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Hartec executives who were fired when things heated up in 1987. Hartec, owned by one of El Paso’s most aggressive Republican contracts during Zdniga’s two-year tenure at the El Paso SBA office. The Herald -Post, then Channel 7, and finally NBC’s “20/20” \(which covered the El Paso SBA in a special “License to Steal” contributions to Republican candidates and received 46.5 percent analysis done by the Herald -Post’s DuBay. p olitical contributions, it seemed, had become a participation fee, a requirement to enter the SBA set-aside contract system. If political contributions provided an entrance, the bankruptcy courts provided an exitwhen companies like Hartec were either unwilling or unable to deliver on government contracts. bankruptcy, according to federal court records. The Army, Navy, Federal Aviation Agency and other government buyers were left to clean up behind the SBA, while sub-contractors, creditors, and ultimately taxpayers picked up the tab. It 1988, when a group of contractors finally decided that the situation was intolerable, twelve of them arranged to meet with El Paso Democratic Congressman Ron Coleman. Coleman assigned a staff member to work on the case; information gathered by Coleman’s office, and an NBC “20/20” report that focused on the El Paso SBA office under Ztiniga, brought the FBI into a nascent SBA internal investigation. “The FBI had to become involved because agents from the [SBA] Inspector General’s office don’t carry guns,” a source inside the investigation said. He explained that the investigation involved not only fraud and theft, but cocaine trafficking. “The people from the IG’ s office literally needed their own protection, once they found out what they were involved with,” the source said. This account is confirmed in a Herald -Post report of one SBA client who borrowed $125,000 from the agency’s direct loan program to start up a business, which, according to the state comptroller’s office, never existed in the state’s tax records. The borrower, Arturo Beltran Garcia, was arrested by U.S. Drug Enforcement Agency agents and charged with possession and intent to distribute cocaine. He told DEA agents who arrested him that he was selling drugs because he was having financial problems, according to an arrest report quoted in the Herald -Post. Beltran’s loan had been made over the objections of an SBA loan officer, who was overruled by the loan program administratorand Henry Zdniga. Yet after a year-long, labor-intensive criminal investigation that involved three federal law enforcement authorities, only Alvarez was indicted and convictedof lying on an SBA loan application. And that conviction, on a relatively minor charge, seemed to represent the response of angry federal law enforcement officials determined to deliver someone over to a federal judge after an investigation had gone south. “The prosecution was going to be built around one key witness,” the source inside the investigation said. “When he died in a plane crash, it was over. The OIG couldn’t commit any more resources to it….I mean, you have to consider their budget, and the possibility of a successful prosecution much, much later.” An internal Inspector General’s document dated June 28, 1988, confirms this account. In a letter signed by then-Inspector General Charles Gillum, the El Paso investigation is described as the office’ s “most significant in terms of resources committed.” And, Gillum added, pressure from Coleman’s office had brought the Public Integrity Section of the Department of Justice’s Criminal Division into the investigation. “The investigation,” Gillum wrote, “had progressed reasonably well in spite of the vast scope of the allegations; the untimely death of a key witness, Don McCoy, the owner of El Paso Sand and Gravel, who was killed in an accidental plane crash….” warning that retreat was imminent. He was, after all, a junior officer in a bureaucratic army directed by Ronald Reagan’s appointed generals. And he hadby deploying 18 percent of his staff and 25 percent of his travel fundexhausted his budget. When his key witness went down in a plane crash, so did his investigation. Henry Zuniga lost his job and filed a libel and slander suit against the Herald -Post. Zdniga’s attorney, Albert Armendariz Sr., said neither he nor his client would speak to the Observer, citing restrictions agreed to in Zimiga’s settlement with the newspaper. But a representative of Scripps Howard, the cornpany that owns the Herald -Post, said the suit was settled “on a nuisance basis, which means if the plaintiff says he prevailed, he is not being truthful.” And in truth, Henry Zaniga never solicited political contributions, although his wife Laura, who was not a federal employee, did. Edward Alvarez, who could not be located by the Observer, was convicted of a felony and served a five-year probated sentence. And at a huge cost to creditors and taxpayers, Bankruptcy Court. One El Paso Times story, written a year before the scandal made the news, captured so much Age of Reagan hypocrisy that it reads like farce. Here is Henry aniga, the hometown boy back from a year in wanted to dismantle. Here is Jose Aceves and Hartec Enterprises, described as a Small Business Administration success story. And in the next column, here is Senator Phil Gramm, complaining about the high rate of SBA loan defaults, while his man in El Paso is running a shakedown that can only drive the default rate higher while it directs some of those loan proceeds toward the Senator and his party. But it only reads like farce. “Our lives were ruined,” said one of the twelve contractors who met with Congressman Coleman. “We filed bankruptcy, we lost our house, and we never recovered.” “Somebody,” he said,” should have been held responsible.” He wasn’t talking about Eddie Alvarez. HERE IS SENATOR PHIL GRAMM, COMPLAINING ABOUT THE HIGH RATE OF SBA LOAN DEFAULTS, WHILE HIS MAN IN EL PASO IS RUNNING A SHAKEDOWN THAT CAN ONLY DRIVE THE DEFAULT RATE HIGHER WHILE IT DIRECTS SOME OF THOSE LOAN PROCEEDS TOWARD THE SENATOR AND HIS PARTY. 10 THE TEXAS OBSERVER SEPTEMBER 27, 1996