DURHAM, N.C. -- More than three years after Durham's small business loan program collapsed, the city has filed a lawsuit against the woman at the center of the scandal.
In the suit filed in Durham County Superior Court last month, the city accuses Anita Bennett of fraud, breach of contract and engaging in unfair and deceptive trade practices in her role as the owner and sole employee of the Triangle Economic Development Corp. The city is seeking unspecified damages and the reimbursement of its legal fees.
Bennett's company was awarded a no-bid contract in 1999 to oversee a program that loaned $828,000 from a federal grant aimed at helping start or expand small businesses in poor neighborhoods.
In 2001, auditors with the U.S. Department of Housing and Urban Development determined that almost all of the loans were not being repaid. Some who received loans had provided fake addresses, and some of the businesses that got money didn't exist.
Bennett, who lives in Raleigh, was paid more than $83,000 to manage the loans. She could not be reached Tuesday. An FBI investigation of the case is ongoing.
Mayor Bill Bell said the City Council made the decision to pursue the suit based on the advice of the city attorney. Members of the council had expressed concern about the slow pace of the criminal investigation, worried that the statute of limitations for civil action would expire.
"The council wanted to try to bring some resolution to this, especially considering how long it's been hanging out there," said Bell, who won election in the wake of the problems.
Patrick Baker, the assistant city attorney who filed the suit, did not return calls Tuesday.
The suit alleges that Bennett repeatedly lied or misled the city, saying that her company was a registered nonprofit corporation when it was not. The suit says she improperly charged some low-income loan recipients a "broker's fee" of as much as $2,000 and failed to fulfill the terms of her contracts with the city by not completing required documents for the loans. Signatures on some of the loan documents also may have been forged, the suit says.
"These misrepresentations and concealments were made with the intent to deceive the city," the suit says. "The city reasonably relied on the defendant's misrepresentations and concealments to their detriment."
Bennett, 38, grew up in rural New Hanover County and went to N.C. A&T State University in Greensboro. She dropped out in the late 1980s and moved to the Triangle, where she landed jobs at Raleigh's Chamber of Commerce and the Raleigh Downtown Alliance, a nonprofit booster group.
In 1998, she oversaw a small nonprofit group in Raleigh that was steering loans backed by taxpayers to minority businesses. City officials there cut ties with Bennett in early 1999, after $48,000 she managed couldn't be found.
Baker has said that the city's role in Bennett's handling of the program could hurt its case. Many of her actions appear to have been expressly authorized by city staff.
All of the city employees directly involved with the small business loan program have resigned or been dismissed -- including the city's manager of property and facilities management, Kendall Abernathy, and her husband, former city economic development director Ted Abernathy. Kendall Abernathy received an e-mail message warning of Bennett's problems in Raleigh before Bennett was hired in Durham.
In addition to the suit against Bennett, the city has previously filed suit against 15 recipients of small business loans seeking repayment. So far, only one of the 24 loans issued under Bennett has been repaid.
Staff writer Benjamin Niolet contributed to this story.
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