Minority Initiative Denies Any Connection to BLX Scandal, Allied

"BLX Has No Leadership Role, but Free to Participate in FDDI"

WASHINGTON, D.C. (BlueMauMau) - Donald Graves, head of the Franchise Diversity Development Initiative, took strong issue with a recent article on Blue MauMau, again linking the FDDI program to Business Loans Express, owned by Allied Capital Corp., which has recently been surrounded by controversy. The non-bank small business and commercial lender is part of an ongoing investigation by the U.S. Small Business Administration. On March 6, 2007, BLX signed an agreement with SBA stating it will submit each loan transaction to the agency for review. The agreement was the result of an indictment of BLX's executive vice president, Patrick Harrington, on fraud and other charges. Since then he has pled guilty October 1, to conspiracy to fraudulently originate loans and to lying to a grand jury.

Graves, who is chairman of the Metropolitan Business Collaborative, a national urban development organization supporting small businesses, said in an interview today, "BLX has no role in the leadership of FDDI, and has no other ties at this point. BLX is a participating lender just like any other lending organization." Graves agreed BLX may have its own troubles but his diversity program has no problem with them being involved. "Until such time the government tells them they can no longer provide loans, they will be welcome. Our program is open to all lenders." But he also feels that the light should be shone on any instances of questionable ethics or practices in business.

In explaining BLX's investment into their program, Graves said they did put up some money to help them put the program together. He said the money was in-kind contributions to get it up and running, which went to constructing the FDDI website. He said, "BLX is the only company that has made any in-kind contributions other than myself." Graves also stated that he has not received any money from any organization, that he has funded his own effort to travel around the country educating people on the program for minorities and women. "We are a very small non-profit trying to do good for underserved communities.

History of FDDI Development

Graves told how David Nayor, vice president of BLX, came to them when they were first discussing the new initiative. He said there were others at the table discussing the issues. But BLX felt there was a lack of support and resources for the minorities and women in the franchising industry. They felt there were not a lot of lenders who would step up to the plate and put up the money to fund it. "They were the ones who came forward at the beginning of putting the project together ," Graves explained. He said there was plenty of opportunity for others to embrace the initial effort. He feels they are filling a niche that others in franchising have not been able to fill. "We were just looking for help in launching the program," said Graves.

He also feels that others who participated in the initial discussions should have revealed BLX's problematic background, but they didn't. He said, "No one came to us with that information."

The articles on Blue MauMau, according to Graves, have caused them to lose some lenders. He said some were ready to sign on and become sponsors, but were afraid that their companies would be tied to BLX in a negative way.

Graves also told of how they joined IFA in the venture because they are not in the franchise arena. He said they saw an opportunity to join strengths — IFA's background in franchising and Metropolitan Business's expertise in business development. He said any IFA lender who wants to participate in providing loans, can do so.

When asked if FDDI is risking liability in being involved with BLX, Graves said as long as they are allowed, under the law, to provide loans and as long as BLX is a member of IFA, he doesn't feel there is any liability. He said there are also legal issues if they keep them out. He said, "It is a problem either way." FDDI tries to refer people to the best lender for their needs, and Graves said they have to review the process and talk with their own attorneys. He said, "They decide where they want to go."

IFA Response, "It is Not an IFA Program"

In an interview with IFA's vice president of communications Terry Hill, he said he took offense to the Blue MauMau article appearing before they were given a chance to respond. He also felt the reference to FDDI as "smoldering ashes" meant the program was gone, which it isn't. Although the minority project hasn't been mentioned on IFA's website in months, Hill said the program was still in operation, and that the only reason it wasn't on the web page is that it is not an IFA program. He said, "We help many groups with their programs in getting financing and technical assistance. You are trying to tar IFA with this fraud brush at BLX. How do you make that connection?"

When reminded that IFA and BLX's David Nayor launched the program together at a Franchise Update conference in Atlanta in 2006 and again at the IFA convention this year, Hill said he took issue with using the term "launched." He repeatedly said Donald Graves should be the one answering question about FDDI, saying, "It is not an IFA program." But in reminding him of previous comments from Miriam Brewer, director of IFA’s Development and Diversity Initiatives, in another article stating that IFA was making changes regarding the FDDI leadership, and of an article by John Reynolds, head of IFA's Educational Foundation, which again pointed to IFA's involvement, Hill again rejected the notion.

When asked directly, "Is IFA distancing itself from FDDI, Hill said "It may sound to you like that but those are not the facts. But I suspect it is going to be like any other facts, it just won't be reported accurately."

In answer to one last question: Do you understand the BLX situation, Hill replied that he understood the possible repercussions of the BLX scandal but said, "That is something else Don Graves can talk to you about."