131 Cong Rec E 1963 Tuesday, May 7, 1985

Congressional Record -- Extension of Remarks

Tuesday, May 7, 1985

99th Cong. 1st Sess.

131 Cong Rec E 1963

REFERENCE: Vol. 131 No. 58

TITLE: IMPROPER PRACTICES

SPEAKER: HON. DAVID DREIER OF CALIFORNIA
IN THE HOUSE OF REPRESENTATIVES

TEXT:  
   Text that appears in UPPER CASE identifies statements or insertions which are not spoken by a Member of the Senate on the floor.  

MR. DREIER OF CALIFORNIA. MR. SPEAKER, THIS WEEK, NEWSDAY, A DAILY NEWSPAPER ON LONG ISLAND, NY, IS RUNNING A FIVE-PART INVESTIGATIVE SERIES ON IMPROPER LOAN PRACTICES INVOLVING LONG ISLAND BUSINESSES WHICH WERE FINANCED BY THE FEDERAL SMALL BUSINESS ADMINISTRATION. WHILE I WANT TO POINT OUT THAT THE ILLEGAL PRACTICES OUTLINED IN THIS SERIES ARE NOT PREVALENT THROUGHOUT THE UNITED STATES, THEY DO HIGHLIGHT SOME OF THE PROBLEMS THAT CONSISTENTLY PLAGUE THE SBA AND CREATE QUESTIONS ABOUT THE AGENCY'S REAL IMPACT ON THE OVERALL SMALL BUSINESS ECONOMY.

I WOULD LIKE TO SUBMIT FOR TODAY'S RECORD THE FIRST PART OF THIS FIVE-PART SERIES PUBLISHED IN THE MAY 5 ISSUE OF NEWSDAY. I WILL THEN SUBMIT THE REMAINING FOUR PARTS IN FUTURE PRINTINGS OF THIS RECORD.

IMPROPER PRACTICES UNCOVERED IN LI SMALL-BUSINESS LOANS

A NEWSDAY INVESTIGATION OF GOVERNMENT LOANS TO LONG ISLAND BUSINESSES HAS UNCOVERED CONFLICTS OF INTEREST, LOANS TO COMPANIES WITH ORGANIZED-CRIME CONNECTIONS AND SLOPPY LENDING PRACTICES THAT HAVE WASTED MILLIONS OF DOLLARS IN PUBLIC FUNDS.

BOTH THE FEDERAL SMALL BUSINESS ADMINISTRATION AND THE STATE JOB DEVELOPMENT AUTHORITY PLAY ACTIVE ROLES IN LONG ISLAND'S ECONOMIC DEVELOPMENT, GRANTING COMPANIES LOANS AT MORE FAVORABLE TERMS THAN THEY COULD OTHERWISE GET. MOST OF THE LOANS ARE REPAID, AND THE AGENCIES PROPERLY TAKE CREDIT FOR CREATING OR SAVING THOUSANDS OF JOBS FOR LONG ISLANDERS.

FOR SOME LOANS, HOWEVER, THE SYSTEM HAS A HIDDEN UNDERSIDE. THIS IS A WORLD WHERE OFFICIALS WITH AUTHORITY OVER LOANS MAKE PRIVATE BUSINESS DEALS WITH BORROWERS. IT IS A WORLD WHERE THE SBA HAS SUBSIDIZED ALLEGED ORGANIZED CRIME FIGURES WHOSE BUSINESSES THEN COLLAPSED. IT IS A WORLD OF UNDISCLOSED, POSSIBLY ILLEGAL CONSULTING PAYMENTS; OF IMPROPER GRATUITIES; OF PRIVATE INTERESTS GAINING EFFECTIVE CONTROL OVER THE LENDING OF GOVERNMENT FUNDS.

NEWSDAY'S INVESTIGATION FOUND THAT THE SBA PROGRAM ON LONG ISLAND IS TROUBLED BY SOME OF THE SAME PROBLEMS THAT FIGURE IN THE CURRENT NATIONAL DEBATE OVER THE FUTURE OF THE SBA: FAILURE TO SECURE SOME LOANS WITH ADEQUATED COLLATERAL; FAILURE TO PREVENT COLLATERAL FROM DISAPPEARING WHEN SOME LOANS GO BAD; AND FAILURE TO PREVENT CRIMINALS FROM EXPLOITING THE PROGRAM.

THE REAGAN ADMINISTRATION HAS PROPOSED DRASTIC CUTS IN THE SBA'S BUDGET. THE DEBATE OVER THE AGENCY'S FUTURE CENTERS ON WHETHER THE AGENCY'S LENDING PROGRAMS ARE FAIR AND WHETHER THEIR IMPACT ON THE NATION'S ECONOMY IS WORTH THE MONEY.

BOTH THE SBA AND JDA DELEGATE A SIGNIFICANT AMOUNT OF THEIR DECISION MAKING IN GRANTING LOANS TO LOCAL DEVELOPMENT CORPORATIONS -- QUASI-GOVERNMENTAL COMMUNITY ORGANIZATIONS THAT FUNCTION AS OFFICIAL ARMS OF THE LENDING AGENCIES. THREE OF THE STATE'S MOST ACTIVE DEVELOPMENT CORPORATIONS HAVE OPERATED ON LONG ISLAND: THE LONG ISLAND ECONOMIC DEVELOPMENT CORP. AND THE BI-COUNTY DEVELOPMENT CORP.

NEWSDAY'S YEARLONG INVESTIGATION CENTERED ON THOSE THREE AGENCIES AS WELL AS SBA AND JDA. IN MANY INSTANCES, SBA OFFICIALS REFUSED REPORTERS ACCESS TO KEY RECORDS, CLAIMING CONFIDENTIALITY. ONE LOCAL DEVELOPMENT CORPORATION OFFERED TO PRODUCE ALL OF ITS RECORDS, THEN CLAIMED MOST OF THEM WERE MISSING. IN ALL, IT TOOK 22 FORMAL REQUESTS UNDER THE FREEDOM OF INFORMATION ACT FOR NEWSDAY TO OBTAIN THE RECORDS ON WHICH THESE STORIES ARE PARTIALLY BASED. MANY OTHER RECORDS STILL ARE BEING WITHHELD.

NEVERTHELESS, THE NEWSDAY INVESTIGATION FOUND THAT:

THE LONG ISLAND DEVELOPMENT CORP.'S TOP OFFICIAL, STEVEN D. GURIAN, ADMITS HE HAS HAD CONSULTING DEALS, UNDISCLOSED OWNERSHIP INTERESTS OR OTHER BUSINESS DEALS WITH SEVEN COMPANIES THAT GOT $5,716,000 IN GOVERNMENT LOANS WITH HIS HELP. ONE LOAN RECIPIENT, GURIAN SAID, GAVE HIM TIMESHARE UNITS FOR FOUR WEEKS EACH YEAR IN A LUXURY RESORT. GURIAN DENIED ANY WRONGDOING BUT ACKNOWLEDGED THAT HIS DEALS DID REPRESENT "AN APPARENT CONFLICT OF INTEREST.

LONG ISLAND BUSINESSES WITH TIES TO ORGANIZED CRIME HAVE OBTAINED AT LEAST $1,635,000 IN SBA LOANS, AND ALL THOSE LOANS HAVE GONE BAD. THOSE WHO HAVE BENEFITED INCLUDE SALVATORE AVELLINO AND MICHAEL FRANZESE, BOTH IDENTIFIED BY ATHORITIES AS IMPORTANT FIGURES IN ORGANIZED CRIME. FRANZESE DENIES INVOLVEMENT IN ORGANIZED CRIME. AVELLINO DID NOT RESPOND TO SEVERAL REQUESTS FOR AN INTERVIEW.

JDA OFFICIALS SAID DONALD GALLAGHER, BI-COUNTY'S FORMER CHIEF OPERATING OFFICER, DID NOT DISCLOSE TO THE JDA HIS FINANCIAL CONNECTION TO SEVEN PROJECTS THAT RECEIVED JDA LOANS TOTALING $5,031,001 ON BI-COUNTY'S RECOMMENDATION. GALLAGHER WAS A PAID CONSULTANT TO THE BORROWERS OR THEIR CONTRACTORS ON THOSE PROJECTS. AFTER NEWSDAY QUESTIONED GALLAGHER'S ROLE, HE WAS REMOVED FROM BI-COUNTY'S TOP POST BUT REMAINS ON ITS BOARD, WHICH INCLUDES A BROKER AND A LAWYER WHO ALSO HAVE REPRESENTED BI-COUNTY BORROWERS. GALLAGHER REFUSED TO COMMENT.

AS A BI-COUNTY DIRECTOR, SUFFOLK COUNTY'S COMMISSIONER OF ECONOMIC DEVELOPMENT, JOSEPH GIACALONE, VOTED TO APPROVE A $304,000 LOAN TO A COMPANY FOR LAND AND A NEW BUILDING WITHOUT DISCLOSING THAT HE WAS A PARTNER IN THE FIRM SELLING THE COMPANY THE LAND. GIACALONE AT FIRST CALLED HIS ACTION "AN ERROR ON MY PART" BUT LATER DENIED ANY CONFLICT.

LOCAL SBA OFFICIALS OVERRULED ONE OF THEIR OWN LOAN OFFICERS AND LOANED $500,000 TO A FINANCIALLY TROUBLED COMPANY AFTER GETTING A PHONE CALL FROM PETER NEGLIA, THEN REGIONAL SBA DIRECTOR. NEGLIA HAS ACKNOWLEDGED THAT HE MADE THE CALL AT THE REQUEST OF FORMER SUFFOLK GOP LEADER ROBERT CURCIO, SR., WHO WAS A CONSULTANT TO THE COMPANY SEEKING THE LOAN. NEWSDAY HAS TRACED $28,000 IN CHECKS FROM THE COMPANY TO CURCIO -- NEVER DISCLOSED TO THE SBA AS REQUIRED BY LAW. NEGLIA HAS SINCE BEEN PROMOTED TO ACTING SBA CHIEF OF STAFF IN WASHINGTON. THE LOAN WENT BAD AFTER FIVE MONTHS.

THE QUESTIONED SBA LENDING PRACTICES FOUND BY NEWSDAY CREATE EXTRA COSTS FOR THE TAXPAYERS BEYOND JUST THE DOLLAR AMOUNT OF THE BAD LOANS. WHEN THE GOVERNMENT SUBSIDIZES A BUSINESS THAT FAILS, THERE IS A RIPPLE EFFECT: UNPAID BILLS TO OTHER BUSINESSES, UNPAID STATE AND LOCAL TAXES, UNPAID UTILITY AND WORKERS COMPENSATION BILLS, UNEMPLOYMENT INSURANCE FOR WORKERS WHO LOST JOBS. ULTIMATELY, THE PUBLIC ABSORBS ALL THOSE COSTS.

AND THE ETHICAL QUESTIONS IN BOTH THE SBA AND JDA PROGRAMS POSE THE DANGER OF ANOTHER KIND OF LOSS TO THE PUBLIC -- FAILURE OF THESE LOAN PROGRAMS TO REACH THEIR FULL ECONOMIC POTENTIAL. THAT THESE LOANS HAVE BROUGHT INCREASED EMPLOYMENT AND PROSPERITY TO LONG ISLAND IS UNQUESTIONED. BUT CRITICS ASK WHETHER THERE WOULD BE EVEN MORE JOBS AND GREATER PROSPERITY ON THE ISLAND IF MORE GOVERNMENT LOANS WENT TO COMPANIES WITH THE BEST POTENTIAL FOR CREATING EMPLOYMENT AND FEWER WENT TO FIRMS WITH THE BEST PRIVATE CONNECTIONS TO LENDING OFFICIALS.

THE ISLAND'S LOAN MASTER

STEVEN D. GURIAN HAS SPENT MOST OF HIS ADULT LIFE MASTERING THE INTRICACIES OF THE FEDERAL SMALL BUSINESS ADMINISTRATION, AND THE MORNING OF JUNE 25, 1984, MARKED A PROUD POINT IN HIS MULTIFACETED CAREER.

AT A BANQUET ROOM IN THE SMITHTOWN SHERATON, SEVERAL DOZEN POLITICIANS, BANKERS, BROKERS AND SBA OFFICIALS GATHERED OVER A BREAKFAST OF SCRAMBLED EGGS, SAUSAGE AND DANISH PASTRIES FOR CEREMONIES HONORING GURIAN AS AN IMPORTANT FORCE IN LONG ISLAND'S ECONOMIC DEVELOPMENT.

AT A DAIS DECORATED WITH A LARGE BANNER THAT READ "LONG ISLAND DEVELOPMENT CORP.," OFFICIALS FROM STATE, COUNTY AND FEDERAL AGENCIES PRAISED GURIAN, WHO HEADS THE LIDC, FOR HIS GOVERNMENT EXPERTISE, HIS BUSINESS ACUMEN, HIS HARD WORK. THE SBA'S THEN-REGIONAL DIRECTOR, PETER NEGLIA, GAVE HIM A LARGE PLAQUE.

THE PLAQUE WAS AN AWARD TO THE LIDC FOR BECOMING THE MOST ACTIVE DEVELOPMENT CORPORATION OF ITS KIND IN THE COUNTRY, PROCESSING MORE THAN $15 MILLION IN SBA LOANS DURING THE PREVIOUS YEAR. ALTHOUGH LITTLE KNOWN TO THE GENERAL PUBLIC, SBA-CERTIFIED DEVELOPMENT CORPORATIONS SUCH AS GURIAN'S PLAY AN INFLUENTIAL ROLE IN TODAY'S WORLD OF INDUSTRIAL FINANCE.

GURIAN HAS HIS BOARD OF DIRECTORS -- A GROUP OF PUBLIC OFFICIALS, BANKERS, BROKERS AND LAWYERS -- REVIEW AND VOTE ON MILLIONS OF DOLLARS A YEAR IN LOAN APPLICATIONS FROM COMPANIES SEEKING FINANCING FROM THE SBA AND ITS COUNTERPART IN STATE GOVERNMENT, THE JOB DEVELOPMENT AUTHORITY. BOTH NASSAU AND SUFFOLK COUNTIES GIVE THE LIDC FINANCIAL SUPPORT.

LIDC IS ONE OF A NETWORK OF QUASI-PUBLIC DEVELOPMENT FIRMS AND AGENCIES ON LONG ISLAND AND ELSEWHERE THAT HAVE RESULTED FROM GOVERNMENTAL DECISIONS TO FARM OUT THE PROCESSING OF SMALL BUSINESS LOAN APPLICATIONS. THE SBA AND JDA HAVE THE FINAL WORD ON THESE APPLICATIONS, BUT THEY GENERALLY FOLLOW THE RECOMMENDATIONS OF THE LIDC AND SIMILAR AGENCIES.

SINCE GURIAN IS THE LIDC'S FULL-TIME EXECUTIVE DIRECTOR, HE SAID HIS OWN RECOMMENDATION USUALLY DETERMINES HOW THE BOARD VOTES. "I HAVE A PRETTY BIG INPUT ON THE WAY THE BOARD REACTS PRIMARILY BECAUSE I'M PREPARING THE PIECE OF PAPER THAT WE SEE," GURIAN SAID. "THEY ONLY SEE WHAT I GIVE THEM TO SEE."

THE NEWSDAY INVESTIGATION FOUND THAT GURIAN HAS USED HIS POSITION WITH THE LIDC AND TWO OTHER LOCAL DEVELOPMENT AGENCIES FOR HIS OWN FINANCIAL GAIN. HE HAS DONE THIS IN SEVERAL WAYS, INCLUDING ACTING AS A PAID FINANCIAL CONSULTANT TO LOAN APPLICANTS, ENGAGING IN PRIVATE BUSINESS DEALS WITH OTHER BORROWERS, AND STEERING AT LEAST TWO OTHERS TO A FINANCE COMPANY THAT HE HEADED.

GURIAN MAINTAINS HE HAS DONE NOTHING WRONG. AND REGULATIONS COVERING SUCH ACTIVITY ARE FUZZY OR NONEXISTENT. BUT GURIAN'S INDUSTRY PEERS AND SENIOR OFFICIALS FROM THE COUNTY, SBA AND JDA CONTACTED BY NEWSDAY SAY HE HAS ACTED IMPROPERLY. "IF YOU CHECK THE INDUSTRY, YOU'LL FIND IT'S NOT A STANDARD PRACTICE," SAID SBA OFFICIAL WAYNE FOREN. "IT'S ONE OF THOSE THINGS YOU JUST DON'T EXPECT PEOPLE TO DO."

GURIAN RUNS A PRIVATE CONSULTING BUSINESS, GURIAN CONSULTANTS INC., THAT OPERATES FROM A SMALL ONE-ROOM OFFICE AT 300 OLD COUNTRY RD., MINEOLA. THERE IS NO SIGN ON THE DOOR AND NO PHONE LISTING.

IN A SERIES OF INTERVIEWS, GURIAN ACKNOWLEDGED THAT HE HAS HAD CONSULTING DEALS, UNDISCLOSED OWNERSHIP INTERESTS OR OTHER BUSINESS TIES WITH AT LEAST SEVEN COMPANIES. THOSE COMPANIES GOT GOVERNMENT LOANS TOTALING $5,716,000 WITH HIS HELP. HE SAID HE HAS WORKED AS A PRIVATE CONSULTANT TO SIX OF THE COMPANIES AND HOLDS AN OPTION FOR A 10 PERCENT SHARE OF THE SEVENTH.

HE ALSO HAS BEEN A PAID FINANCIAL ADVISER TO ONE OF THOSE COMPANIES, GURNEY'S INN, WHILE HELPING THE LUXURIOUS MONTAUK RESORT GET GOVERNMENT LOANS THROUGH ONE OF HIS LOCAL DEVELOPMENT CORPORATIONS. GURNEY'S PRESIDENT, GURIAN SAID, ALSO HAS GIVEN HIM TIME-SHARE APARTMENT UNITS AT THE RESORT FOR FOUR WEEKS EACH YEAR.

TWO MORE OF GURIAN'S BUSINESS DEALS WITH SBA BORROWERS INVOLVE A MEXICAN AUTO PARTS COMPANY IN WHICH HE OWNS STOCK. UNTIL A FEW YEARS AGO, HE SAID, HE SERVED AS THAT COMPANY'S U.S. PURCHASING AGENT, COLLECTING A PERCENTAGE OF SALES. GURIAN SAID HE OBTAINED SALES CONTRACTS FOR THE MEXICAN COMPANY FROM TWO COMPANIES THAT GOT SBA LOANS THROUGH ANOTHER DEVELOPMENT CORPORATION THAT HE CONTROLS, THE LONG ISLAND ECONOMIC DEVELOPMENT CORP. (LIEDC). "IT WAS A SIZEABLE AMOUNT OF BUSINESS, AND IT WAS VERY, VERY PROFITABLE," GURIAN SAID.

A CAR DEALER WHO GOT A $500,000 SBA LOAN THROUGH GURIAN SAID GURIAN SOLICITED HIM, WHILE DISCUSSING A POSSIBLE SECOND LOAN, TO BUY PARTS FROM THE MEXICAN COMPANY. "HE INSINUATED THAT IF I DID SOME BUSINESS WITH HIM, THERE WOULD BE NO PROBLEM WITH THE LOAN," SAID WALTER DONOR, PROPRIETOR OF THE NOW-DEFUNCT RUMPLIK CHEVROLET IN EAST ISLIP, WHO WAS RECENTLY INDICTED ON TAX EVASION CHARGES. "THERE WAS A CONVERSATION ABOUT HOW WE COULD MAKE A LOT OF MONEY ON OVERSEAS PARTS, BUT IT NEVER MATERIALIZED."

GURIAN SAID HE ALWAYS DISCLOSES TO THE GOVERNMENT AGENCIES AND HIS BOARD WHEN HE HAS A FINANCIAL INVOLVEMENT WITH A LOAN APPLICANT. "IT'S A FULL DISCLOSURE," HE SAID. LIDC MINUTES SHOW THAT HE DID DISCLOSE AT LEAST TWO CONSULTING RELATIONSHIPS AND ABSTAINED FROM THE VOTES. AND SINCE GURIAN SAID HE COULDN'T FIND MOST OF THE RECORDS FOR TWO OF HIS OTHER LOCAL DEVELOPMENT CORPORATIONS, IT WAS IMPOSSIBLE TO DETERMINE WHETHER HE HAD MADE SIMILAR DISCLOSURES TO THOSE BOARDS.

BUT LOCAL GOVERNMENT, SBA AND JDA OFFICIALS SAID THAT GURIAN HAD NEVER ADVISED THEM OF THE EXTENT TO WHICH HE WAS INVOLVED WITH LOAN RECIPIENTS. THEY SAID THAT THEY CONSIDERED HIS ACTIVITIES IMPROPER AND THAT HE SHOULD HAVE DISCLOSED THEM.

"IT IS SOMETHING THAT FLIES IN THE FACE OF WHAT WE'RE TRYING TO DO, WHICH IS TO GET FULL DISCLOSURE OF ANY KIND OF INTEREST BY ANY OF THE PARTIES," SAID ROBERT DORMER, PRESIDENT OF JDA. FOREN OF THE SBA SAID: "THAT'S SOMETHING WE WOULD NOT PERMIT, AND I WOULD HAVE TO LOOK INTO IT." ROY CACCIATORE, NASSAU COUNTY'S COMMISSIONER OF COMMERCE AND INDUSTRY, WHO SITS ON THE LIDC BOARD, COMMENTED: "GURIAN CAN BE REPLACED."

TOP OFFICIALS OF FOUR OF THE NATION'S LARGEST DEVELOPMENT CORPORATIONS SAID THEY CONSIDERED SIDE DEALS WITH LOAN RECIPIENTS WRONG. THEIR ATTITUDE WAS VOICED BY MARSHALL LUSTIG, EXECUTIVE DIRECTOR OF THE NEW YORK BUSINESS DEVELOPMENT CORPORATION, WHO SAID: "IF WE HAD A DIRECTOR TAKING PART IN SUCH AN ACTIVITY WE WOULD ASK THAT PERSON TO CEASE AND DESIST FROM THAT ROLE OR TO RESIGN FROM THE BOARD."

GURIAN FOUNDED HIS FIRST SBS-CERTIFIED DEVELOPMENT CORPORATION, THE LONG ISLAND ECONOMIC DEVELOPMENT CORP., IN 1969. THE LIEDC STARTED AS A SHOESTRING OPERATION, GURIAN SAID, "SOMETHING I RAN FROM MY BRIEFCASE," AND GREW TO BE ONE OF THE STATE'S MOST ACTIVE DEVELOPMENT CORPORATIONS.

IN 1980, CONGRESS CREATED ANOTHER SBA PROGRAM TO HELP EXPANDING BUSINESSES BUY LAND AND BUILDINGS. TO PARTICIPATE, COMMUNITIES HAD TO FORM DEVELOPMENT CORPORATIONS. NASSAU AND SUFFOLK COUNTIES CREATED THE LIDC, CHOOSING GURIAN AS EXECUTIVE DIRECTOR. GURIAN SAID HE WAS THE LOGICAL CHOICE BECAUSE OF HIS SBA EXPERTISE.

THE COUNTIES CONTRIBUTED $30,000 IN START-UP MONEY, AND EACH ASSIGNED ONE OF ITS ECONOMIC DEVELOPMENT OFFICIALS TO THE LIDC STAFF. LIDC STATIONERY CARRIES THE OFFICIAL SEAL OF BOTH COUNTIES AND LISTS THEIR ECONOMIC DEVELOPMENT DEPARTMENTS AS BRANCH OFFICES OF LIDC. AND IN 1983 THE STATE JDA DESIGNATED THE LIDC AS A JDA "BRANCH BANK," ACCEPTING LOAN APPLICATIONS DIRECTLY FROM THE LIDC WITHOUT INDEPENDENT STAFF REVIEW.

THE CREATION OF LIDC HAS PUT GURIAN INTO AN UNUSUAL POSITION. HE PERFORMS IN AN OFFICIAL CAPACITY FOR FOUR DIFFERENT GOVERNMENT ENTITIES: NASSAU COUNTY, SUFFOLK COUNTY, THE JDA AND THE SBA. BUT SINCE HE DRAWS A SALARY FROM NONE OF THEM, HE IS TECHNICALLY NOT A GOVERNMENT EMPLOYEE. HE SAID THAT HE RECENTLY BEGAN DRAWING A SALARY OF $286 A WEEK FROM LIDC BUT ADDED THAT HE IS INDEPENDENTLY WELL-OFF.

CONSULTING DEALS

TWO COMPANIES THAT GURIAN SAID WERE HIS CONSULTING CLIENTS GOT LOANS AFTER A 1982 SBA REGULATION PROHIBITING MANAGEMENT CONSULTING RELATIONSHIPS. THEY WERE ALLIED BAKERS CO. INC. OF WESTBURY AND ALUMINUM LOUVRE CORP. OF OLD BETHPAGE. ALTHOUGH GURIAN ABSTAINED FROM LIDC VOTES ON BOTH COMPANIES, DOCUMENTS EXAMINED BY NEWSDAY SHOW THAT HE HAD A PERSONAL ROLE IN BOTH LOAN APPLICATIONS.

OFFICIALS OF THESE COMPANIES AND OTHER FIRMS THAT USED GURIAN AS A CONSULTANT REFUSED TO SAY HOW MUCH THEY PAID HIM, AND GURIAN ALSO HAS DECLINED TO DISCLOSE HIS FEES.

RECORDS SHOW THAT GURIAN MADE THE REQUIRED FIELD VISIT TO ALLIED BAKERS BEFORE THE LDIC APPROVED A $230,000 SBA LOAN LAST YEAR. GURIAN WROTE A REPORT CONCLUDING: "RESULTS OF INTERVIEW: POSITIVE." HE ALSO WROTE TO LONG ISLAND TRUST CO. ABOUT ITS SHARE OF THE FINANCING PACKAGE, SAYING "WE SHOULD BE ABLE TO COMPLETE AN IRREVOCABLE COMMITMENT WITHIN 45 DAYS ..." AT THAT POINT THE LIDC BOARD HAD NOT VOTED ON THE LOAN.

THAT WAS ALLIED BAKERS' THIRD SBA LOAN -- TWO THROUGH GURIAN DEVELOPMENT CORPORATIONS -- BRINGING THE TOTAL TO $1,130,000. GURIAN SAID HE HAS BEEN A CONSULTANT TO ALLIED SINCE THE EARLY 1970'S. ALLIED'S PRESIDENT, NELSON WOLTHER, PRAISED GURIAN'S ASSISTANCE TO HIS COMPANY AND SAID THERE WAS NOTHING IMPROPER IN HIS ROLE.

LAST YEAR, ALUMINUM LOUVRE GOT A $255,000 SBA LOAN AND A $220,000 JDA LOAN THROUGH LIDC TO BUY THE OLD BETHPAGE BUILDING IT HAD BEEN RENTING. GURIAN ABSTAINED ON THE VOTE, BUT THE JDA'S FILE INCLUDES A LETTER TO GURIAN AT LIDC FROM MELVIN GREENBERG, A PARTNER IN THE COMPANY. "THANK YOU FOR ALL YOUR EFFORTS ON BEHALF OF ALUMINUM LOUVRE CORPORATION RELATIVE TO THE SBA AND JDA LOANS," GREENBERG SAID. GREENBERG HAS DENIED PAYING GURIAN AS A CONSULTANT.

FOUR OTHER COMPANIES THAT GURIAN SAID HE REPRESENTED AS A CONSULTANT GOT LOANS THROUGH HIS EARLIER DEVELOPMENT CORPORATIONS, THE LIEDC OR A SISTER CORPORATION, THE SECOND LONG ISLAND DEVELOPMENT CORP. HE IDENTIFIED THE COMPANIES AS GURNEY'S INN OF MONTAUK, AJAC TRANSMISSION PARTS INC. OF ELMONT, WALTRON AUTOMOTIVE PRODUCTS INC. OF PORT JEFFERSON AND ALLISON AUDIO PRODUCTS INC. OF HAUPPAUGE. BUT HE TOLD REPORTERS THAT NEARLY ALL RECORDS OF LIEDC AND SECOND LIEDC LOANS HAD BEEN LOST.

GURIAN SAID HE WAS "ON RETAINER WITH AJAC FOR SEVEN, EIGHT YEARS, MAYBE MORE." GURIAN HOLDS AN INSURANCE LICENSE AND SAID HE ALSO SOLD A PENSION PLAN TO THE COMPANY'S OWNER, JERRY JACOBY. AJAC GOT FIVE SBA LOANS TOTALING $948,000. GURIAN SAID HE NEGOTIATED A SALES CONTRACT BETWEEN AJAC AND THE MEXICAN COMPANY, SERVICO GM AFINACIONES FRENOS Y SERVICIO S.A., THAT EMPLOYED HIM AS ITS PURCHASING AGENT. "I WOULD GET A PERCENTAGE FROM THE TOTAL PURCHASE," GURIAN SAID. AJAC'S PRESIDENT, JERRY JACOBY, SAID GURIAN'S CONSULTING "HAD NOTHING TO DO WITH THE LOANS."

ANOTHER CONSULTING CLIENT THAT MADE A SALES DEAL WITH GURIAN'S MEXICAN COMPANY WAS WALTRON, WHICH GOT A $40,000 SBA LOAN THROUGH LIEDC IN 1969. ONE PRINCIPAL, REINHOLD STOLL, SAID GURIAN BECAME A CONSULTANT AS SOON AS THE COMPANY WAS FORMED. "HE WAS ON THE STAFF, MORE OR LESS," STOLL SAID. GURIAN CONCEDED THAT HE SOLD INSURANCE TO WALTRON, HELPED ONE OF ITS PRINCIPALS GET HIS HOUSE REMOVED AS COLLATERAL ON THE LOAN AND ENTERED INTO A CONSULTING AGREEMENT TO GO TO MEXICO FOR WALTRON TO LOOK INTO AN INVESTMENT THERE.

GURIAN SAID HE ALSO APPROACHED ANOTHER BORROWER, BARAD AUTO INDUSTRIES CORP. OF HAUPPAUGE, WHICH GOT A $388,000 SBA LOAN THROUGH LIEDC IN 1980, ABOUT BUYING PARTS FROM THE MEXICAN COMPANY. "WE TRIED, BUT THEY ALREADY HAD A SOURCE OF SUPPLY FROM TEXAS FOR THE SAME PRODUCT," GURIAN SAID.

STILL ANOTHER GURIAN TIE WITH AN SBA BORROWER INVOLVES MGW MANUFACTURING CORP. OF BOHEMIA, WHICH MAKES TRANSMISSION PARTS. WHEN THE COMPANY WAS FORMED IN 1975, GURIAN SAID, ONE INVESTOR WANTED TO KEEP HIS IDENTITY CONFIDENTIAL. GURIAN SAID THE INVESTOR HIRED HIM TO SET UP A BLIND TRUST THROUGH WHICH THE INVESTOR LOANED MONEY TO MGW. AS PART OF THE DEAL, GURIAN SAID HE GOT AN OPTION ON 10 PERCENT OF MGW'S STOCK AND STILL HOLDS THE OPTION.

IN 1977, MGW GOT TWO SBA LOANS TOTALING $460,000. GURIAN SAID HE GAVE THE COMPANY SOME ADVICE ON HOW TO GET THE LOANS BUT DID NOT FEEL HE SHOULD HAVE BEEN DISCLOSED TO THE SBA AS A CONSULTANT. "SINCE I HAVE KNOWLEDGE, I TOLD THEM HOW TO PROCEED, AND THEY PROCEEDED COMPLETELY ON THEIR OWN."

ANOTHER GURIAN CONSULTING CLIENT, ALLISON AUDIO PRODUCTS, GOT A $63,000 SBA LOAN THROUGH THE LIEDC IN 1973. THE COMPANY'S FOUNDER, LOUIS LIGATOR, SAID GURIAN ALSO HELPED HIM GET A $193,000 JDA LOAN THE SAME YEAR TO ACQUIRE A BUILDING IN HAUPPAUGE. LIGATOR SAID GURIAN'S CONSULTING WORK WAS NOT RELATED TO THE GOVERNMENT LOANS. "I ASKED HIM ABOUT OTHER BUSINESSES THAT I WAS INVOLVED IN," LIGATOR SAID. "STEVE GURIAN IN HIS POSITION HAS DONE A LOT FOR THE ISLAND IN MY PERSONAL OPINION. HE'S A HARD-WORKING MAN AND HAS HELPED A LOT OF BUSINESSES."

GURNEY'S INN

DURING THE MID-1970'S, WHEN RISING GASOLINE PRICES WERE THREATENING EAST END TOURISM, GURIAN AND HIS SECOND LONG ISLAND DEVELOPMENT CORP. WON FAVORABLE PUBLICITY FOR ARRANGING A FINANCING PACKAGE TO EXPAND GURNEY'S INN IN MONTAUK. THE OCEANFRONT RESORT IS ONE OF THE LARGEST EMPLOYERS IN THE EAST END, AN AREA TROUBLED BY UNEMPLOYMENT AND A SEASONAL ECONOMY.

THE INITIAL PACKAGE WAS $984,000 IN SBA LOANS AND $615,000 LOAN FROM ANOTHER FEDERAL AGENCY, THE ECONOMIC DEVELOPMENT ADMINISTRATION. GURNEY'S PROPRIETOR, NICK MONTE, SAID OF GURIAN AND THE DEVELOPMENT CORPORATION: "THEY HELPED PUT ALL THIS TOGETHER, AND THEY HAVE BEEN VERY, VERY HELPFUL. I THINK HE'S BEEN A BOON TO EASTERN LONG ISLAND AND ALL OF LONG ISLAND."

WHAT WAS NOT DISCLOSED, EITHER TO THE PUBLIC OR TO THE LENDING AGENCIES, WAS THAT GURIAN HAS BEEN A PAID FINANCIAL CONSULTANT TO GURNEY'S -- BY HIS OWN ACCOUNT -- FOR THE PAST 15 YEARS. "I WAS THEIR CHIEF FINANCIAL ADVISER," GURIAN SAID. "I GOT THEM ALL THEIR FINANCING."

THE EDA, LIKE THE SBA, REQUIRES BORROWERS TO DISCLOSE ON THEIR LOAN APPLICATIONS ANYONE WHO PROVIDED SERVICES IN GETTING THE LOAN AND THE FEES PAID. BY 1978, GURNEY'S NEEDED MORE FINANCING, AND THE EDA AGREED TO GUARANTEE ANOTHER $600,000 LOAN. THE RESORT ALSO RECEIVED ANOTHER SBA LOAN FOR $106,000 IN 1978. BY THEN, GURIAN WAS NOT ONLY GURNEY'S FINANCIAL CONSULTANT, BUT ALSO A DIRECTOR AND STOCKHOLDER.

THE APPLICATION, HOWEVER, DID NOT LIST GURIAN'S CONNECTIONS WITH THE COMPANY. INSTEAD, GURIAN'S NAME APPEARED IN A DIFFERENT ROLE. HE SIGNED THE FORM GIVING THE REQUIRED LOCAL ENDORSEMENT OF THE PROJECT AS THE PRESIDENT OF THE LIEDC. EACH EDA LOAN APPLICATION MUST CARRY THE FAVORABLE RECOMMENDATION OF A LOCAL ECONOMIC DEVELOPMENT OFFICIAL.

GURIAN SAID MUCH OF HIS WORK FOR GURNEY'S WAS DONE FREE OF CHARGE. "I THINK IF YOU TOOK THE SUM TOTAL OF ALL REMUNERATIONS FROM NICK FOR THE PAST 15 YEARS, I DOUBT IF IT'S THREE OR FOUR THOUSAND DOLLARS," GURIAN SAID. HE ADDED, HOWEVER, THAT IN 1982 HE WAS GIVEN FOUR ONE-WEEK TIME-SHARE UNITS IN A NEW SECTION OF THE INN. HIS SHARES ARE VALUED AT $31,000.

MONTE SAID GURIAN PAID FOR THE UNITS, AND SUFFOLK REAL ESTATE RECORDS LIST GURIAN AMONG THE DEBTORS TO THE BANK THAT FINANCED THE TIME PAYMENTS FOR THE UNITS. BUT GURIAN SAID THE UNITS WERE A GIFT TO HIM FROM MONTE. HE ADDED: "I DID AN AWFUL LOT FOR NICK MONTE PERSONALLY ... I WAS AT HIS SIDE CONSTANTLY, WITH ATTORNEYS, WITH ACCOUNTANTS, REAL ESTATE. I WOULD SAY THAT HE WOULD SAY THAT HE HAS A DEBT THAT CAN'T BE REPAID. SO WHEN THE UNITS CAME UP, HE BOUGHT A NUMBER OF THEM, I KNOW, AND HE ACQUIRED IT FOR FAMILY MEMBERS AND I'M JUST FAMILY."

GURIAN SAID THAT MONTE RECENTLY BEGAN PAYING HIM $500 A MONTH TO TRY TO ARRANGE A COMPLETE REFINANCING OF THE BUSINESS, WHICH HE SAID "HAS A VERY SERIOUS PROBLEM ON THE FINANCING." ALTHOUGH MOST OF THE SBA LOANS ARE STILL PENDING (THE SBA WOULD NOT RELEASE THE BALANCES), GURIAN SAID THIS WORK WILL NOT INVOLVE DEALINGS WITH THE SBA BUT ONLY WITH PRIVATE FINANCIAL INSTITUTIONS.

THE MONEY STORE

GURIAN HAS WORN ANOTHER FINANCIAL HAT SEEMINGLY AS INTERCHANGEABLE AS THOSE HE WEARS AS PROPRIETOR OF GURIAN CONSULTANTS INC. AND EXECUTIVE DIRECTOR OF LIDC AND LIEDC. WHEN HE WAS NAMED TO THE LIDC POST, GURIAN REMAINED IN HIS PRIVATE JOB AS PRESIDENT OF THE MONEY STORE OF NEW YORK, A BRANCH OF THE NEW JERSEY-BASED FINANCE COMPANY BEST KNOWN FOR ITS PHIL RIZZUTO TELEVISION COMMERCIALS.

THE MONEY STORE HAS BECOME THE NATION'S LARGEST LENDER IN THE SBA'S GUARANTEED-LOANS PROGRAM, AND THE SUBSIDIARY THAT GURIAN HEADED HANDLES THAT LOAN BUSINESS IN NEW YORK. THE LIDC'S OFFICES ARE IN THE MONEY STORE'S BUILDING AT 265 GLEN COVE RD., CARLE PLACE.

JOSEPH GIACALONE, SUFFOLK'S COMMISSIONER OF ECONOMIC DEVELOPMENT AND A MEMBER OF THE LIDC BOARD, SAID THAT AT THE INCEPTION OF LIDC HE AND OTHER BOARD MEMBERS WERE WORRIED ABOUT GURIAN'S DUAL ROLE WITH THE AGENCY AND THE MONEY STORE OF NEW YORK. AS A CERTIFIED SBA LENDER, THE MONEY STORE ISSUES LOANS THAT ARE 90 PERCENT GUARANTEED BY THE SBA. SINCE BOTH COUNTIES REFER PROSPECTIVE BORROWERS TO GURIAN AT THE LIDC, GIACALONE SAID THERE WAS CONCERN IT WOULD APPEAR THAT THE COUNTIES WERE STEERING BUSINESS TO THE MONEY STORE IF PROSPECTIVE BORROWERS WOUND UP GETTING THEIR LOANS THERE INSTEAD OF THROUGH LIDC. HE SAID GURIAN ASSURED HIM THAT THIS WOULD NOT HAPPEN.

GURIAN TOLD NEWSDAY, HOWEVER, THAT HE DID REFER SOME BORROWERS FROM LIDC TO THE MONEY STORE, BUT ONLY BECAUSE HE FELT THEIR BUSINESS NEEDS WOULD BE BETTER SERVED THERE. SBA LOANS FROM LIDC ARE RESTRICTED MAINLY TO REAL ESTATE AND CONSTRUCTION, WHILE THE MONEY STORE OPERATES UNDER AN SBA PROGRAM THAT ALLOWS WORKING CAPITAL LOANS.

"I DON'T BELIEVE THAT THERE WERE MAYBE MORE THAN TWO INSTANCES IN THE PAST FOUR YEARS -- IF IT WAS THREE IT WOULD HAVE BEEN A LOT -- WHERE PEOPLE CAME TO THE DEVELOPMENT CORPORATION AND THEY WERE NOT ELIGIBLE AND I RECOMMENDED AND THEY CHOSE TO GO TO THE MONEY STORE," HE SAID.

A FEW DAYS AFTER NEWSDAY FIRST INTERVIEWED GURIAN LAST JUNE ABOUT HIS BUSINESS ACTIVITIES, HE RETIRED AS PRESIDENT OF THE MONEY STORE OF NEW YORK AND SAID HE HAD BECOME A CONSULTANT TO THE PARENT COMPANY. HE FIRST EXPLAINED THAT HE WAS RETIRING BECAUSE HIS MONEY STORE POSITION "COULD BE AN EMBARRASSMENT" AND "COULD BE AN APPARENT CONFLICT OF INTEREST" THAT "MIGHT LOOK BAD FOR THE LIDC." LATER, HOWEVER, HE SAID THE RETIREMENT WAS SOLELY BECAUSE THE TWO JOBS PUT TOO MUCH DEMAND ON HIS TIME.

WALTER LEAVITT, HEAD OF THE SBA'S LONG ISLAND OFFICE IN MELVILLE, SAID WHENEVER GURIAN CALLED OR VISITED HIS OFFICE TO DISCUSS LOANS, HE ASSUMED GURIAN WAS ACTING AS HEAD OF THE LIDC OR THE MONEY STORE. HE SAID THAT GURIAN NEVER TOLD HIM ABOUT HIS PRIVATE DEALS THE SBA BORROWERS. "HE SHOULD HAVE GIVEN SOME INDICATION." SAID LEAVITT. THE SBA REQUIRES LOAN APPLICANTS TO DISCLOSE THE NAMES AND FEES OF CONSULTANTS AND THOSE WHO HELPED PREPARE THE APPLICATION. LEAVITT AND GURIAN IS NOT LISTED AS A CONSULTANT ON ANY LOAN APPLICATIONS HE HAS HANDLED.

GURIAN HAS GIVEN CONFLICTING ANSWERS ON WHETHER HIS PRIVATE CONSULTING BUSINESS INCLUDES THE OBTAINING OF SBA LOANS. AT ONE POINT HE SAID HE CONSULTS COMPANIES ONLY ON MATTERS UNRELATED TO GOVERNMENT LOANS. BUT, ON ANOTHER OCCASION, HE SAID: "GENERALLY MY ANSWER IS, PLEASE, I KNOW YOU, I KNOW WHAT THE PROBLEM IS, GET YOUR ATTORNEY, HAVE A SIT-DOWN SESSION AND I'LL TELL YOU HOW TO DO IT AND IF YOU WANT OR IF I WANT YOU'LL COMPENSATE ME FOR THE HOUR OR THE DAY OR WHATEVER IT IS, BUT I'M NOT GOING TO GET INVOLVED. BECAUSE IT REALLY REPRESENTS A CONFLICT OF INTEREST. NOT JUST AN APPARENT."

HE ALSO MAINTAINS THAT ETHICAL QUESTIONS ARE LESS IMPORTANT THAN SUCCESSFUL DEALS TO HELP LONG ISLAND'S ECONOMY. "WE'RE ALL GROWN UP PERSONS," GURIAN SAID. "WE ALL KNOW IF THINGS WERE DONE ACCORDING TO THE LETTER OF THE LAW, A LOT OF MERCANTILE ACTIVITY WOULD COME TO A HALT. THERE HAS TO BE SOME BENDING."