U.S. Rep. Gerry Connolly, (D-Dist. 11) has gotten involved in the fight between Springfield’s Fischer Hardware store and the Ace Hardware chain.
Roy and Pattie Ewers, the owners of Fischer Hardware, say Ace misled them into taking out nearly $2 million in loans with inflated revenue projections, and then left them twisting in the wind.
According to Roy Ewers, he and his wife purchased the store, which has been a staple of the Springfield community for more than half a century, from the Fischer family in 2009.
The Ewers say Ace misrepresented its market share in the hardware industry and misled them as to how competitive the company would be against big-box retail stores such as Home Depot, Lowes and Tractor Supply Company. The Ewers filed for bankruptcy in April after dismissing more than 70 percent of their employees because of diminishing revenues. The Ewers also put $930,000 of their own money into the store.
When they could no longer afford to pay Ace for supplies and services, Ace sued them in in DuPage County, Ill., the suburb of Chicago where the company is headquartered. The Ewers’ countersued, alleging fraud by Ace.
“They set us up to fail,” Roy Ewers said.
The Ewers say Ace — under its “Vision 21” program that purchases hardware stores and then homogenizes them with certain product lines in an effort to make them more recognizable as Ace locations — falsified documents that were then submitted to the Small Business Administration and an Arlington bank. That bank loaned the Ewers $1.85 million to function as an Ace store based on what the Ewers say were false revenue projections and falsified numbers.
That loan was backed by the SBA, and guaranteed with federal taxpayer money.
“I am writing to request a robust investigation into this complaint,” wrote Connolly in a letter requesting the SBA to look into the “lender,” who might have “willfully manipulated figures and business projections in order to justify inflated values, which were then used to qualify for loans” guaranteed by the SBA.
The Ewers are not the only ones who have undertaken similar litigation against Ace.
“While this is one case, numerous [lawsuits] have been filed around the country. This is not an isolated case, but appears to be a pattern that needs to be addressed,” Connolly wrote in his letter to the SBA. “If evidence of fraud is uncovered, I encourage efforts to determine if it was a single case by an individual loan officer or widespread and possibly sanctioned or promoted by senior management of the company.”
Ace spokeswoman Sasha Bigda said that out of more than 4,000 stores affiliated with Ace, she is aware of only six hardware store lawsuits, but denied Ace is referenced in Connolly’s letter to the SBA.
“Ace Hardware Corporation is not a lender under any SBA program,” Bigda said. “The SBA has not contacted Ace about any investigation concerning any SBA loan program, nor has any other government agency done so … we have no knowledge of any investigation or inquiry involving Ace by the U.S. Small Business Administration ...”
But according to Peggy Gustafson, inspector general for the SBA, her office has had an open matter regarding Roy Ewers’ complaint since February 2011.
“We are aware of the suits referenced in your letter and looking into those additional cases along with Mr. Ewer’s complaint,” wrote Gustafson in a reply to Connolly. “At this point however, we do not have sufficient evidence to determine whether the allegations in Mr. Ewers’ complaint represent a pattern or practice of illegal or inappropriate activity. Once our review … is complete, we will refer a case to the Department of Justice for criminal or civil remedies if the evidence supports a referral.”
Meanwhile, in Illinois, a federal judge last week allowed one of the Ewers’ counterclaims against Ace to proceed.
Bigda said Ace would “vigorously defend itself” against the Ewers’ claim.
“For more than 85 years, Ace and our independently owned- and operated-retailers have successfully weathered competitive pressures in various economic cycles,” Bigda said. “While Ace wants all Ace store owners to be successful, for various reasons not every store attains the level of success that its owner desires.”