As Gov. Pat Quinn's aides sought to pump up an anti-violence program ahead of his November 2010 election bid, they decided to add to the pot $3.76 million in federal disaster recovery funds from Hurricane Ike to make loans to small businesses.
In the rush to get the program launched, the Quinn administration hired a financially troubled West Side business development group to dole out loans, despite concluding the organization had recently misspent state grant funds.
The group, Chicago Community Ventures did not make a single loan, but was allowed to keep more than $150,000 when the contract was nixed, the Tribune has found.
Quinn aides say they caught the problems early by carefully monitoring the group and opted to let the organization keep the money because it had been spent appropriately on administrative costs.
But the administration would not specify how the group was vetted and whether other warning signs about the group's finances were taken into consideration before it was selected.
The group had failed to submit tax documents to the state on time, and prior tax reports showed the organization was spending more than it was taking in. In addition, the group did not provide the state its required annual outside audit — one that showed the group was more than $500,000 in the red — until well after the contract was signed.
The revelations about the loan program shed light on a little-known portion of Quinn's $54.5 million Neighborhood Recovery Initiative that centered on federal money. Much of the focus — including that of federal and Cook County prosecutors — has been on a larger pool of state money that went to community groups, some of whom failed to keep careful track of how the money was spent and did not live up to grant requirements, according to Illinois' auditor general.