Another black eye – Hallandale loses $75,000 in taxpayer money in botched business loan

By William Gjebre, BrowardBulldog.org

A firm that obtained a $75,000 business development loan from Hallandale Beach without signing a repayment agreement or providing collateral has defaulted, leaving the city unable to recover nearly all of the taxpayer-supplied money.

The loan default by Digital Outernet Inc. (DOI), headed by a Californian with past ties to the pornography industry and a local businessman who has since died, is the latest snafu to surface in the operations of the city’s Community Redevelopment Agency (CRA).

News of the soured loan comes as the Broward Inspector General’s Office opened an investigation last week into the city’s management practices, including those at the CRA, whose director are the five city commissioners.

“I was against it from day one; we are not in business to lose money,” said City Commissioner Keith London, who cast the lone vote opposing the loan three years ago. “It was never a sustainable, viable initiative.”

Commissioners approved the taxpayer loan in their capacity as CRA board members.

Digital Outernet was incorporated in November 2008. Four months later, it got the loan to buy equipment and materials. The plan it sold the city on: to setup television screens in local businesses and condominiums and sell advertising while also airing city and other information, such as job ads

CONTROVERSIAL HANDOUTS

The corporate loan was made during a time when the city was making numerous loans to local businesses, some controversial.

In 2009, the city administration also approved a $50,000 loan for a weekly newspaper, The Sun Times, forgiving half the loan ($25,000), even though two top executives earned $200,000 annually two years before the loan. Mayor Joy Cooper is a featured columnist.

The same year, the city erroneously forgave an extra $7,500 on a property improvement loan that Commissioner Anthony Sanders obtained before he was a commissioner. As a result, Sanders’ non-profit Higher Vision Ministries did not repay $15,000 on a $46,000 loan for property improvements at 501 N.W. First Ave. The city then brought the property for $235,000, even though the church only paid $45,000 for it in 2001.

Digital Outernet’s chief officials were local businessman John Hardwick and Steve Fecske, a Californian, according to state corporate and city files.

When the loan was approved, the Sun-Sentinel reported at the time, Fecske told Hallandale Beach commissioners he had been involved with a company that provided technology services to porn-connected websites, one of which featured star Jenna Jameson. He assured commissioners his pornography work was in the past.

Fecske is listed on LinkedIn, the professional networking web sit , where he is described as an “independent information technology and services professional.” He is currently associated with McKenzie & Co., Forensic CPAs in Los Angeles. He was president of Digital Outernet, Inc. from 2007-2010.

Fecske could not be reached for comment.

LOAN RECIPIENT OUT OF BUSINESS

On the current Florida Department of State Division of Corporations web site, Digital Outernet is listed as inactive.

While approved for a $125,000 loan, Digital Outernet only received $75,000. It had to meet certain city-imposed conditions to get the rest, but apparently did not do so.

However, one loan requirement was waived by the city: that the firm had to own its place of business; it was leasing. The loan also provided for 15 percent ($11,250) forgiveness, with the balance to be repaid at 4 percent (interest rate) over 10 years.

City records show it wasn’t long after funds were distributed that problems at Digital Outernet became apparent.

In June, 2010, the city sent a letter to Hardwick and Fecske denying their request for the additional $50,000. The letter pointed out the firm had missed its first two quarterly loan payments of $2,284 each, failed to sign a loan promissory note, and did not provide required financial reports and details on employee hires.

A month later, the city sent a similar letter.

CRA director Alvin Jackson said he met with Hardwick shortly after he became director of the CRA in January 2011, reminding him about the loan repayments and the documents and reports that needed to be filed with the city.

But state corporate records show that by then, the company had ceased to exist as a legal entity.

HARD TO TELL WHAT HAPPENED

Available city records do not explain what happened to Digital Outernet and the city’s $75,000. A recent report by an auditing firm criticized the CRA for failing to properly track loans and property acquisitions.

Jackson said the company made only one installment payment of $2,284 in July, 2010, adding that the firm appeared to go out of business with the death of Hardwick.

A member of the Hallandale Beach Chamber of Commerce, Hardwick, 41, suffered a stroke and died at Hollywood’s Memorial Hospital on May 22, 2011. Prior to becoming involved with Digital Outernet, Hardwick ran a barbershop/salon at 708 Foster Road in the city, the same location listed for DOI.

Jackson said the DOI file was sent to the City Attorney’s office for review and follow-up action. He said he was told that an investigator was sent to the Foster Road address to identify possible assets but none have been recovered, so far.

Jackson said he believed that Digital Outernet may have actually placed several television screens in local businesses, but he did not know for certain. The city file contained no information on the placement of the video screens.

The city “never got the balance” of the loan, Jackson added.

Broward Bulldog reviewed the city’s file. It makes no mention of Hardwick’s death and gives no indication that the city was trying to follow up by reaching Fecske in California.

The file also did not indicate what, if anything, the city attorney’s office did in the matter. There were no reports by the city attorney’s staff in the DOI file.

Local realtor Joe Kessel is listed as an official of DOI in one document in the city’s file. He said in an interview that he was “not involved” with the company and had long ago asked that his name be removed as a DOI associate. Kessel declined further comment.

Mike Good was the city manager at the time of the loan. The file contains a letter he wrote endorsing the DOI project. “The city supports the concept and advertising model offered by Digital Outernet, Inc., and seeks the support from our local business community as well,” Good wrote in his letter in December 2008.

Good, who was fired in June 2010, could not be reached for comment.