The Hartford Economic Development Corporation (HEDCO), a nonprofit that administers taxpayer-backed loans to start-ups and small businesses in the Hartford area, has initiated fifty-six court actions over the last ten years to recover $4.6 million in loans, including second loans they had made to businesses that were already in default for their initial loans, according to a review of court cases.

Although HEDCO offers its own small loans to companies, many of the unpaid loans were made through various state-offered programs managed by the Department of Economic and Community Development (DECD), including the Small Business Express program, the Minority Business Revolving Loan Fund, and the Small and Minority Business Financial Assistance program. 

In some cases, the total amount loaned to companies reached $600,000 as HEDCO offered second loans through a different state program to companies who still owed nearly all of their first loan, according to court documents.

• A $250,000 loan made to Vintage Trading through the Small Business Express program in 2012 was followed up by a second loan of $50,000 through the Small and Minority Business Financial Assistance program in 2014. When HEDCO initiated court action to collect in 2018, the company owed nearly $339,000.
• HEDCO made an initial loan to Maple Avenue Enterprises in 2012 of $50,000, despite the company having not filed an annual report with the Secretary of State’s office since 2010, and then made a second loan to the company through the Small Business Express program of $198,000 in 2013. When HEDCO initiated court action to collect repayment in 2018, the company owed more than $290,000. Maple Avenue Enterprises filed for dissolution in 2019.
• In the case of Urban Contractors of CT, the business was formed in 2008 and received a $200,000 loan from HEDCO that same year; in 2018, the company received $400,000 from HEDCO through Connecticut’s Small Business Express program. The company filed for dissolution in 2022 and still owed $198,000 in principal on the first loan. Combined with the remaining principal on the second loan, along with interest, late charges and attorney’s fees, the total owed came to $348,491.

Some of those loans — and the fees HEDCO was collecting to administer them — were at the center of a whistleblower case at the DECD after former fiscal administrative assistant Adam Osmond raised concerns about the agency’s third-party lending partners and the fees they were accumulating – concerns that were later validated by the Connecticut state auditors.

HEDCO, an institution in Connecticut since 1975, is an official lending partner for the state, meant to prop up small and minority owned businesses. According to the nonprofit’s website, it has made 1,196 loans totaling $64.3 million since its inception. However, just the last ten years of court cases alone would account for 4.6 percent of all loans made by the organization, and 7.1 percent of the total money loaned over fifty years. 

According to the 2024 audit of HEDCO submitted to the Office of Policy and Management, in 2024, $1.5 million out of $8.9 million in rated loans were rated either “fair” or “poor,” meaning they didn’t have enough collateral to cover the loan or were in collections. Another $6.1 million in loans were unrated, “as any losses would result in a reduction of loans payable to the State or City, or HEDCO expects forgiveness of outstanding balances from the State.”

In 2023, according to the audit, $5.3 million of the total $9.5 million in rated loans were rated either fair or poor.

According to that same audit, at the end of the 2024 fiscal year, $4.1 million out of a total of $12.2 million in outstanding loans was more than 31 days past due, with the vast majority — $3.6 million – more than 90 days past due. The auditors indicated that HEDCO will often try to modify loans when borrowers are experiencing financial difficulty by delaying payment, extending the terms or reducing the interest rate.

In 2001, the Hartford Courant documented that “one third of the 178 state or federally funded loans,” made over four years by HEDCO had gone into default or fallen behind, and a review of the program found large loans “went to financial deadbeats or politically connected board members of neighborhood agencies that controlled the money, and to relatives of agency officials.”

HEDCO now, however, finds itself in the middle of a federal investigation into how state and federal money was distributed several Hartford-area nonprofits. HEDCO had partnered with another nonprofit called SHEBA to administer loans. SHEBA was run by Sonserae Cicero-Hamlin, who allegedly had a personal relationship with Sen. Douglas McCrory, D-Hartford, who helped direct that state funding to SHEBA through HEDCO, according to documents obtained by Inside Investigator and other news reports.

The U.S. District Attorney issued subpoenas to the DECD and the Minority Business Initiative for “all documents concerning grants, loans, or funding” for numerous nonprofits, including HEDCO and SHEBA.

The DECD awarded SHEBA $500,000 in 2021 to partner with HEDCO to provide small business training and financial support services. The two organizations partnered again in 2022 when SHEBA received $300,000 from the Minority Business Initiative, where McCrory was a board member, to offer a certification program to businesses that would enable them to receive a low-interest forgivable loan through HEDCO using $3 million in state funds called the Restart Program.

According to HEDCO’s 2024 audit, however, the amount of money going toward the Restart Program for HEDCO and SHEBA was double the reported $3 million. Over the course of fiscal year 2023 HEDCO “redirected a total of $6 million from The Minority Business Revolving Loan Fund to fund the COVID-19 Restart Program as directed by Department of Economic and Community Development,” to provide forgivable loans and lines of credit administered by SHEBA.

“As part of redirecting funds, HEDCO was reimbursed $588,027 of interest income that was lost due to the reallocation,” of the $6 million to SHEBA. According to HEDCO’s audit, the program dispersed $3.7 million in loans and lines of credit over 2023 and 2024. Documents obtained by Inside Investigator show that $3 million from the MBRLF was distributed to “HEDCO/SHEBA” and another $3 million was distributed to “HEDCO/SAMA Small Business Support.”

According to Minority Business Initiative Board transcripts, Sen. McCrory argued that SHEBA should receive the funding so that companies receiving support from HEDCO would be better positioned for success by completing SHEBA’s training program. That same arrangement with SHEBA was repeated through a $5 million grant to the nonprofit Girls for Technology, and again in a $1.7 million grant to the Upper Albany Main Street Program from the City of Hartford.

Since 2015, HEDCO has initiated court actions for $1.1 million in Small Business Express loans; $895,000 in Small and Minority Business Financial Assistance loans; $420,000 in loans through the Minority Business Loan Revolving Fund, and $1.2 million in loans made directly by HEDCO, according to a review of court records.

HEDCO initiated three court actions to collect debts in 2024, including against the well-known restaurant Place 2 Be for $115,000. According to court records, it appears all those cases have been settled, and were subsequently dismissed as HEDCO no longer pursued them.

HEDCO President and CEO Kim B. Hawkins did not return request for comment.

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