Texas Rangers to investigate Goliad lending practices

Goliad District Attorney Michael Sheppard

Goliad District Attorney Michael Sheppard

The state's top law enforcement agency will investigate the $1 million in programs and economic development incentives Goliad City Council and its Municipal Development District mishandled.

"It's obviously a scandal, and it's obviously horrible policy and sloppy lending practices," Goliad District Attorney Michael Sheppard said of why he requested the Texas Rangers investigate.

Through its Municipal Development District, the City Council has provided loans and grants in a program riddled with accounting errors and little accountability.

The district attorney made the call to the Texas Rangers after the Victoria Advocate published the results of its six-month investigation Sept. 8.

"In small towns like this, one of your objectives if you want it to be transparent and looked at honestly - not with an eye toward accusing someone wrongly or toward exonerating someone wrongly - is having someone independently come look at it," Sheppard said.

Ranger headquarters approved the district attorney's request late Friday and assigned two investigators to the case, Sheppard said.

City Administrator Larry Zermeno was quoted in last week's Goliad Advance-Guard newspaper as saying some loans were in default, but all loans were currently being collected on. He said one loan is a month behind.

He has refused to comment to the Advocate since the Sept. 8 report.

Councilman Lionel Garcia, who was given a $31,128 loan for a laundromat, owed $12,991 when a letter of default was sent to him by the city in June. The laundromat has created one job - Garcia's.

He said he owes money but is not corrupt.

"I ain't got nothing to hide," Garcia said last week. "The laundromat was a mistake."

Garcia was approved for a loan Oct. 30, 2009. After being elected to the City Council in May 2011, he defaulted on his loan. Zermeno said Garcia made $1,549 in payments in June and July of this year.

"I didn't run for City Council to get favors for a loan," Garcia said. "I ran to help the people of Goliad."

He said he plans to repay what he owes.

"I'll pay this loan," Garcia said. "I'm not going any where. I live here."

Garcia said his son, who is stationed in Alaska with the military, called after reading the news of the council's lending practices and loss of money.

Recalling the phone conversation, Garcia said his son asked whether he would go to prison for being corrupt.

"I'm not sad; I'm mad," Garcia said. "I know I didn't do nothing wrong."

Former Mayor Shirley Young said she thinks this "is the tip of the iceberg."

"I've been hearing rumors ... so-and-so got a loan and didn't qualify, so-and-so is delinquent in their payments," Young said.

She served six years as a councilwoman and six years as mayor from 1976 to 1988. She guided the city to join the Main Street Program, a statewide organization promoting downtown rehabilitation.

She said the current policies are "not sound business practices."

"The city should not be in the lending service. That's not a function of city government," Young said. "Their job should be running the city and running it correctly, without deficiencies."

Young imagines tangible projects the sales tax money could have supported, including sidewalks or parks for the children - even an event center.

If someone needs or qualifies for a loan, "let them go to a bank," she said.

Ward Thomas, who resigned from the Municipal Development District board on Jan. 25, 2011, said the organization was poorly managed.

"I was very upset with the way it operated when I was on there. That's why I resigned," he said.

He said he became the lone dissenter and even tried to start an effort to rescind the sales tax collection.

"The people who were on the board, they just seemed like all they wanted to do was give away money to people, who, to me, seemed undeserving," he said.

Thomas said his issue was that the city collected sales tax from residents, whose budgets were already stretched thin, and turned around and gave the money to wealthy developers and corporations.

"I don't have any bones to pick with anyone; I think it needs to be brought out how inept that board is," he said.

Linda Powell, a Goliad resident, has raised concern about the development district for more than a year.

"Most of our citizens here have known or at least suspected that some very serious wrongdoings have been going on for a very long time," she said. "No one would take a look at anything."

Now that the $1 million mess is in the spotlight, Powell said she hopes the city's lending practices will change.

"People are so happy and elated that perhaps this will be a beginning of a turnaround, and we'll see the end of corruption and perhaps the beginning of a form of government as it should be," she said.

Allen Najvar is owner of the Hanging Tree restaurant, one of 11 businesses whose loans were mismanaged by the Municipal Development District.

In 2006, he received a $12,000 loan and a $12,000 grant under a previous economic development corporation in Goliad.

He said he missed payments in 2008, but the city renegotiated his loan, and he has been current since 2011.

While city records are unclear to what he owes, Najvar said, his loan is nearly paid off, and the city's estimate - between $1,612 and $4,800 - is wrong.

"I got behind, but we made an agreement," he said.

He said he called the city Monday to confirm his balance, but the city still did not know how much he owed.

He estimated he had $1,600 remaining on the loan in March.

It is "common knowledge in town" that the city gave loans, and his was vital to making his business successful, Najvar said. The money paid for restaurant equipment, tables, silverware, refrigerators and stoves.

"It's going to be harder to get a loan from the city," he said. "They were handing them out pretty easy to some people."

He called the current administration "the worst city government in Goliad since I don't know when" but said there are still a few good people around.

"I think Larry stepped into the mess," Najvar said of the current city administrator.

District Attorney Sheppard said investigating the case with local resources would be a Catch-22.

"If it's investigated by local authorities and no charges are brought, then people will say that it's swept under the rug, or the paper would report local authorities found nothing, but we're not so sure we trust them," he said. "If charges are brought, people will say local authorities are bringing charges to cover themselves."

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Continue Reading: Goliad Investigation: Legislators to review development districts law