Loan packager finds easy targets in tough times
About 4600 words
This is a four-part series of articles about a man who was ripping off small businesses all over Central Texas. The first two articles exposed his misdeeds. The third article reported his indictments. The fourth article reported his sentencing more than two years after the first articles were published. © Copyright 1990 by Austin Business Journal Inc.
Small-business owners hired John B. Chenault with good intentions and good money in hopes he would help them get loans they needed to keep their businesses afloat.
But many of his clients say what they got was ripped off.
They say Chenault took their money and then took longer than necessary to prepare their loan applications, which often turned out to be worthless. In many cases, he produced nothing but excuses.
The Austin Business Journal located 28 small businesses in Central Texas that paid Chenault to assemble their financial package for a loan guaranteed by the U.S. Small Business Administration (SBA). Ten of those businesses got their packages. But some of them waited more than a year.
Not one of them got a loan.
Chenault never promised business owners a loan would be approved. Not in writing. But he may have misled clients. Many of those interviewed said that when Chenault was clinching a contract and getting a non-refundable deposit, he often said things like, “I see no problem with this,” and “You are just the kind of people banks are looking for.”
“I have made statements like that,” Chenault conceded in an interview with the Austin Business Journal.
Eighteen of Chenault’s clients, who paid fees ranging from $500 to $3,500 apiece, got little or nothing in return.
Stanley and Gilda Ginsel, a brother and sister who ran an Austin feed store, sued Chenault after he took their $3,400 and did not produce their loan application (see accompanying story, “Business dream lost in loan deal gone bad”). Alleging Chenault was guilty of deceptive trade practices, they won treble damages of more than $14,000 in a court-ordered judgment.
The Ginsels haven’t gotten a dime of it. They own one of Chenault’s 13 unpaid judgments, totaling $143,000 plus interest, that are recorded in the Travis County Courthouse.
None of his judgment. creditors are likely to collect. Their claims take a back seat to the Internal Revenue Service, which in February 1989 filed liens against Chenault for $127,000.
A lot of people have taken a chance on Chenault, but he trusts no one. He habitually cashes the checks he gets before the ink dries. He drives straight from contract signings to his client’s bank, where he pockets cold cash.
“I’m not going to work on a non-sufficient funds check. I have no embarrassment whatsoever. I’ll do that to anyone,” he said.
Chenault’s upset clients are legion. Business owners claiming Chenault ripped them off were found in Austin, Bastrop, Bertram, Burnet, Elgin, Marble Falls, Killeen, Manchaca, Round Rock, Smithville and Wimberley.
“I begged. I threatened him one time to whip his fat ass. I threatened him with the IRS. I tried every trick in the book to get what I paid for,” said Byron Benoit, who owns Associated Drilling of Manchaca.
Benoit was so steamed he tried to frighten Chenault, who stands six-foot-one and weighs around 275 pounds.
“I was screaming. I was so upset my old heart was pumping. I’m five-foot-six and 135 pounds. I’m not going to whip anybody,” Benoit said.
Chenault admits he had Benoit in a dither and did little to calm him.
“He was screaming, ‘You fat S.O.B., are you going to do this [package] for me?’ He was having a nervous breakdown,” Chenault said.
Did Benoit have a legitimate gripe?
“Yes, he has a complaint. I told him, ‘I’m not doing applications by hand anymore. I’m converting to computers and you have to wait,'” Chenault said.
This kind of treatment has not endeared Chenault to his clients. Nor has it earned him good word-of-mouth.
“I have never had anyone get a loan approved and then recommend me to someone else. They’re interested in what helps them the cheapest and the quickest, and then it’s, ‘Get out of my life,'” Chenault said.
He’s happy to oblige. Once a package is completed, Chenault disclaims any interest in whether it presents a creditworthy client, or whether it gets a thumbs up or a thumbs down from lenders.
“My responsibility ends when I turn the package over to a banker,” he said. “People don’t even tell me if a loan’s approved or disapproved. Banks don’t call me and neither do the clients. I do not have any curiosity because I’m working on other deals.”
The SBA has taken special note of Chennault’s actions.
A September 1988 certified letter from the SBA’s regional counsel in Dallas, obtained by the Austin Business Journal under the Freedom of Information Act (FOIA), warned Chenault to stop using a business card that said, “John B. Chenault, SBA LOAN PACKAGE PREPARATION.” The letter also directed him to quit using the SBA’s name in advertisements or other representations.
‘‘The failure to refrain from the use of our name or the term SBA in representations could lead to the initiation of debarment proceedings,” the letter warned. If debarred, Chenault could not prepare loan packages to be submitted, through lenders, to the SBA.
According to a second letter obtained under the FOIA, the SBA’s district office in San. Antonio recently rejected one of Chenault’s loan packages because of what officials said was its extremely poor quality.
The package requested a loan of $120,000 for Barney Novelties Inc. of Austin, doing business as The Party House, owned by Jorge Barney.
“We are returning the application because it is very incomplete, poorly prepared, and the packaging fees charged to applicant are very excessive,” J.E. Clement, assistant district director for finance and investment, wrote in a May 9 letter.
Chenault told the Austin Business Journal that another consultant reworked the package before it went to the SBA and it was “totally out of my hands.”
But only Chenault drew a fee.
“He charged this guy $2,000 and it’s so poorly prepared we sent it back,” Clement said. “What amazes me is how this guy continues to operate. It takes a ton of complaints before you can get the authorities to act.”
Barney, like nearly all of Chenault’s clients interviewed, said he called Chenault after receiving a solicitation letter.
“He made it sound like a for-sure deal,” said Barney, who hired Chenault last September. “He said he didn’t see any problems, that ‘everything looks real pretty.'”
That’s not the way the SBA saw it. The rejection letter for Barney’s loan cited 10 items missing from his package, including such basics as current financial statements, tax returns and inventories.
The letter went on to tell the lender, “If your bank is going to submit loan applications prepared by this packager, we suggest that you closely review the information provided in the loan package for accuracy prior to submission to the SBA.”
Clement got so fed up earlier this year he told Chenault he would not accept any loan package Chenault prepared. But because Chenault has not been formally debarred, the decision did not stick.
Chenault has been investigated by the U.S. Postal Service, which found no violations of federal statutes concerning mail fraud or false representation.
Austin’s Better Business Bureau found the “nature and pattern of complaints” about Chenault significant enough to provide information to the Texas Attorney General for action deemed appropriate, said John Etchieson, president of the BBB.
The attorney general’s office has received numerous complaints of its own about Chenault. The complaints allege he took fees of from $600 to $2,000, produced nothing, and refused to return the money.
To date, however, the attorney general has neither initiated an investigation of Chenault nor filed a lawsuit against him.
“We have to pick the ones that indicate a pattern of deception that affects a large number of people,” said assistant Attorney General Clyde Farrell, chief of the Consumer Protection Division. He said the office gets 25,000 to 40,000 complaints a year.
Chenault also frequently got into hot water with another facet of his work, brokering the sale of businesses. One client got Chenault indicted on a felony, forcing him to pay $5,000 in restitution. Three others filed lawsuits that resulted in two financial judgments against Chenault and forced restitution of $10,000. The fifth filed a complaint with the attorney general.
Concerns about Chenault’s questionable conduct as a loan packager and business broker are heightened by the fact that he has a criminal record. Chenault once served 21 months in a Texas penitentiary for theft. His rap sheet stretches from 1967 to 1976 and then leapfrogs to 1986 and 1988.
Chenault’s credentials—or lack of them—give further cause for concern. While he has a high-school education and no formal training in his work, he conveys the impression to clients that he can pull a punch-drunk business off the ropes and send it back into the ring with arms pumping and legs dancing on the pure adrenaline of fresh money.
Yet he admits his limitations.
“To put together an SBA loan package takes knowledge and experience of what’s required by banks. Maybe I have weak qualifications,” he said. Chenault said he was shown how to prepare SBA packages by a local SBA official in the early 1980s.
Given that he has no professional education, he was asked to demonstrate his business acumen by naming the businesses he has owned. Chenault declined, saying, “I don’t choose to answer.”
But court documents and various contracts show Chenault has used at least eight different company names since 1985:
• Since September 1988, he has operated as Business Brokerage and Financing Service at 3508 Far West Boulevard.
• From April 1987 to September 1988, Chenault had an office in the Heritage Bank Tower at 7800 N. MoPac, doing business variously as Chenault and Co., J. Chenault Business Brokerage, and Business Brokerage and Service.
• Before that, he worked out of 13706 Research Boulevard and had companies called Rental Assurance Co. and National Business Listing Service.
• In September 1985, he was also doing business as Hornet Service Station, with offices at 7801 N. Lamar.
Chenault was successfully sued while he operated many of these companies.
“I’m not going to sit around and say I’m an angel,” he said.
A number of Chenault’s clients interviewed by the Austin Business Journal agree Chenault’s no angel. They said he’s a smooth-talking slicker who often intimidated them.
“He’s a high roller, driving a big Cadillac Eldorado. He dresses real nice…expensive clothes, shoes, everything,” said George Gale, owner of The Marine Center, a Marble Falls marina. “I just contributed to it, I guess,” Gale said, referring to the $1,400 he claims to have paid Chenault.
“Smooth talker? True. High roller? True. Intimidator? True,” Chenault said. “I make them tell the truth and furnish all the facts about their businesses, good or bad. Some respected me for it, some hated me for it…Intimidation is a tactic used by all salesmen.”
But intimidation also conveys an element of danger.
Many people are scared of Chenault, and with reason. Both criminal and civil court documents indicate he’s prone to violence.
He battered two wives, now ex-wives, court documents and witnesses say.
He was charged with criminal mischief when, following a near traffic mishap, he tried to drag a man out of his car and, prevented from it by locked doors, stood screaming obscenities and kicking the car until he racked up damages totaling $379.
Chenault even intimidated General Motors Acceptance Corp., which filed for a court order to get back two CadilIacs leased to Chenault, for which he had failed to make payments. The petition stated the firm feared Chenault “may assault its agents if repossession of the vehicles is attempted by GMAC.”
Despite his voluminous shortcomings, Chenault would like to paper over his criminal record, ignore his financial irresponsibility and forget about his clients’ complaints. He furnished alibis about embittered ex-wives, incompetent employees and simple bad judgment. But he’s not quitting.
“Nobody’s going to put me out of business because I don’t do anything criminal. Only criminals get put out of business,” Chenault said. ‘‘They have a list of people who have been proven to defraud people and my name is not on the list.”
But will potential customers, made aware of Chenault’s irresponsible and sometimes violent past, still hire him?
“As long as I sold their businesses, I could be Jack the Ripper,” Chenault said. ‘‘They love me because I sold their rotten, [crappy], stinking businesses.”
This article was originally published in the May 28, 1990, edition of the Austin Business Journal.
Business dream lost in loan deal gone bad
© Copyright 1990 by Austin Business Journal Inc.
Mention John Bert Chenault to his clients and they get mad. They call him a con man, a crook and a lying bum, plus a lot of things you can’t print in a newspaper.
“The man has no conscience. He doesn’t care,” said Gilda Ginsel, who with brother Stanley Ginsel ran the now-defunct Ginsel Countryside Supply, a feed store on U.S. Highway 290 East.
When asked about complainers, Chenault explained each deal, sometimes admitting error, sometimes not.
“I don’t like to suck [up to] to clients,” Chenault explains. “If I worried about everything, I would not sleep at night.”
Does he sleep well?
“Sure,” Chenault said.
Gilda Ginsel has reason to be cranky. She and her brother lost $3,400 to Chenault and then spent $550 in legal fees chasing after it They got a court-ordered judgment of more than $14,000 that included treble damages for deceptive trade practices.
They did not collect a penny. But out of dozens of Chenault’s clients who feel ripped off, they are one of only a tiny fraction who had the resources to sue.
By 1987, the Ginsels could see that horse feed, the mainstay of their business, was a dying commodity. Horse owners were going bust and selling off their stock. And the fabled expansion of the Manor Downs race track was a fast-fading hope.
The Ginsels wanted to diversify Countryside Supply. They aimed to expand their minor line of pet supplies and western wear and become a mini-Callahan’s General Store to serve northeast Travis County customers the way their model for success dominated the southeast sector.
They figured that with a loan all things were possible. As if an omen, at that moment the Ginsels received one of Chenault’s short letters offering his services.
“They’re backed against the wall. It gets to the point of desperation. They respond to the letters I send out,” Chenault said, in describing the people who buy what he’s selling.
Chenault knows his prospects.
“Our business was on the rocks,” Gilda Ginsel said.
In July 1987, the Ginsels hired Chenault to package their application for a loan guaranteed by the U.S. Small Business Administration. Members of a successful farming family that owns a grain elevator in Manor, the Ginsels paid him a $900 fee up front. In October 1987 they paid him another $2,500.
For $3,400, the Ginsels got zilch. They fumed. They cried. They demanded a refund.
When Chenault refused to give back their money, the Ginsels went to the Austin Police Department, which, they say, pooh-poohed their allegations. Deprived of criminal prosecution, the Ginsels filed a lawsuit against Chenault in August 1988.
While the suit was still pending, Gilda Ginsel took on Chenault like a feisty flyweight boxer windmilling around the heavyweight champ. She made written complaints with the Better Business Bureau (BBB) and the Texas Attorney General. Both agencies said their hands were tied because of the lawsuit
She also ran a classified ad in the Sunday Austin American-Statesman. The ad was no bigger than a paper clip: “If you have done business with John Chenault call ….”
From Bertram and Killeen, from Garfield and Oak Hill, and from all over Austin, the responses poured in. Chenault’s customers claimed losses from as little as $500 to as much as $3,500 apiece.
“On Monday the phone was ringing off the hook. I took 25 calls. Sixteen gave useful information,” Ginsel said.
Filled full of fresh ammunition, Ginsel obtained complaint forms from the attorney general and mailed them to her callers, urging them to file.
“I thought the attorney general or the district attorney would say, ‘Aha!’ But nobody cared,” she said. “The little guy wins against the jerks. I’ve seen that old movie too many times.”
She also tried to interest federal postal authorities in investigating Chenault for furthering an allegedly criminal scheme through the mails. In a June 1989 reply to Ginsel, postal authorities wrote, “the activities of this subject have previously been investigated by this service. The circumstances and evidence disclosed did not establish use of the mails in violation of the mail fraud or false representation statutes.”
Finally, there was no remedy left but the lawsuit.
Chenault adhered to his long-established pattern and did not show up to defend himself against the Ginsels’ lawsuit. Thus, in March 1989 the court awarded the Ginsels a default judgment that totaled $14,456.
The victory was hollow. Their lawyer never pursued collection.
“I should have gotten a hungrier attorney,” Ginsel said.
Not that it would have done them much good, considering the $270,000 in tax liens and judgments Chenault has filed against him in Travis County.
Countryside Supply, deprived of the capital to switch its line of merchandise, folded in June 1989. The Ginsels decided they could make more by leasing out their building than they could trying to run a feed store for a vanishing herd of horses.
In an interview with the Austin Business Journal, Chenault admitted he treated the Ginsels poorly.
“I did not complete their package in a prudent, quick manner. My mistake,” Chenault said.
Given the money she lost, Chenault’s admission rings hollow to Gilda Ginsel. It’s now almost three years since she hired Chenault and more than 14 months after winning a court-ordered judgment. Having talked to so many others who rolled the dice with Chenault and lost their wad, Ginsel wonders when justice will be done.
“This guy takes advantage of businesses he knows are on their last legs, and I find that reprehensible,” Ginsel said. “He never delivers anything but heartaches.”
This article was originally published in the May 28, 1990, edition of the Austin Business Journal.
Chenault indicted in two counties
by Ken Martin
Austin Business Journal Editor
© Copyright 1991 by Austin Business Journal Inc.
A man whose questionable business practices were exposed in articles published last year by the Austin Business Journal has been indicted in both Travis and Williamson counties.
John Bert Chenault, 52, was indicted in Travis County on a first-degree felony for alleged misapplication of fiduciary property of more than $10,000.
A Williamson County grand jury indicated Chenault for a third-degree felony theft charge.
Bonds were set at $15,000 in Williamson County and $7,500 in Travis County. Chenault has been released on bail in both counties pending disposition of the cases.
Articles published by the Austin Business Journal of May 28, 1990, stated that 28 small businesses in Central Texas had paid Chenault to assemble an application package for a loan guaranteed by the U.S. Small Business Administration. Ten of those businesses got their packages, although some of them waited more than a year.
Not one of them got a loan.
At the time these articles were published, Chenault had 13 unpaid court judgments against him totaling $143,000 plus interest, recorded in the Travis County Courthouse. In February 1989, the Internal Revenue Service filed liens against Chenault totaling $127,000.
The Travis County charges now pending against Chenault stem from his alleged acceptance of some $20,000 from Sergio Tristan in connection with the purchase of a business in Austin. The indictment says Chenault withdrew funds from an escrow account and recklessly misapplied sums of more than $200 but less than $10,000 on eight separate occasions between January and March of 1990.
The pending Williamson County theft charges, court records say, stem from dealings with Bill Topiwala, who lost $5,000, and David Stone, who lost $600.
Chenault is represented by Austin attorney Terry Stork, who declined to comment on the indictments.
In addition to these criminal charges, Texas Attorney General Dan Morales filed a civil suit against Chenault last March. The suit claims that Chenault “engaged in false, deceptive and misleading acts and practices in the court of trade and commerce as defined in the…Deceptive Trade Practices Act.”
The civil action, which is still pending, asked the court to assess civil penalties up to $10,000 against Chenault; order him to restore all money taken by means of unlawful acts or to award judgment for damages to compensate for such losses; and order him to pay the state for attorney fees and costs of court.
According to the lawsuit, Chenault typically solicits business by mailing letters to small-business owners. The letters state his company engages in the sale of businesses and prepares loan packages for small businesses. The solicitation letters state his company has been successful in locating funding for businesses although, according to the lawsuit, he made little effort to locate funds once he collected his advance fee.
Chenault does business as John B. Chenault and Associates Business Brokerage and Financing Service at 13706 Research Blvd., according to the lawsuit.
If convicted on the first-degree felony charge in Travis County, Chenault could be sentenced to five to 99 years or life in prison and fined up to $10,000, according to Assistant District Attorney Blake Williams, who is prosecuting the case.
Chenault is still under investigation in Travis County and other indictments are possible, said Williams, who works in the special prosecutions division that handles paper-type crimes within the public integrity unit.
Chenault was previously convicted of theft in Bexar County. He served 21 months in a Texas penitentiary for that offense and was discharged in 1971. His rap sheet stretches from 1967 to 1976 and then leapfrogs to 1986 and 1988.
Chenault has used at least eight different company names since 1985 and was successfully sued while operating many of these companies.
Violence also mars Chenault’s record.
He battered two wives, now ex-wives, court documents and witnesses said.
In December 1986, he was charged with criminal mischief when, after a near traffic mishap in Austin, he tried to drag a man out of his car and, prevented from it by locked doors, stood screaming obscenities and kicking the door until he racked up damages totaling $379.
General Motors Acceptance Corp. filed a court order to get back two Cadillacs leased to Chenault, for which he had failed to make payments. The petition stated the firm feared Chenault “may assault its agents if repossession of the vehicles is attempted by GMAC.”
This article was originally published in the September 16, 1991, edition of the Austin Business Journal.
by Ken Martin
Austin Business Journal Editor
© Copyright 1992 by Austin Business Journal Inc.
An Austin loan packager and business broker was sentenced in a Travis County state district court last week after pleading guilty to two charges of misapplication of fiduciary property of more than $10,000, both first-degree felonies.
John Bert Chenault was ordered by District Judge Jon Wisser to serve 14 days in the Travis County Jail, 10 years probation, 10 years deferred adjudication, pay a $1,000 fine and make restitution of $33,500.
Chenault’s questionable business practices were exposed by the Austin Business Journal more than two years ago.
The lead paragraph in one of the stories about Chenault, published May 28, 1990, described the excesses of a man who ripped off clients all over Central Texas, both in his work as a business broker and as an assembler of financial packages to be submitted for loans.
“Mention John Bert Chenault to his clients and they get mad. They call him a con man, a crook and lying bum, plus a lot of things you can’t print in a newspaper,” the story said.
He battered two wives, now ex-wives, court documents and witnesses say. In other violent episodes, he was arrested for criminal mischief and had a court order filed against him by an automobile-leasing agency, which feared he would assault agents trying to repossess two Cadillacs. He once served 21 months in a Texas penitentiary for theft. His rap sheet goes back to 1967.
Chenault had shrugged off lawsuits for deceptive trade practices and flaunted unpaid judgments and tax liens that together totaled $270,000 at the time the first article was published. Yet he wore expensive suits, drove a late model Cadillac and maintained a spacious office. He attracted new clients with a direct-mail campaign that appealed particularly to struggling small firms.
In March 1991, after conducting an independent investigation, the Texas Attorney General sued Chenault under the Deceptive Trade Practices Act.
As an outgrowth of the attorney general’s investigation, Chenault was subsequently indicted in Williamson County on felony theft charges. The indictment stemmed from dealings with Bill Topiwala, who lost $5,000, and David Stone, who lost $600. The charges were dropped after Chenault made restitution.
Chenault also was indicted in Travis County on a first-degree felony charge of misapplication of fiduciary property of more than $10,000. The charge, stemming from acceptance of some $20,000 from Sergio and Guadalupe Tristan in connection with the purchase of a laundromat in Austin, said Chenault withdrew funds from an escrow account and recklessly misapplied sums of more than $200 but less than $10,000 on eight occasions.
Last week, Chenault pled guilty in the Tristan case and a similar one in which he accepted $26,000 from Greg Shaw in connection with the purchase of a restaurant.
Blake Williams, an assistant district attorney in the Public Integrity Unit that prosecutes white-collar crimes for the Travis County District Attorney, said in both the Tristan and Shaw cases, Chenault withdrew earnest money from the escrow account and used it for expenses unrelated to any business he had with the victims. When the deals fell through, he was unable to refund the money.
Since his indictment on the Tristan case, Chenault repaid $9,000 of the $42,500 he had accepted from Shaw and the Tristans, Williams said. The court-ordered restitution of $33,500 would repay the remainder.
Court documents from last week’s sentencing show Chenault is to repay the $26,000 at $125 a month and the $7,500 at $25 a month until the sums are paid in full. Assuming the repayment schedules are met, the 300-pound Chenault, now 52 years of age, would be nearly 78 years old when the debt is repaid.
Esther Chavez, the assistant attorney general who filed the civil lawsuit against Chenault, last week said the case had been put on hold during prosecution of the criminal charges.
The lawsuit had sought to assess civil penalties of up to $10,000 against Chenault, and to order him to restore all money taken from another set of victims by means of unlawful acts or to award judgment for damages.
“We have negotiated an agreed judgment that includes injunctive relief that is similar to what the criminal court has ordered,” Chavez said.
In sentencing last week, Chenault also was prohibited from engaging in either business brokering or the preparation of loan packages for the Small Business Administration.
This article was originally published in the July 20, 1992, edition of the Austin Business Journal.