THE BEGINNINGS
On April 30, 1996, the Oakland City Council awarded E.M. Health
conditional approval for a $1.1million federal loan to establish a
training program for home health aides. According to loan documents and internal memos, the city
approved that loan despite flaws in the company's business plan and no
discernible collateral or equity to back up the debt. The money was part of a $44 million pot — half loan, half
grant — awarded to the city by the federal Department of Housing and
Urban Development to fund start-up ventures or help expand existing
businesses in three distressed areas of Oakland with high unemployment
rates. The federal money was supposed to create jobs, and it was
intended for borrowers who could not qualify for conventional loans. E.M. Health's share of that pot — through the leadership of
then-bakery lieutenant Nedir Bey — would further Yusuf Bey's efforts to
empower poor black residents and ex-cons by giving them training and
job opportunities at various bakery outlets and private security
companies affiliated with the patriarch's expanding empire. The loan proceeds were supposed to be used for start-up costs
to recruit workers and patients, establish the home health training
program and provide ongoing operating expenses. The company never lived up to its promise. Ten years have
passed and still not a cent has been repaid. The equipment pledged to
secure the proceeds never surfaced. The promised jobs for low-income
residents, as well as the promised services for sick and elderly
clients, evaporated. The Oakland city attorney sued to recoup the debt,
plus interest, but the city's finance department has not been able to
collect. Nedir Bey, whose last listed occupation is business
development consultant, would not answer questions about the business
operations or why the company failed to take hold, saying that was "in
the past." In a brief telephone conversation, Bey said there were other
Oakland businesses that defaulted on city loans and he asked if they
were receiving the same level of scrutiny. Bey remains in Oakland but
says he is no longer affiliated with the bakery. Former bakery associate and businessman Ali Saleem Bey has
spent the last several months trying to save the heavily indebted
bakery enterprise from liquidation. Saleem Bey said he hasn't spoken to
Nedir Bey in years, but he defended E.M. Health's efforts to provide
job training and services to poor Oakland residents. Saleem Bey, reached by phone, said the city subjected the
business to undue scrutiny compared with others seeking public money.
That scrutiny also led to the company being underfunded, Saleem Bey
said, and contributed to its demise. "We really felt we were sabotaged by the city, ..." said
Saleem Bey, who worked alongside other bakery associates to help launch
the business. "Politically, they never wanted to give us the money ... and
when it came time to work with us and make it go, they made it as hard
as possible," Saleem Bey said. "They wanted to wag their fingers at
us." But the only thing that remains today from the ashes of E.M.
Health is a considerable outstanding debt to taxpayers — a debt that
could have been much larger.
BIG PLANS, BIG LOAN REQUESTS
The Qiyamah Corp., E.M. Health's nonprofit parent company,
first filed state business registration papers in October 1993. The
nonprofit organization was formed to expand the bakery's community work
and job training programs, and it wasn't long before bakery members
sought the city's help in financing a new home health care venture. Nedir Bey originally approached the city in approximately
1994 for a $3.4million loan to buy an apartment building on 24th Street
in North Oakland. That would be used, he said at the time, as a base
for his home health care program. The building purchase didn't qualify for HUD funds, and over
time it was dropped from the plan. The loan request was whittled down
to the $1.1 million, which was conditionally awarded to Qiyamah's
for-profit subsidiary, E.M. Health. The company promised to create 32 full-time jobs, more than
half of which would be filled by residents of West Oakland, East
Oakland or San Antonio/Fruitvale — the three economically depressed
areas targeted by HUD. The company also promised to train 120 low-income residents
and welfare recipients as home health workers, who would in turn
provide services to Medicare and MediCal patients and other clients who
were privately insured. According to E.M. Health's business plan
accepted by the city, insurance reimbursements would be more than
sufficient to repay the loan. It might have worked if Nedir Bey had
started small. Instead, he purchased expensive office furniture and loaded
the payroll with bakery insiders, most of whom had no health care
experience, while spending little initially on actual medical supplies,
according to loan documents. Bill Claggett, the former director of Oakland's Community and
Economic Development Agency who inherited the E.M. loan in late 1997,
said he couldn't believe the city gave the company "a dime," let alone
$1.1 million. "They didn't know what they were doing," Claggett said. "The
cost per person served was much higher than any other similar business.
It was clear (Bey) didn't have the kind of staffing he needed for that
operation." E.M. Health opened its doors on July 10, 1996, in an office
storefront on Grand Avenue. That first year's tax return posted income
of $6,007 and a loss of $437,802. It spent $85,886 on consultants,
$10,600 on security and only $5,708 for medical supplies. It survived
almost exclusively on the city loan. The list of employees included Nedir Bey's wife, Rosemarie
Boothe; and another woman, Kathy Leviege, with whom he has two
children; family associate Janet Bey; and Madeeah Bey and Farieda Bey,
two wives of bakery patriarch Yusuf Bey who are alleged to have
received illegal welfare payments at the time, according to civil
depositions taken recently in an unrelated case. Within three months of receiving start-up funds from the
city, Nedir Bey was on track to earn $108,000 a year, a figure that was
out of line with what similar agencies in the Bay Area paid their CEOs,
according to a spring 1997 memo in the city's loan files. Quarterly wage reports filed with the state show that Nedir
Bey's wife earned $47,000 as the assistant administrator, and Yusuf
Bey's wives — whose occupations were listed as marketing director and
LVN/outreach coordinator — earned nearly $60,000 each, the same as
Janet Bey, a registered public health nurse. Other than Janet Bey, none
of the women had nursing degrees or related licenses, according to a
review of state documents. Saleem Bey said it should not seem
suspicious that members of the bakery's extended family ended up on
E.M. Health's payroll. He said they worked many different jobs to help
support the bakery empire and to further Yusuf Bey's edict to be
self-reliant. He said they also worked alongside Nedir Bey to try and make the enterprise a success. To infer otherwise would be a mistake. "It behooved the organization to be successful, so it wasn't as
if everybody was just eyeing this money and they wanted to steal a
million," Saleem Bey said. "If the business plan was successful, by
this time it would have created 10 times that amount of money and
created many jobs." Even so, the city's loan staff requested that the
compensation for E.M.'s three top executives be reduced by 20 percent,
a move Nedir Bey protested in a memo to city officials.
OTHER QUESTIONABLE EXPENSES
There were other missteps and invoices that city officials
questioned before the city received the HUD proceeds, including a lease
on a Cadillac and reimbursements to a security company controlled by
the bakery. One city staffer flagged the vehicle lease, $64,000 in
consulting contracts, and thousands budgeted for security as ineligible
uses of the federal funds. "Staff is exploring options for recovering
these costs," reads one memo from April 1, 1997. That same year, in addition to their salaries, E.M. Health
paid approximately $40,000 in consulting fees and service payments to
Nedir Bey and relatives either directly or through companies that he
and other associates of the bakery controlled, according to records on
file with the city of Oakland. Bakery associates also made 15-day loans to E.M. Health to
cover operating expenses and charged substantial interest fees in
return. Nedir Bey earned a $750 fee for a $9,000 loan he made to the
company, and Ali Saleem Bey charged $1,000 interest for a $13,750 loan.
Time after time, city staff questioned the invoices E.M. Health
submitted for reimbursement, asking for more details or supporting
documentation. But the money was never withheld for long.
It was a noble cause: Train welfare recipients as home health aides and
put them to work caring for homebound sick and elderly clients. A decade ago, while Your Black Muslim Bakery founder Yusuf
Bey enjoyed unwavering support and adulation from black businesses and
politicians, his spiritually adopted son, Nedir Bey, pressured and
shamed city leaders into giving him a $1.1 million loan to help finance
the promise of black entrepreneurial independence. But the venture, E.M. Health Services, swiftly collapsed. The
failure of CEO Nedir Bey to repay a dime of the loan made headlines at
the time and prompted most to assume the company's demise was caused by
a combination of poor business decisions, bureaucratic hurdles and
simple bad luck. But was it? City officials overlooked flaws in the company's business plans
and relented to black community leaders who insisted they award the
loan, according to interviews, documents and other correspondence
reviewed by the Chauncey Bailey Project. The loan was granted to Nedir Bey despite his well-publicized
arrest for the torture and kidnapping of a man two years earlier. Bey
pleaded no contest to one felony count of false imprisonment and was sentenced to three years' probation.In awarding the loan to Nedir Bey, nearly every elected
official lauded the accomplishments of Yusuf Bey in turning around the
lives of troubled young men. Yet dozens of those men had armed
themselves during a standoff with police two years earlier. And a few
years later, Yusuf Bey himself would be accused of raping and fathering
children with young girls who were placed in his care. And the Chauncey
Bailey Project has learned that in late 1999 and early 2000, the FBI
investigated E.M. Health Services' loan and Nedir Bey, although it's
not clear how the probe was resolved. In the wake of reported real estate and welfare fraud allegedly
committed by the wives and children of Yusuf Bey, a deeper review of
the E.M. Health Services loan reveals several questionable expenses
that suggest an internal pattern of cronyism that enriched nearly every
facet of the bakery empire's inner circle including: -Tens of thousands of dollars in consulting fees paid to
companies controlled by Nedir Bey and his wife, Rosemarie Boothe-Bey,
as well as other bakery insiders. -Thousands of dollars in security fees paid to yet another
company controlled by Your Black Muslim Bakery and thousands more in
advertising fees paid to Universal Distributors, a company operated by
associates of the bakery. -$20,000 paid to the administrator of an Oakland home health
company who had urged the city to award the loan to E.M. Health
Services. -Top-end salaries paid to Nedir Bey and his wife, Rosemarie
Boothe, as well as to two of the Muslim wives of bakery patriarch Yusuf
Bey who are accused of receiving fraudulent welfare payments at the
time, and a second woman with whom Nedir Bey fathered children. Other
bakery insiders filled the company's payroll. -15-day loans made to E.M. Health by Nedir Bey and other bakery associates that were repaid with hefty loan fees.
Editor's note: This is
the first of a three-part series examining a $1million city loan to a
Your Black Muslim Bakery affiliate that was never repaid.
MediaNews investigative reporters Thomas Peele and Josh
Richman, KQED reporter Judy Campbell and freelance radio reporter Bob
Butler contributed to this report. Cecily Burt is a MediaNews staff
writer. G.W. Schulz is a staff writer at the San Francisco Bay Guardian. SOURCE OF THIS STORY
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