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Barborak questions funding for Newbold firms

October 27, 2012
Morning Journal News

LISBON - In 2009, a non-profit organization founded by state Rep. Craig Newbold and his wife received $499,000 in federal stimulus money to start a small-business revolving loan program.

The Laus Deo Foundation's administration of the loan program has come under scrutiny by Nick Barborak, Newbold's opponent in the Nov. 6 election, who said Newbold's for-profit businesses may have improperly benefited from one of the loans that was awarded for a business begun by a Newbold employee and his wife.

"It certainly calls into question whether this stimulus money, which was intended to create jobs for small businesses, was used properly. Or was this money simply redirected to places where it benefited people who are directly involved with the loan," said Barborak, who is a Democrat. Newbold is a Republican.

Barborak first raised the issue during Wednesday's debate hosted by the Morning Journal and produced documentation the next day to support his claims. The Morning Journal also received copies of the same documentation.

The $150,000 loan in question was awarded by the Laus Deo Foundation in 2010 to Carefree Enterprises LLC of Columbiana to start an online farmer's market featuring produce from local farmers, with the produce available for home delivery to the elderly and others. The president of Carefree is Linda Hiscox, the wife of Doug Hiscox, a former Newbold employee.

Barborak said Carefree used loan money to pay $18,391 to Soaring Eagle and Newbold Technologies for website work. Both are for-profit businesses operated by Newbold. He found this particularly troubling given Newbold's position as an elected official, although the stimulus money was awarded to Laus Deo in 2009, prior to Newbold running for office.

"I don't think people who are in public office should ever profit from the administration of tax dollars, and even the appearance of impropriety should be avoided. And in this case it calls into question why was the wife of an employee of Mr. Newbold's company receiving all of this money and then turning around and hiring his company to do the work," Barborak said.

Newbold said he treated Carefree the same as other applicants and decided to award the loan after reviewing its business plan and requiring sufficient collateral to cover the debt should the recipient become insolvent.

As for Carefree contracting with his software companies for website services, Newbold saw nothing improper with the arrangement because he did not personally benefit.

"I don't benefit from my business because I've never taken a salary," and the companies have yet to turn a profit despite pouring millions of his own dollars into them, Newbold said, adding he put up $75,000 to qualify for the stimulus grant.

"Nick's just trying to make issues and create issues. Our objective is strictly to help the economy in Columbiana County. That's been my mission since I came back to the county," he said.

Carefree has since gone out of business but continues to make its loan payments. "They basically ran out of money ... It didn't work out," Newbold said, adding Mr. Hiscox no longer works for him due to budget cuts and may have been gone by the time he approved the loan.

Barborak had other problems with the loan awarded Carefree and other aspects of how the program was administered.

"(Newbold) was aware that he couldn't use it for his own benefit," Barborak said of the loan money. "I don't know if he broke the law or violated regulations, but it should raise a question in people's mind whether it was appropriate."

Funding for the loan program came from the U.S. Department of Agriculture, and Newbold said USDA representatives have twice audited the program since loans were issued, "and they didn't have any problems. I think this validates we didn't do anything improper."

Because of these questions, Barborak believes Newbold Technologies should reimburse the Laus Deo Foundation the money it was paid and turn over the loan program's administration to another agency.

Gary Bonnell of East Liverpool contacted the Morning Journal on Thursday to say he was responsible for compiling the information about the Laus Deo loan program. Bonnell said he met this week with officials from the FBI and U.S. Department of Agriculture and was told the matter will be referred to the appropriate officials for further review.

Laus Deo has issued 16 loans, and 12 of the applicants are still in business, Newbold said. Two of the four that have ceased operations continue to make loan payments, and legal action has been taken against another recipient to recover the money.

Newbold noted the businesses created 70 jobs to date, "so that's what makes me feel good ... They (USDA) even told me we were one of the better-run programs as far as success and creating jobs."

Newbold is confident the loan program has been run fairly and in compliance with the law and suggested Barborak's time could have been better spent pursuing the large number of property tax delinquencies in his capacity as county treasurer.

"Maybe Nick should've been going after the $11 million in delinquent taxes. Shouldn't someone be asking him about that?" he said.

Barborak said the $11 million number is a moving target because the delinquent tax rate is always increasing and decreasing as people pay their bills. He said the average is more like $6 million, "which is still not acceptable, but you have to understand that a lot of that is tied up in bankruptcies and we can't do anything about that."

Barborak said a significant portion of the delinquencies are also subject to foreclosure actions that can take years to wend their way through the legal system before the county can collect.

"We've been very aggressive in collecting delinquent taxes, and this year I think we set a record of $5 million," he said, adding more than $1 million of that came from the sale of the Firestone Farms development. "That certainly helped."



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