What happened to companies that defaulted on Cuyahoga County loans?

CLEVELAND, Ohio - Nelson Pitlor would rather be running a successful company and paying off a $200,000 loan from Cuyahoga County than explaining how his business failed. Pitlor's company, Accessmount, which mounted and removed lighting fixtures, is one of...

What happened to companies that defaulted on Cuyahoga County loans?

CLEVELAND, Ohio - Nelson Pitlor would rather be running a successful company and paying off a $200,000 loan from Cuyahoga County than explaining how his business failed. Pitlor's company, Accessmount, which mounted and removed lighting fixtures, is one of...

25 April 2017 Tuesday 10:05
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What happened to companies that defaulted on Cuyahoga County loans?

CLEVELAND, Ohio - Nelson Pitlor would rather be running a successful company and paying off a $200,000 loan from Cuyahoga County than explaining how his business failed.

Pitlor's company, Accessmount, which mounted and removed lighting fixtures, is one of about 60 companies that defaulted on more than $5.8 million in county loans, according to a list provided by the county.

Cuyahoga County issued 87 loans totaling $7.38 million to 62 companies between 2003 to 2013 and has collected only $1.55 million, according to information provided by county officials.

The companies ranged from established firms, such as Accessmount, to start-ups. Some had a run of good business then folded. In nearly every case the entrepreneur and other investors say they also lost money in the venture. Some business owners say they did not understand the process of the loan and did not receive promised help.

More than $5.8 million owed to Cuyahoga County in delinquent loans - see the list.

While the county is now trying to collect on the delinquent loans, officials have said it is unlikely many of the high-risk companies have the money to pay them back.

Before the current executive-council form of county government was formed in 2010, the county-made loans that were "more like grants" and simply written off if they weren't repaid, County Executive Armond Budish has said.

The lackadaisical approach, which began under the former county commissioner form of government, is now under investigation by the county inspector general.

The county loaned millions of dollars to 270 companies over the past decade, but the economic development department had no policies or procedures to keep track of repayments -- and paperwork on many is missing, officials recently said.

80 of 270 Cuyahoga County loans delinquent - and the county lacked paperwork

County officials haven't found any ties to corrupt government officials or contractors, and a cleveland.com review of the companies shows many were small businesses that simply failed.

Take a look at two badly hit programs:

New Product Loan Fund: Fifty-eight of the loans were issued from the low-interest New Product Loan Fund, which was created in 2005, when the county still was administered by three elected commissioners. Less than $200,000 of the $2.4 million loaned has been repaid.

Company owners contacted by cleveland.com said they would have repaid the loans had their companies succeeded. Some also said they received much less support and help than had been promised from Camp Inc., a nonprofit consultant. 

"They said 'Don't worry, we'll take care of you,'" said Art Zimmerman, who creates products for motorcycle racers and motorcycle owners and received two loans totaling $99,688. "They never did."

Zimmerman said he needed the loans because banks would not lend him money. But although he still makes and sells parts from his garage, DocZ International never took off. Zimmerman said he barely makes a living and cannot pay off the loan.

North Coast Opportunities Technology Fund: The fund, which was launched in 2008 under the commissioners, provided low-interest loans to high-potential technology companies. 

According to the list, none of the $486,500 loaned was repaid.

"The company failed in every way, shape and form," said Robert Conway, who received $76,150 for Body Phyx International, which created equipment to relieve neuromuscular pain such as carpal tunnel syndrome.

He said he and family members put in far more money than the county.

"We were not trying to rip off the county," he said "We all got clobbered."

Cleveland Whiskey, a startup with a proprietary method that hastens the whiskey-making process, is on the list as owing $123,500 received in June 2011. Founder Tom Lix said he began repaying his loan with interest at the beginning of 2017, as required by his loan agreement.

Budish's administration has made changes to try minimize the risk the county faces in its lending. The county now partners with organizations to oversee high-risk loans.

Following are stories of some of the companies that defaulted.

Accessmount LLC: The former Twinsburg company received $200,000 in May 2005. No money has been repaid.

Nelson Pitlor developed the Accessmount system, which mounted and removed fixtures without use of a ladder and replace fixtures without rewiring. It works when the lamp is enclosed and not available for pole-based unscrewing systems.

Pitlor, who now works for Welbilt Food Service, said his company went out of business about five years ago.

He said more than $1 million in investments were lost.

"There is no way to pay the (county) loan," he said. "There really isn't anything left."

Pitlor said the business crashed following the market collapse in 2008.

Aeroclay Inc.: The former Bedford Heights company received $125,000 in December 2010. No money has been repaid.

Aeroclay is based on a Case Western Reserve University researcher's discovery of some novel ways to transform clay into a high-tech substance.  The technology uses freeze-drying and polymer additives to turn clay into a versatile material that can be used  as an absorbent, insulator or packing material.

The company raised $1 million from investors and received the county loan. 

In July 2016 Compadre, a transport packaging design center based in Austin, Texas, obtained an exclusive license to pursue commercial uses for AeroClay, according to refrigeratedfrozenfood.com. 

Although Aeroclay will be part of Compadre, CWRU professor David Schiraldi's lab will have a role in the research and development of AeroClay products.

American Innovative Products Inc: The Lakewood company received $15,000 in May 2006, $20,000 in July 2007, $53,000 in November 2008 and $14,560 in June 2009. It owes $102,824.

Walter Berry invented Siphon Flush, a product he hoped would replace toilet flappers. The product created a vacuum in an expandable chamber to force water out of the tank and into the bowl. It prevents leaks and conserves water.

Berry and the company moved to Frisco, Texas, in 2009, according to records. The status of the company is unknown. The website is not functioning, and he could not be reached for comment. 

AVN Technologies LLC: The Pepper Pike company received $120,000 in June 2010. No money has been repaid.

The company invented an airway management device that improves the placement of a breathing tube into the trachea. 

Inventors were anesthesiologists Dr. Howard Nearman, of University Hospitals, and Dr. Donald Voltz, of Aultman Hospital.

Voltz said the the device has been developed and a patent was issued. He and Nearman are trying to commercialize the device, which is partially robotic. They are also seeking partnerships with a medical device or airway company.

The intent is to repay the loan once the device is marketed, he said.

Body Phyx International: The Fairview Park company received $76,150 in March 2009. No money has been repaid. 

Established in 2006, the company developed new technology and equipment to relieve neuromuscular pain such as carpal tunnel syndrome.

While several of the machines are being used at a physical therapy clinic, the company has been dissolved, said Robert Conway.

Caralon Global: The Cleveland company received $125,000 in March 2010. It owes $138,376.

The manufacturer of ultra-thin thermal insulating material operated from July 2009 to June 2015, according to CEO Tim Wojciechowski's LinkedIn profile.

Wojciechowski, now president and CEO of Aatru Medical Corporation, could not be reached for comment.

DocZ International:  The Bay Village company received $40,000 in October 2005 and $58,266 in October 2006. It owes $99,688.

The company creates products for motorcycle racers and motorcycle owners. 

Owner Art Zimmerman said he originally thought he was applying for a grant, not a loan, and did not receive the help he was promised to make his business grow.

Zimmerman said he operates the company out of his garage and earns little. He said he does not have money to repay the loans.

Future Image Technologies: The North Olmsted company received $14,145 in April 2005, $39,848 in July 2005 and $50,876 in July 2007. It has not repaid any and owes $104,869.

Company owner James Stallman designed the Kickback Kooler, a cooler that doubles as seats and can be used by tailgaters, sports spectators, campers, fishermen, boaters and beachgoers.

In 2015 he launched a Kickstarter campaign. The campaign raised $280 of the $150,000 goal. Another campaign in 2016 raised $3,544 of the $185,000 goal.

Stallman said he never received the help promised by Camp.

"They people involved told me that if it didn't take off they couldn't come after me for the funds," he said. "It is not going anywhere. I spent a lot of my own money."

NeoMed Technologies: The Cleveland company received $40,000 in August 2006 and $60,000 in October 2006. It owes $87.726.

Founder George Coleman developed a system to detect coronary artery disease.

Coleman could not be reached for comment. 

Nine Iron Innovations: The Independence company received $59,846 in January 2006. It owes $57,238.

The company offered Verishot Mobile, a golf shot video monitoring, contest, and marketing program for golf courses and event managers.

The company also received funds from other sources, including JumpStart, shut down in 2011, reported Crain's Cleveland Business. 

Founder Mike Burkons said at the requests of new investors and stakeholders he left the company and gave up his equity in 2009. He started a similar company, Charitee Golf LLC.

SparkBase: The Cleveland company received $700,000 in July 2013. It owes $557,278.

The company, which developed private label gift and loyalty card programs for the financial and merchant services industries, had raised nearly $9 million from a long list of investors, and received millions in investments, Crains Cleveland Business reported. The company lost clients, ran out of money and went out of business in April 2016. 

Sensor Development Corp.: The company, formerly of Strongsville, is now located at Lorain County Community College in Elyria.

It received loans of $59,808 in 2006, $39,888 in 2007 and $45,025 in 2012. It owes $94,274.

Founder and President Nicholas Smilanich said he did not want to comment on the loans.

The company focuses research and development in the agricultural industry. It is developing highly sensitive and selective nanocrystalline tin-oxide sensors to detect minute amounts of gaseous volatile organic compounds.

cleveland.com is a partner of the Greater Cleveland Food Bank. Every dollar buys four meals for the hungry. Click here to donate. 

Our editors found this article on this site using Google and regenerated it for our readers.

Updated: 28.04.2017 14:38


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