From the Star Ledger:
The EDA gave tax breaks to a predatory lender, group says. That’s why the state agency needs to be overhauled.
Last week, corporate whistleblower Kerrie-Ann Murray testified that her former employer falsified payroll paperwork to facilitate a move to New Jersey and obtain $16.8 million in tax credits from our state Economic Development Authority. The company, Jersey City-based World Business Lenders, then laid off an entire department after selling that tax credit to a third party.
Murray’s testimony is yet another example of the level of waste and corruption involving EDA’s corporate tax incentive program. What’s even more troubling was that the EDA considered an application from World Business Lenders at all.
At first glance, this seems the kind of company you want to persuade with tax incentives to do business in New Jersey. World Business Lenders claims to be a non-bank lender dedicated to serving the needs of small business owners, in particular minority-owned main street businesses unable to obtain credit or loans from banks.
But a close examination of the company history, and Kerrie-Ann Murray’s testimony, shows it’s the worst kind of subprime predatory lender, preying on vulnerable business owners who need quick access to capital. World Business Lenders makes profits off bad credit, defaulted loans, and the misery of bankruptcy. It’s the kind of company that destroys small businesses and local economies.
Company founder Doug Naidus made his fortune by selling a mortgage company to Deutsche Bank, a financial outfit responsible for servicing and foreclosing on many of the subprime loans that fueled the world financial crisis. Since then, Naidus has perfected a new kind of predatory lending — this time targeting small business owners. As a non-bank lender his company is subject to less regulatory oversight than banks, and that’s reflected in its business practices.
World Business Lenders charges interest rates as high as 125 percent, with daily loan repayments sometimes running to more than $160 per day for small business owners. Borrowers have put up cars, houses or even livestock as loan collateral. When unable to pay, the company has seized these assets, forcing bankruptcies and ruining lives. “They’re in the business of helping these businesses fail,” said Mark Pinsky, former president of Opportunity Finance Network, a national association of community development financial institutions. Nadius himself once joked that he could save his company money by paying salesmen in repossessed Pontiacs.