February 6, 2018
By Bob Coleman
Editor, SBA Hot Topic Tuesday
SBA Hot Topic Tuesday — CDC Shuttered due to Excessive CEO Pay — SBA Closes Delval Business Finance
The bottom line is if you make more than the President of the United States, $400,000 a year, you are a target by SBA. And as a target, you better dot all i’s and cross all t’s. Doesn’t mean you can’t draw a big salary — but you need to back it up.
Just ask Michael Schwartz. The former president of the Gettysburg-based CDC who is now out of a job and his company is out of business.
The facts demonstrate that DelVal (1) has an ineffective Board; (2) has a President, who though compensated at a rate almost three times higher than the managers of other Pennsylvania CDCs, has been unable to bring DelVal into regulatory compliance for over a decade; and (3) is not a satisfactory steward of a program that is funded with taxpayer money.
DelVal has consistently compensated its President almost three times higher than any other Pennsylvania CDC. Despite SBA’s request, the CDC has failed to provide any documentation of Board discussions or the process and analysis undertaken by the Board in establishing the President’s compensation at this level. Further, DelVal has failed to provide SBA with a copy of its executive compensation policy, as required by the Cure Notice.
A review of DelVal’s financial statements shows that the CDC President, Michael Schwartz, received the following compensation from 2010 to 2015 (including salary and the aforementioned loan):
|Fiscal Year||Salary||Balance of Unsecured Loan
to President as of Year-end
United States Small Business Administration Final Agency Decision Permanently Revoking Authority to Participate in 504 Loan Program and Permanently Transferring 504 Loan Portfolio, 9/11/17