Animal Kindness pet clinic, at 4910 E. Bonanza Road, received a $1,124,000 loan through a federal program to help businesses affected by the Sept. 11, 2001, terrorist attacks. Photo by K.M. Cannon.

WASHINGTON -- Fifty Las Vegas businesses received federally backed loans intended to help them recover from the post-9/11 economic downturn, even though a new audit concludes that most probably should not have qualified for the money.

A veterinary hospital, a tanning salon, a Quizno's sandwich shop, a barbershop, a child care center, a car wash and a dentist were among the Las Vegas recipients of Small Business Administration-guaranteed Supplemental Terrorist Activity Star Relief (STAR) loans, according to SBA data.

In an audit released right before Christmas, the SBA inspector general blamed top agency officials for promoting a special disaster loan program as one where "virtually any small business qualified."

After examining a sampling of 59 businesses around the country that got loans through the Supplemental Terrorist Activity Relief program, investigators determined that only nine appeared to have been deserving.

Among the 59 businesses randomly reviewed by inspectors was a Las Vegas tanning salon that received a $583,500 loan on Dec. 3, 2002. A company representative told investigators the business was not harmed by the terrorist attacks.

But auditors said the bank that issued the loan said it was justified.

"Many of the customers who use tanning salons are performers in casinos and work in various capacities in the casino industry," investigators reported after speaking with bank officials. "Las Vegas tourism was hit hard by 9/11, and many casino workers lost their jobs or had their hours scaled back. ... This is a large part of (borrower's) customer base."

Las Vegas' tourism-based economy did suffer a downturn in the months following 9/11, but the tanning salon did not appear to be adversely affected the way hotels, casinos and facets of the tourism industry were.

Auditors cited bank credit documents that showed the tanning salon experienced a 51.6 percent sales growth in 2001 and projected sales would grow another 31.6 percent the following year.

The report did not identify the salon or the bank. However, 2002 SBA loans records show The Tan Factory LLC as the only Las Vegas tanning salon that received a STAR program loan. Silver State Bank awarded the loan, according to SBA records.

Representatives of The Tan Factory and Silver State Bank did not return the Review-Journal's calls seeking comment.

Other Las Vegas businesses that received terrorism-related loans included: Quizno's Classic Subs, Great Clips, Duck Duck Goose Daycare LLC, Rainbow Car Wash, Quality Auto Body and Ray McClave, D.D.S., according to the SBA records.

In all, Las Vegas businesses qualified for $19.3 million in loans from six banks.

One business, C&E Tooling Inc. in the Cheyenne West Business Park, received two loans under the program, totaling $1.26 million, from U.S. Bank National Association, according to the SBA records.

Nevada Construction Cleanup, 2745 N. Nellis Blvd., had the largest loan on the list: $1.53 million.

It's a 15-year-old business whose employees remove the debris that subcontractors leave at job sites. The SBA's report shows Nevada Construction Cleanup received a STAR program loan through Henderson-based Silver State Bank in 2002.

But David Marino, the company's controller, said he has no idea how Nevada Construction Cleanup landed on the list of terrorism-relief loan recipients.

"This loan was way before 9/11," Marino said.

Marino was unable to pinpoint a precise borrowing date, but he said Nevada Construction Cleanup has had its SBA loan for at least 4 1/2 years.

Terrorism recovery "wasn't even a thought in anybody's mind at that time," Marino said.

Marino said the financing helped expand the business.

Officials with the various banks that handled the loans told investigators they only qualified businesses for the anti-terror loans after SBA officials aggressively marketed the program to "mean that every small business could claim it was somehow impacted by the attacks, and therefore, eligible to receive a STAR loan."

Congress created the one-year loan program in 2002 to help small businesses affected by the terrorist attacks.

Lenders across the country approved 8,201 loans totaling $3.7 billion between Jan. 11, 2002, and Jan. 10, 2003, according to the report.

SBA Administrator Hector Barreto this week said his agency "implemented the program as Congress intended." However, Barreto agreed the agency should create more robust documentation requirements should a similar program be authorized again.

Rep. Nydia Velazquez, D-N.Y., the top Democrat on the Small Business Committee, called on Barreto to resign, pointing to his "mishandling" of disaster assistance to hurricane and terrorism victims.

"When it comes down to it, this failure to exert proper guidance and direction is simply unacceptable," Velazquez said.

Rep. Jim Gibbons, R-Nev., called for a congressional investigation and said businesses that "fraudulently received money" should be held accountable.

"It is unfortunate that these individuals took advantage of the post-9/11 grants which were designed to help businesses overcome economic hardships as result of the terrorist attacks," Gibbons said.

"These dishonest acts took away much needed funding for businesses truly suffering. "

Review-Journal writer Jennifer Robison contributed to this report

LAS VEGAS FIRMS GOT LOANS TO RECOVER FROM 9/11
Fifty Las Vegas businesses received federally backed loans (four received more than one loan) under a U.S. Small Business Administration program that was supposed to help businesses that had been adversely affected by the terrorist attacks of Sept. 11, 2001: