WASHINGTON -- The government's $5 billion effort to help small businesses recover from the Sept. 11 attacks was so loosely managed that it gave low-interest loans to companies that didn't need terrorism relief -- or even know they were getting it, the Associated Press has found.
And while some at Ground Zero couldn't get the assistance they desperately sought, companies far removed from the devastation -- a South Dakota country radio station, a Virgin Islands perfume shop, a Utah dog boutique, and more than 100 Dunkin' Donuts, and Quiznos and Subway sandwich shops -- had no problem getting the government-guaranteed loans.
''That's scary. 9/11 had nothing to do with this," said James Munsey, a Virginia entrepreneur who described himself as ''beyond shocked" to learn that his nearly $1 million loan to buy a special events company in Richmond was drawn from the Sept. 11 program.
''It would have been inappropriate for me to take this kind of loan," he said, stating that the company he bought suffered no ill effects from the attacks.
Arvind ''Andy" Patel, 50, said he used his $350,000 loan in fall 2002 to remodel his Dunkin' Donuts shop in western New York State and never knew it was drawn through the Sept. 11 program.
''Not at all," Patel said when asked whether his business was hurt by the attacks.
Government officials said they believe banks assigned loans to the Sept. 11 relief program without telling borrowers. Neither the government nor its participating banks said they could provide figures on how many businesses got loans that way.
But AP's nationwide investigation located businesses in dozens of states who said they did not know their loans were drawn from the Sept. 11 programs, suggesting that at least hundreds of millions of dollars went to unwitting recipients.
The Small Business Administration, which administered the two Sept. 11 recovery loan programs, said it first learned of the problems through AP's review and was weighing whether an investigation was needed. But officials acknowledged that they intended to spread the post-Sept. 11 aid broadly.
''We started seeing business [needing help] in areas you wouldn't think of -- tourism, crop dusting, trade, and transportation. . . . So there were a lot of examples you wouldn't think of, at first blush," said Hector Barreto, SBA administrator.
Of the 19,000 loans approved by the two programs, less than 11 percent went to companies in New York City and Washington, according to an AP computer analysis of loan records obtained under the Freedom of Information Act. The pattern left some at Ground Zero seething.
''You have to take it back and give it to us. Even now, I could use it," said Mike Yagudayev, who said the SBA gave him only $20,000 of a $70,000 loan he requested to rebuild his hair salon, which was flattened by the collapse of World Trade Center towers in New York.
Under one of the programs, SBA lent money directly to companies that provided detailed statements on how they were hurt. The other, the Supplementary Terrorism Activity Relief, or STAR, program, provided incentives -- and guaranteed loans from default -- so banks could lend money to companies they determined were hurt by the post-Sept. 11 economic downturn.
SBA documents obtained by the AP show banks had a strong incentive to approve as many loans as possible from the relief program. The banks profited from the interest while incurring little risk because the government guaranteed 75 percent to 85 percent of each loan.
Also, lenders saved an additional $5,000 a year for every $2 million they loaned under STAR.
Banking officials said SBA encouraged the industry to use the post-Sept. 11 programs liberally, especially when its normal guaranteed lending program was hit by steep budget cuts in 2002.
''They had personnel at our conference stand up and say if you cannot find a reason to move the loan over to the STAR program, contact us, and we'll help you find a reason to move it over," recalled Tony Wilkinson, president of the National Association of Government Guaranteed Lenders.
Wells Fargo, the nation's second largest SBA lender, said it ''continues to strictly adhere to SBA operational standards for all SBA loan originations."
Many loans went to local outlets of some of America's most famous and lucrative companies. For example, 55 Dunkin' Donuts shops across the country, 14 Quiznos sandwich shops, and 52 Subway sandwich shops received loans. Fourteen Dairy Queen ice cream shops received more than $5 million in loans.
Businesses far from the devastation had no trouble getting SBA loans, simply submitting short applications that linked their slow business to the economic fallout from Sept. 11:
Melva Kravitz, co-owner of the Little Dogs Resort & Salon in Salt Lake City that offers boarding and grooming services for small dogs, said people stopped taking vacations and boarding their pets after Sept. 11, so she needed her $50,000 loan. ''It was awful," she said. ''You just couldn't go on."
Christine Hilty, co-owner of Violettes Boutique on St. Croix in the US Virgin Islands, said the perfume shop lost 60 percent of its business overnight. She got a $169,500 loan from SBA. ''Would we have closed our doors? It was close," she said.