Development agency paid banks $4.6 million to cover bad loans

The Connecticut Development Authority paid $4.6 million over the past six years to five banks whose corporate customers had defaulted on loans guaranteed by the quasi-public agency, its records show.

The payments included $1 million paid to Fleet Bank to cover a default by U.S. Homecare, a now-defunct home health care services firm that state officials had lured to Hartford in 1995 by offering to secure its credit line.

Those officials included Peter N. Ellef, a former Cigna executive who at the time was state economic development commissioner, according to the CDA President Marie C. O'Brien, whom Gov. M. Jodi Rell appointed last year.

Ellef's two-decade-long tenure at the insurance company originally known as Connecticut General Life coincided with that of the eventual CEO of U.S. Homecare, G. Robert O'Brien, a Cigna spokeswoman confirmed Thursday.

G. Robert O'Brien, who had retired as president of the Cigna Employees Benefits Companies in 1992, is not related to Marie C. O'Brien, the latter said Thursday.

Ellef subsequently became former Gov. John G. Rowland's co-chief-of-staff and chairman of the state trash authority, positions he held until resigning after the collapse of the trash authority's $220 million with the now-bankrupt Enron Corp.

Ellef faced a federal corruption indictment alleging that he had run a racketeering enterprise out of Rowland's office until last week, when he pleaded guilty to two conspiracy fraud charges.

O'Brien, who reportedly had been hired by U.S. Homecare in 1994 to effect a financial turnaround, left the company in 1996, the year after it moved from Hartsdale, N.Y., to Hartford.

The CDA was forced to pay off the $1 million loan it guaranteed on behalf of U.S. Homecare in 1999, when the company's auditors issued a statement indicating that they had "substantial doubt" about its ability to continue as a going concern.

U.S. Homecare finally shut down in 2000, leaving the CDA with essentially worthless warrants to purchase 11.4 percent of its shares.

Meanwhile, Rowland, who had attended a ribbon-cutting ceremony at the firm's headquarters in 1995 when it pledged to create at least 340 new jobs, had in 1998 appointed O'Brien to the Capital City Economic Development Authority, an agency overseeing state investments in the redevelopment of downtown Hartford.

O'Brien headed the authority's stadium and convention center committee, which played a critical role in Rowland's failed bid to lure the New England Patriots football team to Hartford.

O'Brien is no longer a member of the authority's board, according to a spokesman.

The CDA records show it also was forced to pay Fleet Bank $588,130 in connection with two loans the agency guaranteed in 1993 for the New Haven-based Tennis Foundation of Connecticut.

Other lenders paid by the CDA included:

* Bank of America Business Credit, which received a total of $2 million in connection with two loans extended in 1993 to a Waterbury-based manufacturer of metal hoses, Anamet Inc.

* Farmington Savings Bank, which got $478,050 in connection with a $500,000 loan extended in 2000 to Southington-based Interior Builders.

* Liberty Bank, which collected $323,926 upon the default of Farmington-based Charles House & Sons, which got a $810,000 loan in 1995.

* People's Bank, which collected $150,000 in connection with a loan for that amount extended in 1998 to Branford-based Databyte International and $82,455 in connection with a $1 million loan made the same year to Trumbull-based EAC Inc.

CDA officials said Thursday that the agency also had paid $1.7 million since 1999 to various lenders in connection with loan guarantees for about 550 companies and partnerships that participated in its small urban business lending program.

The agency has written off a total of about $14 million in loans and $6 million in guarantees over the last six years, its records show.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.