From time to time, Multnomah County lends money to struggling nonprofits. It has floated cash to the Oregon Food Bank, for example, and to Port City Development Center, an outfit that teaches job skills to adults with disabilities.
In 2003, the county extended a $450,000 loan to a Latino-focused health foundation run by a personal friend and influential political supporter of Commissioner Maria Rojo de Steffey.
At the time of the loan, the Susannah Maria Gurule Foundation, founded by El Hispanic News publisher Clara Padilla Andrews, was having a hard time making rent on its city-owned offices, and had been threatened with eviction if it didn't pay up. Padilla Andrews used the county loan to buy that building, at 1200 SE Morrison St. Today, she once again faces eviction, because she owes more than $100,000 to the private lender that partnered with the county to provide the $685,000 mortgage.
Padilla Andrews, a former New Mexico secretary of state, is one of the most influential Hispanic women in Portland. She's a former president of Portland's Hispanic Metropolitan Chamber of Commerce and sits on the Oregon State University board of advisors. The bilingual News has a weekly circulation of 20,000.
Padilla Andrews was also one of Rojo de Steffey's biggest individual campaign contributors in her 2001 run for the commission, donating $617 and later forgiving more than $1,000 in advertising debt to her newspaper.
"Clara has done an incredible amount for this community," says Rojo de Steffey. In a short biographical note on the Latino website Oyetu.com, de Steffey calls Padilla Andrews the most influential person in her life apart from her mother. The two also socialize.
Rojo de Steffey insists her personal connection with Padilla Andrews played no role in the county's decision to make a loan to an organization that couldn't pay its rent. The default on that loan was first reported by The Oregonian last month. "I'm not going to do things to put my personal career in jeopardy," Rojo de Steffey says. "There may be an association, but [drawing a connection between the loan and the friendship] is bullshit."
Although Rojo de Steffey took the lead, commissioners Serena Cruz Walsh and chair Diane Linn also supported the loan. In doing so, they brushed off a number of red flags raised regarding the foundation's ability to pay the money back.
The county's finance director warned at the time that the nonprofit's "budget does not support the debt repayment and there is a good possibility that [it] may default." Handwritten notes in the Portland Development Commission file show that officials were never confident in Padilla Andrews' ability to pay: "We have good security in [the] building, but not a strong feeling about her ability to pay off.... Clara will likely be defaulting from the beginning."
Records also show that SMG never had the cash flow to cover the loan and was counting on donations to save the day. But $900,000 in corporate sponsorship and grants Padilla Andrews told officials she expected to raise never materialized.
One of the loan's biggest beneficiaries seems to be Padilla Andrews' newspaper, which uses space in SMG's building. When asking for help, Padilla Andrews argued that she could help pay the foundation's mortgage by charging rent to her newspaper. But IRS records show that the year SMG purchased the building, the newspaper didn't pay any cash rent at all; instead it gave SMG nearly $18,000 worth of advertising in exchange for space valued at $14,400. That arrangement continues to this day, Padilla Andrews told WW.
Like Rojo de Steffey, Padilla Andrews argues that personal ties played no role in her financial dealings with Multnomah County.
"I have never, never taken advantage of my friendship," Padilla Andrews says. "I know she's an elected official, I have been an elected official, and I know the responsibility that you have when you're an elected official."
SMG is up-to-date with its loan payments to the county. But if the private lender, Enterprise Community Partners, forecloses on the six-figure debt it's owed, taxpayers will eat any loss from the sale of the building. (According to county finance director Dave Boyer, the property's value has increased since Padilla Andrews bought it.)
Enterprise is still in negotiations with SMG and no deadline for foreclosure has been set, says Kate Allen, the company's Portland director. Meanwhile, Commissioner Cruz Walsh says the nonprofit foundation provides a real benefit to the community, especially by recruiting young Latinas into healthcare professions.
"I don't remember being lobbied by either Clara or Maria," Cruz says. "It seemed to be in line with other kind of loans of this nature we'd done."