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Small Business Administration
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Small Business Administration
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Bradley H. Patterson Files (Ford Administration)
Bradley Patterson's Native American Programs Files
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The original documents are located in Box 5, folder "Small Business Administration" of the
Bradley H. Patterson Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 5 of the Bradley H. Patterson Files at the Gerald R. Ford Presidential Library
THE WHITE HOUSE
WASHINGTON
701/477-6539
mr. Jerame
Bucks Electric
n. Dakota
HSS 5g some
(hang
FORD LIBRARY & 938839
SBA
Called 653-6475 Phulbin
11/18
Rivere well
review this.- s
Saturby Tunisell that
S & I's on & X , du - up -
MEMORANDUM
in
VOI CALL
BRAd
YOU WERE CALLED BY-
YOU WERE VISITED BY
OF (Organization)
Bucky Jeromy
PHONE
PLEASE CALL
CODE/EXT. NO
WILL CALL AGAIN
IS WAITING TO SEE YOU
RETURNED YOUR CALL
WISHES AN APPOINTMENT
MESSAGE
(701) 477- 6238
re : SBA
Fargo
RECEIVED BY
DATE
STANDARD FORM 63
GPO : 1969-c48-16-8034 (-1
GSA FPMR (41 CFR) 101-11.6
S
63-108
REVISED AUGUST 1967
00021/20
701-237-5771
all Meray Device office
13036-837-2152 3036-837 -837-2152
SMALL BUSI BUSINESS INESS
U.S. SMALL BUSINESS ADMINISTRATION
ADMINISTRA 1953 ATTO
WASHINGTON, D.C. 20416
OFFICE OF THE ADMINISTRATOR
SEP
1976
MEMORANDUM FOR
Honorable Bradley H. Patterson, Jr.
Special Assistant to the President
for Indian Affairs
On August 31, 1976, we received a copy of your letter to
Mr. Henry Jacket, Sr., Tribal Treasurer, The Ute Mountain
Ute Tribe, Towaoc, Colorado 81334; dated August 27, 1976.
Attached is a copy of our reply to Mr. Jacket.
for Joseph Associate Mack Higgins I Administrator Luma
for Minority Small Business
Attachment
AMERICAN REVOLUTION WEENTENNIAL
1776-1976
SMALL
BUSINESS
U.S. SMALL BUSINESS ADMINISTRATION
ADMINISTRA
INIWAL
1953
NOILL
WASHINGTON, D.C. 20416
OFFICE OF THE ADMINISTRATOR
Mr. Henry Jacket, Sr.
Tribal Treasurer
The Ute Mountain Ute Tribe
Towaoc, Colorado 81334
Dear Mr. Jacket:
In response to your letter to President Ford, dated August 12, 1976,
we would like to submit to you a report submitted by our Regional
Office in Denver.
We recognize the frustrations faced by your Tribe in their effort
to expedite economic development on their Reservation, but it is
also evident that SBA personnel are making a concerted effort to
assist the Tribe. I have been assured by Mr. Rivera, Regional Di-
rector for SBA Region VIII, that he will personally look into this
matter and make every effort to assist your Reservation.
If we can be of any further assistance in this matter, please do
not hesitate to let us know.
Sincerely,
((signed) Joseph J. Luna
C. Mack Higgins
Associate Administrator
for Minority Small Business
Enclosure
FORD
REVOLUTION
AMERICAN
BICENTENNIAL
1776-1976
STATEM
U.S. GOVERNMENT
SMALL
SMALL BUSINESS ADMINISTRATION
REGION VIII
ADMINISTED
ANDIA
EXECUTIVE TOWER BUILDING
1405 CURTIS STREET
DATE
September 3, 1976
DENVER. COLORADO 80202
REPLY TO
ATTN OF: Victor M. Rivera, Regional Director
SUBJECT Efforts to Assist Ute Mountain Ute Tribe
TO: Mr. C. Mack Higgins, Associate Administrator
Minority Small Business
On August 12, 1976, the Tribal Treasurer of the Ute Mountain Ute Tribe of
Towaoc, Colorado submitted a letter to the President of the United States
stating:
"The Small Business Administration tells the American Indian that
they are trying to help him, yet they fail to provide any field repre-
sentatives to fulfill their promises. The only contact they have with
the reservations is made by telephone or through the mail. The majority
of SBA's employees don't even know what an Indian Reservation looks
like."
We must reply to this statement with a chronology of actions taken to assist
the tribe.
In February, 1976, the SBA established an Indian Desk at its regional
headquarters in Denver. The man named as the Indian Business Development
Coordinator for this region is Mr. Al McKay, a member of the Sioux Tribe.
Prior to this appointment, our District Office in Denver reports that Mr.
Paul Klinkerman, Loan Officer, made regular visits to the reservation, meeting
with Mr. Don Toci, Credit Manager for the Tribe. Mr. Willard Carmody, an
Economic Development Specialist, worked with the Tribe for some time, culmi-
nating in a local development company loan for a pottery plant made in 1974.
Mr. Bob White, Loan Officer, also made field visits both in 1974 and 1975 to
the Reservation.
Since the appointment of Mr. McKay, the following activity has occurred on
the Ute Mountain Ute Reservation.
On May 6, 1976, Mr. McKay and Ms. Helen Meyers, Management Assistance Officer,
presented SBA's Indian Business Development Work Plan for the coming fiscal
year to the Dte Mountain Tribal Council. These two individuals also partici-
pated in a comprehensive Tribal Planning Committee meeting on May 5, 1976.
REVOLUTION
AMERICAN
BICENTENNIAL
SALD FOR
1776-1976
Page 2
They also met with Mr. Don Tripp, BIA Credit Officer. In a follow-up report
submitted May 10, 1976, Mr. McKay reported that the Tribe did not have any
problems related to SBA and were grateful to SBA for sending Ms. Meyers. He
also reported that Mr. Jacket assured SBA that loan applications in accordance
with the SBA Indian Business Development Program may be expected in the near
future.
On June 29, 1976, Mr. Jacket, Mr. Horace Garcia, Tribal Economic Development
Planner, Alfred Long and Ernest Price, Tribal members, visited with Mr. McKay
at the Regional Office in Denver. The purpose of the meeting was to discuss
the construction of a 20,000 sq. ft. building to house a manufacturing company.
Also discussed was the Tribe's desire to have a full time decision making
Indian SBA Representative to service the Reservation. Considering a population
of 1372 people on the Reservation and the fact that SBA has very limited
personnel resources, this request cannot be met by Region at this time.
On July 28, 1976, Mr. Donald Tripp, BIA Credit Officer, Mr. Horace Garcia,
Tribal Planner, and Mr. Jerry Folson, BIA Area Office Credit Officer from
Albuquerque, New Mexico, visited with Mr. McKay and Mr. Doug Graves, SBA
District Director for Colorado. As a result of this meeting, Mr. Graves
scheduled a visit to the Reservation on August 24th to meet with Tribal
officials to discuss future projects and to visit existing SBA loan clients.
At the request of the delegation, Mr. Graves arranged for Mr. Al Lopez,
Minority Small Business Specialist to visit the Reservation on August 11th
to discuss a particular loan proposal by Mr. Ernie Price and to discuss the
possibility of an SBA loan to the Tribal Council for the purpose of
purchasing three businesses on the Reservation. As a result of his visit,
Mr. Lopez accepted an application from Mr. Price. After checking with the
Assistant District Director for Finance, Mr. Lopez informed the Tribe that a
loan to the Tribe was ineligible for SBA assistance.
Mr. Graves made his prearranged visit to the Reservation on August 24th, he
met with Mr. Garcia, Tribal Planner, who informed him that his meeting with
the Tribal Council had been cancelled. Mr. Graves was somewhat disappointed,
since he had especially travelled over 500 miles to meet with the Tribe. Mr.
Graves then asked Mr. Garcia to call Mr. Price to invite him to come to the
office to receive the approval letter for his $42,600 loan request.
Mr. Graves later submitted a report to the Regional Office indicating that
he had learned that the Tribe was displeased with SBA because they had been
told that SBA regulations did not permit loans to Tribal governments.
Page 3
In summary, we are very disappointed with the statement made by the Tribe.
We feel that we are making a strong effort to assist them with their business
objectives. It is unfortunate that we cannot meet their every need, such as
stationing a full time representative on the Reservation or making the loan
to the Tribal government, but' these actions are beyond our control due to
staffing limitations and our legislative authority.
However, we will continue to work with the Tribe, assisting them to develop
individually owned businesses on the Reservation and providing follow-up
management assistance.
Victor Rivera
Victor M. Rivera in
Regional Director
Gregory R. Dallaire
LEGAL SERVICES CENTER
Director
BALLARD OFFICE
5308 Ballard Avenue N.W.
Seattle, Washington 98107
(206) 464-5921
26 October, 1976
Mr. Bradley Patterson
Advisor on Indian Affairs
The White House
Washington, D.C.
Dear Mr. Patterson:
I am writing to you on behalf of the Skokomish Indian Tribe
to request your assistance in resolving a matter which
affects not only the Skokomish people but Indian tribes
throughout the country. For a number of years, Indian tribes
have sought assistance from the Small Business Administration
in the establishment and operation of small tribal business
enterprises. These enterprises have often been the tribe's
first venture in the business world. They are viewed by tribes
as a means for training and employing Indian people and fre-
quently provide the only opportunity for reservation Indians
to acquire business skills. Assistance from the SBA would appear
to be clearly consistent with the fundamental purpose of the
Small Business Act to help disadvantaged minority persons and
groups enter and succeed in the business world. The SBA, however,
has refused to provide assistance to business enterprises estab-
lished and operated by tribal governments, irrespective of how
small and unsophisticated in operation they may be.
I have been unable to find any justification in the Small
Business Act and regulations for the refusal of assistance
to tribes. In corresponding and discussing this problem,
over the past year-and-a-half, with a number of persons at
the regional and national levels of SBA, I have heard various
reasons for the denial of assistance, none of which are com-
pelling and several of which are inconsistent or based on
unnecessarily restrictive statutory interpretations. SBA
officials have claimed that tribes are ineligible as "non-
profit" organizations. This claim is made without factual
support and in spite of an express provision in the Indian
Reorganization Act for tribes to conduct profit-making business
activities under a federal charter. At the same time, certain
SBA personnel have claimed that tribes could receive assistance
if they incorporated under state law.
However, state incorporation of tribal business would be
repugnant to the tribe's exercise of self-government rights
2
and could undermine federally protected immunities. Tribes
have also been advised that their enterprises are not eli-
gible because of "competitive advantages," even though the
rural location of many reservations and serious financial,
educational, and other impediments faced by reservation
people have placed them among the most unlikely to compete
successfully in the business world. Now, after over one
year of reviewing SBA's position, the Administration's
Chief Counsel for Economic Development, Maxine Wood, claims
that 16 U.S.C. §632 prohibits tribal eligibility because it
requires that small business concerns be "independently
owned." This provision was obviously intended to prevent
assistance to businesses which are part of large, dominant
enterprises and not the first small steps of developing
tribes to assist their people in acquiring business skills.
Certain SBA policy guidelines have recognized the unique
considerations which should apply to tribally-owned enter-
prises and have declared tribes eligible for at least one
of the programs outlined in the Small Business Act. Yet,
SBA maintains an official policy of refusing assistance for
other programs under the act and the policy guidelines provi-
ding for tribal eligibility appear to be ignored at the
regional levels.
Sherman Quinto, an attorney in the General Counsel's office
of SBA, has recommended that assistance be given to tribally-
chartered businesses. Maxine Wood, Chief Counsel, apparently
disagrees. When questioned about possible changes in policy,
however, she responds that "the matter is still under consid-
eration." There is no indication that any resolution is
forthcoming and, in the meantime, tribal enterprises continue
to be excluded from the benefits of federal programs designed
to assist the very type of business ventures they are seeking
to establish. I, therefore, request your assistance in seeing
that SBA finally does respond to the many concerns expressed
throughout the country regarding this policy on tribal eligi-
bility by allowing tribes to participate in SBA programs.
I have enclosed several pieces of correspondence which provide
additional background information on this problem.
Yours truly,
alen H Sanders
Allen H. Sanders
Attorney at Law
FORD
AHS: jpj
enc:
IRALD
CC: Gary Peterson, Skokomish Indian Tribe
THE WHITE HOUSE
WASHINGTON
November 1, 1976
MEMORANDUM FOR THE ADMINISTRATOR
SMALL BUSINESS ADMINISTRATION
FROM:
BRADLEY H. PATTERSON, JR.
SUBJECT:
Eligibility of Indian Tribal
Enterprises for SBA Loan Guaranty
Programs
I am writing to you pursuant to the President's memo-
randum of August 26, 1976.
It is my understanding that SBA is considering the
above question and that a decision is pending in
the near future.
Mrs. Kilberg, the Associate Counsel here, and I would
appreciate having an opportunity of sitting down with
you and some of your staff to review the legal and
policy issues before the whole matter is finalized.
Would you kindly give me a call so that a session
can be arranged?
Dose
November 1, 1976
MEMORANDUM FOR THE ADMINISTRATOR
SMALL BUSINESS ADMINISTRATION
FROM:
BRADLEY H. PATTERSON, JR.
SUBJECT:
Eligibility of Indian Tribal
Enterprises for SBA Loan Guaranty
Programs
I am writing to you pursuant to the President's memo-
randum of August 26, 1976.
It is my understanding that SBA is considering the
above question and that a decision is pending in
the near future.
Mrs. Kilberg, the Associate Counsel here, and I would
appreciate having an opportunity of sitting down with
you and some of your staff to review the legal and
policy issues before the whole matter is finalized.
Would you kindly give no a call so that a session
can be arranged?
CC: Mrs. Kilberg
FORD LIBRARY is
Director
BALLARD OFFICE
5308 Ballard Avenue N.W.
Seattle, Washington 98107
(206) 464-5921
9 Nóvember, 1976
Mr. Bradley Patterson
Special Advisor On Indian Affairs
The White House
Washington, D.C.
Dear Mr. Patterson:
In my previous communications with you I indicated that the
SBA is now contending that 16 U.S.C. $632 prohibits tribal
eligibility because SBA considers tribal enterprises as not being
"independently owned and operated." Any statutory requirement
that an enterprise be independently owned and operated obviously
was not intended to deny tribal eligibility, but to deny eligibil-
ity to those concerns which are affiliated with corporate giants
or other large enterprises. An examination of pertinent cases,
regulations and legislative history clearly supports this view.
In American Electric Co. V. United States, 270 F. Supp. 689 (1967)
the plaintiff was protesting the inclusion of the sales made by
its affiliates in its total sales figure, which exceeded SBA limits.
The court having reviewed the Act, regulations, and other relevant
case law, specifically held that the "independently owned" clause
of 16 U.S.C. $632 was intended to be applied to this type of busi-
ness affiliation. The Court said:
To decide otherwise would destroy the intent of the
Small Business Act, for it would mean that corporate
giants with small affiliates doing work different from
the parent could reap the benefit of small business
contracts through its affiliates. By statute, these
contracts are now reserved for independently owned and
operated small business concerns. 15 U.S.C. $632 at
691, 692.
Further support can be found by looking directly at the relevant
provisions of the Code of Federal Regulations. 13 C.F.R. §120 (d)
(3) provides that:
An otherwise elibible small business concern will not
become ineligible because it is owned in whole or in
part by a nonprofit organization.
Meanwhile, the only mention of the term "independently owned and
ALD
2
operated" is found in $121.3-2 (a) which equates "independently
owned and operated" with affiliation with other business enter-
prises that would not be small business concerns. This subsection
is specifically intended to determine when one business concern is
affiliated with another concern, not when a tribe is so affiliated.
The entire legislative history of the SBA and more specifically
16 U.S.C. §632 reveals that it was intended to aid small businesses
that were endangered by larger concerns. See 104 Cong. Rec. 12789,
12801 (1958). The requirement of "independent ownership" was only
intended to prevent indirect aid to these larger concerns. There
is no possible basis for inferring that small, developing Indian
tribes with few, if any, other business enterprises were intended
to be denied assistance which is essential, if any significant
number of Indian people are to acquire business skills.
I look forward to hearing from you soon regarding this matter.
Yours truly,
allen Allen H. Sanders
Allen H. Sanders
Attorney at Law
AHS: jpj
CC: Vic Martino
FORD LIBER
THE WHITE HOUSE
WASHINGTON
November 12
Bill -
It seems to me that you must
in your draft response make a very strong
case --- citing law, legislative history and
regulation -- that Congress did not want
any governmental entities to get the benefits
of the Act.
If you can't make that case, then
Indian tribes -- and their tribally owned
businesses -- should be eligible. If you can
make that case, then that is that, since Indian
tribes do consider themselves as governmental
entities.
Brad
FORD
STALL
BUSINESS
U.S. GOVERNMENT
SMALL BUSINESS ADMINISTRATION
1953
WASHINGTON, D.C. 20416
OFFICE OF THE ADMINISTRATOR
DEC 3
1976
Mr. Bradley Patterson
Special Advisor on Indian Affairs
The White House
Washington, D.C. 20500
Dear Mr. Patterson:
This letter replies to your note of November 12, 1976, to my Deputy,
William T. Gennetti. Our review of the legislative history of the Small
Business Act supports our view that the SBA's present interpretation
of its authority is correct, and that it may not extend its financial
assistance programs to governmental entities.
Since Indian Tribes are governmental entities, and wish to remain so,
the SBA cannot assist them as such. This does not, of course, preclude
SBA from rendering financial assistance to individual Indian businesses,
state chartered Indian corporations, and other types of Indian enterprises
that meet our eligibility requirements with regard to size, non-affiliation
with large businesses, and independence of operation and ownership.
SBA recognizes the right of an Indian Tribe, as an independent govern-
mental entity, to issue business charters. However, if that charter
results in affiliation with the Tribe through ownership or control, the
business entity created will not be eligible for SBA assistance because
of affiliation with a governmental entity.
We base our reply on the fact that when SBA was created in 1953 it was
clearly the intent of Congress to limit the authority of the agency to the
provision of financial aid to small business concerns, and to exclude
governmental entities from such aid. An amendment that would have
authorized such assistance was deleted in conference. The legislative
history shows that the financial assistance previously provided to
municipalities by the RFC was to be provided not by SBA, but by separate
legislation.
FORD
STATE
ALD
2
Consistently from 1953 to the present the SBA has limited its financial
assistance programs to independently owned and operated small business
concerns. It has denied assistance to consumer cooperatives, to big
business, to entities so closely affiliated with big businesses as to lose
their character as "small business concerns", and to governmental
entities.
As early as 1956 SBA published in its Opinion Digest an opinion
denying assistance to
"a municipality to engage in sewerage disposal project,
on the ground that this Administration is not permitted
to make loans to assist municipalities or other political
subdivisions' OD NO. 12, December 13, 1956.
There has been no change in SBA's policy on this question in the more
than 20 years of its existence.
This letter is based on a legal memorandum setting forth the legislative
history at some length. I shall be pleased to provide you a copy of that
memorandum if you so desire.
Sincerely,
David M. F. Lambert
General Counsel
FORD
RALD
THE WHITE HOUSE
WASHINGTON
December 8
Dear Dave -
Thank you for your
letter of the 3rd, and for mentiming
the legal memorandum. I would like to
see a copy.
May either your letter or
the legal memorandum or both be made
available to Indian people and their
legal representatives? If neither can,
would you prepare something which I
can give them? (I think your letter
certainly ought to be made available...)
Cordectly
Sead
BUCK'S ELECTRIC
HEATING CONTRACTOR
RESIDENTIAL & COMMERCIAL
Master Electrician
SALES & SERVICE
FARM & RANCH
Licensed & Bonded
WE DO ELECTRIC HEATING
P. O. BOX 357
BELCOURT, NORTH DAKOTA 58316
PHONE 477 6238
December 23, 1976
701-471-6539
12/29
Mr. Bradley H. Patterson, Jr.
President's Public Liasion Indian Affairs
Helling well
White House,
Washington, D. C.
Dear Mr. Patterson, Jr:
all
As per our conversation over the phone the other day about
my SBA loan application I am sending copies of material
prepared for it's approval by Mr. McKay, of the Denver
J.
Regional Office.
Now we understand 8 Mr. Robert Martinez, Mr. MeKay's
supervisor dis-agrees with the procedure used to obtain
and evaluate the application like he did.
I do not feel, you nor Mr. Richard M. Philbin, let us down
and followed the wrong procedures as Mr. Martinez states.
Mr. Martinez, we understand is sending the application back
to the Fargo Office, where is came from and was declined in
the first place.
All the work we have done is being taken as of having no
value. We did not want the application to go back to Fargo
as this 18 where we were discriminated in the first place.
We feel the Mr. Martinez is taking the same stand 28 Mr.
Maine Shafer of Fargo has taken and will do anything to
prevent my application from being approved.
I do not want Mr. Martinez to evaluate my application which
will happen now that he is control of it and returning it to
Fergo.
I just don't know what to do - - but I feel they are only trying
to bankrupt me which will happen if there is continous change
of course and are certainly not 28 understanding as your self,
Mr. Philbin or Mr. MeKay.
I know time is running out for you too, but 18 there anyting
that can be done as long 88 you are still there SO that I can
obtain an unbaised decision which I felt I had until Mr. Martinez
put a stop to what we were all doing.
Your help and assistance has really been appreciated and I hope
something can still be done.
Respectfully Yours
Rerdinand Jerome Ferduard Jasone
SMALL BUSINESS ADMINISTRATION
REGION VIII
VIWIIL
ATION
EXECUTIVE TOWER BUILDING
1953
ISTR
1405 CURTIS STREET
DATE December 17, 1976
DENVER. COLORADO 80202
Bucky-
REPLY TO
ATTN OF: MSBS/Indian Desk
So
SUBJECT: Declined "ME" Loan Application
BobM
TO. Richard M. Philbin, Director
12/16/76
Office of Program Assistance
Office of AA/MSB, SBA, Washington
Thru: Victor M. Rivera, Regional Director
It is determined that Mr. Ferdinand Jerome, a Native American Indian,
d/b/a Buck's Electric, an existing minority small business firm, is
located on the Turtle Mountain Indian reservation, an economically
depressed area with high proportions of unemployed and low income
individuals, in the State of North Dakota.
The intent of special criteria in the standard operating procedures of
the SBA is to provide the greatest possible commitment be made to assist-
ing minority entrepreneurs and to encourage institutions to participate
under the SBA loan guaranty program. Mr. Jerome's bank of account is
willing to participate with the SBA in this program.
This being a loan program for the "disadvantaged" there should be room
for realistic loan conditions that would allow for some "advantage" to
this Indian applicant by establishing a liberal grace period for payments.
A major national goal of the Unites States is to provide the quantity and
quality of federal services and opportunities which will permit Native
American Indians to compete and excel in the life areas of their choice,
and to achieve the measure of self-determination essential to their social
and economic well-being. This goal is strongly emphasized in a Presidential
Memorandum to the Departments and Agencies and within the Executive Office
of the President, that in carrying out the purposes of the SBA's minority
enterprise programs, the President has requested priority attention be
given to those Federal programs designed to serve the Indian people.
After scrutinizing the documents presented to me by the SBA and Mr. Jerome's
Denver Representative, I, unequivocally approve, Mr. Ferdinand Jerome's
application as submitted to the Small Business Administration.
It is the desire of the applicant that Mr. Bradley H. Patterson, Jr., the
President's White House Liaison for Indian Affairs be furnished a copy of
all documents in this matter.
REVOLUTION
Alfred McKay
FORD
Minority Small Business Specialist
&
E
BICENTENNIAL
Indian Desk
AMERICAN
1776-1976
BUSINESS ADMINISTRATION
REGION VIII
THE
EXECUTIVE TOWER BUILDING
1953
1405 CURTIS STREET
DATE. November 18, 1976
DENVER, COLORADO 80202
REPLY TO
ATTN OF: MSBS/Indian Desk
SUBJECT White House Inquiry, Indian loan decline.
TO. Regional Director
Thru: ARD/MSB
At about 4:15 p.m. on November 17, 1976, Bradley H. Patterson, Jr., the
President's Public Liasion Indian Affairs, the White House, called in
regard to information received from Ferdinand Jerome, whose loan applic-
ation had been declined by the ND district SBA office. Mr. Patterson was
very concerned and asked if racial prejudice was involved in the action
taken by the ND office.
I acknowledged, that on November 10, 1976, I had been told personally by
the ND processing loan officer, that the loan application processed for
Mr. Jerome was very good and did not foresee any problem in obtaining an
approval. Mr. Patterson asked what role I could provide in resolving the
matter. I referred to S.O.P. 50-10-E, effective 1-15-76, Appendix 15,
par. 2. EXCEPTIONS TO 7 (a) POLICY AND CRITERIA. For loans over $50,000
(SBA share) not to exceed $350,000 (SBA share), the policy and credit crit-
eria of regular 7(a) loans shall apply, except as follows where necessary
to approve the loan., i. Review of Declined ME Loans. When an ME loan is
declined, it will be referred to the Minority Enterprise Representative for
review. Mr. Patterson indicated that if the S.O.P. was followed it could
assist in resolving this case. He further indicated he would contact, Mr.
Richard Philbin, Indian Desk, Central Office.
Mr. Jerome, an enrolled member of the Turtle Mountain Band of Chippewa
Indians, Belcourt, ND, called me on November 18, 1976, and said he had
discussed his problem with the ARD/MSB the previous day, however, a return-
called promised never came through. Mr. Jerome then told me, that he suspected
the strained relationship existing between himself and the supervisory loan
officer from the ND office maybe a factor in the negative action taken on
his application.
Cupimoby Alfred McKay
MSBS/Indian Desk
REVOLUTION
GERAL
AMERICAN
BICENTENNIAL
1776-1976
Busky-
R. C. MILLER & CO.
al McKuy has the
Over 20 Years of Professional Accounting
621 FOX STREET
original to obtain
DENVER, COLORADO 80204
an from SBH.
303-573-3919
Bobm.
LOAN PACKAGING
TAX PLANNING
SYSTEMS
TAX RETURNS
AUDITING
BUDGETING
FINANCIAL ANALYSIS
PROFIT PLANNING
Ferdinand Jerome
d/b/a Buck's Electric
$112, 000 Lqan Application
Mr. Jerome started this business in 1966 on a very modest basis and
built it up primarily on the basis of reinvested earnings. Outside
financial assistance has been provided primarily by vendors and applicant's
bank of account. There have also been small BIA grants and two small
loans from the SBA -- an $11,000 long-term loan made in 1969 which,
apparently, is current with a present balance of $6,101 and a 1974 loan
which was paid when the collection on the contract was made (the file does
not indicate why an arbitrary maturity of November 1, 1974 was set on
this loan instead of an assignment of the contract).
As pointed out by the 406 contractor in 1974, Mr. Jerome had
If
the usual problems of obtaining adequate sales to generate a living
income for the owner. The problem is accentuated due to low demand for
services by a sparsely populated reservation. However, Bucky Jerome
has the skills to develop the business within the limits of available
local demand.' " The 406 contractor's comments have been proven prophetic
Mr. Jerome has indeed built the business to the limit of local
demands. Mr. Jerome has also proven himself to be a very frugal and
flexible business man. While the demand for electrical work was low,
he was investing his time and money in other ventures to supplement
his income so that his financial statement as of June 30, 1976 showed
Ferdinand Jerome - Page 2
a net worth of $146,807 as shown below:
Assets
Current Assets:
Cash on Hand & In Banks
$ 3,556
Accounts Receivable
20,376
Inventory-Electrical
12,000
3,000
Inventory-Cattle
9,000
Inventory-Hay
Total Current Assets
$47,932
Fixed Assets (Primarily at Estimated Market value)
Residence including 2½ Acres of land
$35,000
Rental Houses (2) on 50' X 100' tract
44,000
Shop Buildings
7,500
Personal Automobile
6,000
Equipment-Electrical
24,550
Equipment-Agriculture
3,500
Less-Accumulated Depreciation
(15,000)
Total Fixed Assets
$105,550
Other Assets (at estimated Market Value):
25% Interest in Belcourt oil Company
(A Partnership)
$25,000
Household Goods
11,500
36,500
Total Other Assets
$189,982
Total Assets
Liabilities & Owners Equity
Current Liabilities:
Note Payable-GMC-On Auto
$ 3,500
Notes payable-Bank-Unsecured
18,580
Notes payable-Bank-On Vehicles
4,556
10,000
Accounts Payable
438
Accrued Taxes
Total Current Liabilities
$ 37,074
6,101
Long-Term Note Payable-SBA
Total Liabilities
43,175
146,807
Owner's Equity
Total Liabilities & Owner's Equity
$189,982
All of the above assets are available for the lender to take a first lien
collateral position excepting the household goods, $11,500, which are
generally considered "Non-bankable" and the vehicles which are presently
Ferdinand Jerome - Page 3
pledged on notes payable.
Subsequent to June 30, 1976, applicant's bank of account has advanced
interim financing of $35,547 and received payment of $12,280 on unsecured
borrowings so that present unsecured borrowings total $41,847. These
funds and the additional funds requested in the loan application are
primarily to finance the growth in accounts receivable and inventories,
both of which would be available for collateral.
The increase in accounts receivable and inventory are due primarily
to government sponsored housing projects in the area. As a result of
this work being available, Mr. Jerome's sales are estimated to be $347,000
in 1977 and $162,000 in 1976 as compared to $143,000 in 1975 and $93,000
in 1974. It is worthy of note that, with the exception of a $300,000
school building job to be done in 1977 and 1978, the jobs are all small
houses of the type that Mr. Jerome has 10 years proven success. In 1977
Mr. Jerome's forecast includes 132 of these houses. At 30 hours per a
house, a very conservative estimate, that is less than two man years of
work. It appears that the growth in Mr. Jerome's business is a result of
working steady for 12 months rather than doing a great deal more work at
one time.
Most of the work that Mr. Jerome forecasts for 1977 will be done under
the general contractor's bond so that his obtaining bonding will not be
required.
The additional work has made it possible for Mr. Jerome to employ a
full-time office manager-accountant so that Mrs. Janice Jerome will no
longer have to fit this into her other duties of mother, homemaker, etc.
Also the BIA has retained a reputable accounting firm to install an
Ferdinand Jerome - Page 4
accounting system and supervise its maintenance, including preparation
of quarterly financial statements, through September 1977.
It has been recommended that the present SBA loan be consolidated
with this loan. Although the application requested an eight year maturity
we suggest that a ten year maturity is more appropriate. This would
result in:
$118,100
Total Loan
9½%
Interest Rate
10 Years
Term
Total Payback
$183,384
Monthly Payment:
$
984
GERALD FORD
Principal
544
Interest
Total
$ 1,528
The cash forecast prepared for Buck's Electric by Keller & Raymo
shows net income before depreciation in
1977
1978
of
$70,448
$53,869
Owner's withdrawals
20,000
20,000
Fixed Assets
10,000
10,000
Debt Service on $118,100
18,338
18,338
Remaining for income taxes
and accelerated debt payment
22,110
5,531
$70,448
$53,869
This program appears to be feasable so long as any accelerated debt
payments are used to reduce the total debt over the remaining term of the
loan, thereby reducing the monthly payments, and not to reduce the term
of the loan (accelerate maturity). At the end of the ten year period
Bucky's Electric would have converted the $118,100 of debt to equity and
would be a strong viable company.
Mr. Jerome, age 41, married, four children, is an enrolled member of
the Turtle Mountain Band of Chippewa Indians, Belcourt, N. D. He served
in the U.S. Navy from 1953 to 1956 and is a graduate of the State school
North nakota and the Haskel Institute at Lawrence,
Ferdinand Jerome - Page 5
Kansas. He has owned and operated Bucky's Electric for over 10 years
and accumulated a sizeable personal estate in that time.
The government housing program has made an unusually large amount of
work available in the area and, since there are only two Indians who are
licensed master electricians in the State, if Mr. Jerome is not provided
adequate financing this work will have to be done by non-Indians -- another
program, well intended & well conceived for the benefit of the Indian,
that benefited primarily the non-Indian.
Mr. Jerome is well qualified and has the confidence of the business
community. Mr. J. T. Munro of Munro Contractors states that they have
"
hired Buck's Electric on multiple projects which included a half
million dollar apartment building. All work was excellent". Mr. John
Hinton of Thunderboldt Enterprises, Inc. writes that "It is our experience
that the risks inherrent in the contracting business are minimized in Mr.
Jerome's case due to his proven capabilities." The 406 contractor
expressed his confidence in Mr. Jerome and recommended that further assist-
ance from him was not necessary. The Security State Bank, Dunseith, N. D.,
continually worked with Mr. Jerome until the requirements were such that
"We just do not have funds available for this large a loan that would
require a long payout period." They obviously need the SBA guarantee so
that they can sell a participation in the loan to another institution.
Conclusion
The U.S. Government has a number of programs designed to assist
minority business men in being successful. The search has always been to
Ferdinand Jerome - Page 6
find those who are capable, reliable and have the work available to do.
Mr. Jerome is such a man and should be supported to the fullest.
P.C.Miller
R.C. Miller
RCM/1s
BI
U.S. SMALL BUSINESS ADMINISTRATION
my
SINESS
P.O. BOX 3086. ROOM 218
FEDERAL BUILDING. U.S. POST OFFICE
653 SECOND AVENUE NORTH
FARGO. NORTH DAKOTA 58102
IDMINIST
1953
ITION
November 17, 1976
Mr. Alan W. Campbell, President
Security State Bank
Dunseith, ND 58329
Dear Mr. Campbell:
Re: Ruck's Electric
Belcourt, ND 58316 Box 357
Your request for SBA to guarantee 90 percent of a loan of $112,000 to the
above business has been thoroughly reviewed. We regret that we are unable
to approve this loan request under our existing authority and policies.
The Small Business Act and the policies under which we operate require us
to be reasonably certain that, with the loan assistance from this Agency,
the borrower can operate on a sound financial basis. While requests for
loans in small amounts sometimes can be approved on a basis of limited
collateral, all requests, regardless of amount sought, must present
reasonable assurance of repayment of the loan and other fixed obligations
from the profits of the business. Otherwise, we would be providing high
risk financing which is not contemplated by the lending authority under
which we operate. Rather, it is the intent of our legislation that we
fulfill a need for longer term financing, an area in which private lending
institutions normally limit their accommodations.
The reason we have been unable to approve your request is as follows:
There is no reasonable assurance that the loan and other obligations
could be repaid from earnings. If approved, the loan would require
repayments of $21,200 each year (principal plus interest) to retire
the obligation over a term of 8 years. Incidentally a term of 8
years is a year or two longer than we would normally consider for
a working capital loan.
The information developed with the application indicates the business
has contracts in progress totaling $191,700 and verbal commitments
totaling an additional $543,500. Based on the average annual
volume of business done in the past we question the advisability
of attempting to handle such a substantial increase in volume,
especially when the latest financial statement showed the business
had no working capital. Our experience has shown that too rapid
expansion too often leads to problems for a business.
is
- 2 -
Two other items should also be pointed out. 1) Experience on
existing SBA loan. This loan originated at $11,000 in 1969 and
has a present balance of $5,500. This is a reduction of only
$5,500 in 7 years and we have had chronic delinquency problems
on this loan. 2) Surety Bond requirements. At present SBA is
guaranteeing two Surety Bonds totaling $164,000. Based on the
present financial condition of the business it may be difficult
for it to obtain additional bonding. One of the primary reasons
the business has had difficulty with bonding is the lack of
adequately prepared financial statements.
We regret that we were not able to give you a favorable decision on
this loan application.
5