009.