TRAVERSE CITY -- Grand Traverse County's first -- and last -- economic development loan to a restaurant in more than two decades ended in default.
FAZ Enterprises LLC, owner of Java To Go on South Airport Road, defaulted on two loans backed by the county Economic Development Corporation and now owes taxpayers $39,887.
The EDC directly loaned FAZ Enterprises $50,000 in 2003, then guaranteed a $20,000 loan from East Catholic Federal Credit Union in 2007.
Java To Go closed its doors in December 2008.
EDC director Jean Derenzy said the EDC typically focuses on loans to industry and hadn't made a restaurant loan since the 1970s. Derenzy said the EDC deviated from its general practice to "help out a new business."
Java to Go owner Fran Zeits did not return messages left at her Suttons Bay home seeking comment.
Zeits is the mother of Karrie Zeits, who is the attorney for the City of Traverse City. Karrie Zeits previously worked as assistant city attorney under Peter Doren, who also represented the county's EDC.
Karrie Zeits said she did the legal work to set up her mother's company, suggested her mother seek the loan from the EDC, and went with her when she made her initial loan presentation to EDC.
But Karrie Zeits said she did not do the legal work for the loan and doesn't believe there was any conflict of interest because she did not benefit from the loan. Kathleen Shannon, wife of former county commissioner and current state Rep. Wayne Schmidt, did the EDC loan work for FAZ Enterprises.
Peter Strom, former chairman of the EDC, said the loans appeared viable at the time. He was aware of the interweaving Zeits relationships, but said they played no role in the EDC decision.
"Fran (Zeits) wasn't approaching us as 'Karrie is my daughter and I want a loan,'" Strom said. "The loans stood on their own merit."
County Administrator Dennis Aloia, a past member of the EDC board, said Charles Blankenship brought the loan request to the EDC. Blankenship formerly worked as executive director of the Traverse Bay EDC, a subsidiary of the Traverse City Chamber of Commerce.
Aloia said the EDC went along with Blankenship's recommendation, and he didn't know at the time that Karrie Zeits worked with Doren.
Doren said that while Karrie Zeits did legal work for her mother, his firm never represented FAZ Enterprises and didn't handle the original loan for the EDC. Doren said his firm worked on the second loan, but said it was not a conflict because both parties were aware of the connection and it wasn't an adversarial relationship.
The EDC instructed its new lawyer, Bethany Warner, to negotiate a settlement with Fran Zeits.
Fran Zeits wrote to the EDC in February to contact her lawyer, Traverse City bankruptcy attorney Paul Bare, who on Thursday said Fran Zeits has not filed for bankruptcy. He declined additional comment.
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