After councilman Michael Jackson defaulted on a business loan, the Paterson Restoration Corporation (PRC) saw a cascade of defaults, according to records reviewed by the Paterson Times.
Records show 16 loans were either in default or delinquent status. 13 of the loans entered default or delinquent status between Aug. 2013 and Jan. 2018.
In all, the 16 loans were worth $4 million.
The Paterson Restoration Corporation, a quasi-governmental organization that issues loans to local small businesses, had to write off $900,000 worth of bad loans, according to records.
Jamie Dykes, chairman of the Paterson Restoration Corporation, said the default rate was always under 3-percent, but it “skyrocketed” following Jackson’s default.
Jackson defaulted on his $140,000 loan in Mar. 2010. However, the default was not publicly known until Jackson unsuccessfully ran for an at-large City Council seat in 2014. Some of his opponents repeatedly attacked him for the default in subsequent elections – 2015, 2016, and 2018 – making the default common knowledge.
“I defaulted in the height of the recession,” said Jackson. “Obviously, all other businesses are going to impacted by that as well.”
Jackson is paying the defaulted amount — $133,566 – through pay garnishment. His default prompted the Paterson Restoration Corporation to take aggressive actions, including obtaining a court judgment to collect. He has called the aggressive collection effort unfair.
“How many of them did they go after like they went after me?” asked Jackson.
“As we do with all our loans, we turn them over to collection,” said Dykes.
Since becoming a councilman in 2015, Jackson has attacked Dykes. He also tried to unsuccessfully get a list of the loans and their statuses from the Paterson Restoration Corporation to show others had defaulted on much larger loans. Initially, the organization refused to provide records to the Paterson Times. However, after three months of back and forth, the Paterson Restoration Corporation released the records last month.
Jackson’s hunch proved right. His was the third biggest default.
“I think that’s a bit of a stretch,” said Michael Powell, executive director of the Paterson Restoration Corporation, speaking of Jackson’s default having a domino effect.
Powell said the Paterson Restoration Corporation is moving away from issuing loans. Over the past three years, the organization has not issued a single loan. Last loan it issued was in Jan. 2017, according to records.
The organization has had some success in the loan business. For example, since 2003 it issued 63 loans worth $15.12 million. There’s $1.9 million remains to be paid on those loans, according to records.
It has issued loans to some key institutions in the city. For example, it issued a $1 million loan to St. Joseph’s Hospital, a $700,000 loan to the Calvary Baptist Church, and $600,000 to Excel Blades Corporation.
Calvary Baptist Church and Excel Blades Corporation have paid their loans in full. St. Joseph’s Hospital’s loan matures in 2021, according to records.
The Paterson Restoration Corporation also issued two loans, $400,000, to the iconic Brownstone House. Both loans are in delinquent status, according to records.
Brownstone paid much of the debt. It is delinquent on just $15,854, according to records.
“That one is a real mystery for me,” said Dykes. “That was one of the ones we had the most confidence in.”
The biggest default was QLP Foods of Ho-Ho-Kus. It was issued an $800,000 loan. It still owes $421,026.
It was a tomato paste and sauce processing company, said Dykes.
“At the time the money was loaned to them, they were 100-percent a Paterson business,” said Dykes.
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