No Dough

Richard and LaJeanne Williams had big dreams for their bakery--until a bank figured their plan was just pie in the sky

Richard Williams saw himself as the pie-and-cookie mogul of Dallas. He envisioned a huge plant churning out thousands of his cheese cakes and pecan pies, a fleet of his trucks delivering them to bake shops and restaurants across Texas--maybe even the country. It was a dream Williams and his wife, LaJeanne, nourished for 13 years, from the day they started Scratch Bake Bakery in the tiny kitchen of their suburban DeSoto home.

The dream seemed to be coming together last year, with Scratch Bake poised to offer the rest of the city what southern Dallas residents already had--the joys of its homemade desserts.

Richard Williams rented an empty storefront downtown, bigger by far than the store on Camp Wisdom Road that Scratch Bake moved into after outgrowing the DeSoto kitchen. He ordered stainless-steel tables, mixers with bowls big enough to lie down in, and ovens that could bake 28 pies at a time.

The company doubled its staff, hiring much of its work force--as Richard Williams liked to do--from among the city's most marginal people: single parents on welfare, ex-convicts, and others needing a second chance.

The second location would be easily accessible to people from all parts of the city. Heavy corporate hitters like American Airlines and Nordstrom had signed letters saying they would place orders with Scratch Bake.

The one missing ingredient was money, but the Williamses weren't worried about that. Bank of America had already loaned Scratch Bake $100,000 to start its expansion. And, the Williamses would claim in a lawsuit, they had been assured by Don Ford, a bank vice president, that the second $100,000 loan needed to complete the project was on its way. Based on the bank's representations, the Williamses bet the business.

And they lost.
Bank of America never loaned the couple the promised money. Instead, the bank delayed funding the loan, and ultimately killed it. The Williamses found themselves spending nearly all of their money to keep Scratch Bake afloat as they scrambled for capital.

Their efforts failed, and so did the bakery, putting 22 people out of work and scorching the 13-year-old dream.

A year later, bitter confusion has replaced the sweet taste of success. The Williamses still don't understand why a business with a successful track record like theirs was suddenly shunned by the bank. Their speculations keep leading them to the color of their skin. LaJeanne Williams says the couple has lived in Dallas too long not to consider race a factor. At the very least, the Williamses feel they are victims of the excessive burdens placed on minority-owned businesses trying to work their way up.

"I don't think they dealt with us in good faith," LaJeanne Williams says. "I don't think they intended to give us the money.

"It seems like it's OK for you to make money, as long as it's a little bit," she says. "But don't try to make too much...or you're stepping on toes."

The couple now is suing Bank of America, claiming it lied to Scratch Bake about the loan. The bank, Richard Williams says, deliberately dragged out funding the loan while Scratch Bake spent its way into a financial hole. The bank continually misrepresented the status of the loan, the lawsuit contends. And because the Williamses believed the bank's promise that the money was forthcoming, they lost their livelihood.

Bank of America will say nothing in its own defense. Numerous telephone calls to Jeffrey King, the bank's Dallas attorney, and bank officials in California, where the loan was handled, yielded only a "no comment" from bank spokesman John Keane. "We will defend ourselves in court," he says.

The suit has become a sort of crusade for Richard Williams, who sees a higher purpose in the bakery failure. God may not want him to become the next Famous Amos yet, he says, but he can try to make sure no one else is so unjustly treated.

"I think it's important that people understand...the stalling tactics they use," Richard Williams says. "It seems what they want to do is wear the person down so that they give up. I honestly believe there is a story to be told."

To hear the Williamses tell it, theirs was an accidental foray into the baking business.

Richard Williams, 45, used to be a counselor at the Dallas County Youth Village. At 6 foot 9 and more than 300 pounds, he is built more like a football player than a baker. LaJeanne Williams, 48, had spent nearly 20 years of her life working at Southwestern Bell, baking only occasionally for her family.

In 1982, the couple's daughter needed to raise money for a choir trip to Florida. Someone suggested that LaJeanne Williams bake a couple of cakes and pies and raffle them off to co-workers. The raffle went well, and yielded an added bonus.

"People started asking me to bake for them," LaJeanne Williams says. The Williamses began taking orders for desserts, and for the first year baked in the modest kitchen of their home. Then the couple landed a contract to make desserts for Partners restaurant, owned by Joe "Mean Joe" Greene, former defensive lineman for the Pittsburgh Steelers. It was time to open a real store, and Richard Williams scouted locations. He found one in downtown Duncanville, and Scratch Bake Bakery had its first actual business address. Several years later, the company moved from Duncanville to its Camp Wisdom Road location.

The bakery's appeal was its sinful products. The cheese cakes, pecan pies, cookies, and desserts were unabashedly fattening, made with whole milk, butter, eggs--all things forbidden or substituted in today's confections, Richard Williams says.

"I've never really been one to brag," he says. "But our pies were made from scratch. With stuff like your mamma used to use." His favorite, he says, was the cheese cake.

After the deal with Partners, other contracts followed with places like Mamma Joe's restaurant and even the Hard Rock Cafe, which bought pecan pies in bulk.

Bonnie Johnson, owner of Mamma Joe's cafe in Red Bird Mall, says a cake or pie from Scratch Bake was like a room at the Adolphus Hotel--comforting, lovely to look at, and classy.

"He served everyone, from the highest to the lowest," Johnson says.
The bakery's hiring philosophy reflected the Christian social ideals of its owners and Richard Williams' background as a youth counselor. The Williamses routinely employed folks that others wouldn't give a chance to: the long-time out-of-work, welfare parents, and ex-convicts. Richard Williams says that giving people a job gives them hope and a chance at redemption.

"[Richard Williams] was about giving people chances," says Thomas Chapman, who managed the downtown Scratch Bake store. "The ladies who were on welfare came in and worked their hearts out."

Delphia Brooks says the bakery gave her her life back. A single mother of three, Brooks had trouble finding a job after going through trade school. She was out of work and had been on welfare for a year when she went to a job fair at her housing project three years ago and heard about Scratch Bake. She sat down for an interview and thought things went well. She wanted to be a cashier.

But Richard Williams had other plans for her, Brooks says. He asked her about the sorts of foods she cooked for her children. And she told him. He looked at her and told her she was going to be a baker. "But I have no experience," she recalls telling him.

"Doesn't matter," Richard Williams replied. "We can train you."
And they did. Soon, Brooks says, she could make tasty confections with ease. A year and a half later, Richard Williams took another chance and made Brooks bakery manager. He bought her books on management so she could learn how to handle sticky situations with employees like evaluations.

"They got me back on my feet and off welfare," she says. "I really like the job. It gave me experience that I can use for the rest of my life. I will never lose that."

When Chapman went to work for Scratch Bake, he wasn't looking for a way off welfare; he was looking for a chance to be a boss. Chapman managed a rent-to-own store in the same plaza as Scratch Bake, and knew Richard Williams. When he heard about Scratch Bake's expansion plans, Chapman applied for a job and took a cut in pay to work for the bakery.

"It was an ideal situation for me," he says. "[Richard Williams] wanted to eventually have four or five stores. And I knew he could do it. I mean, I ate enough of the cakes."

The tiny bakery on Camp Wisdom Road was usually swamped, and getting through the door on weekends could be difficult. Indeed, the bakery's tiny kitchen was equipped with household appliances, making it hard for Scratch Bake to fill its orders.

The Williamses say they knew they had to find bigger digs. And Richard Williams says he had big plans for the bakery. He could see people driving in from North Dallas and Fort Worth for supplies. In his mind, he envisioned selling his cookies and pies nationwide, becoming Texas' version of Famous Amos.

"I know that we could have become the best-known bakery in the state," he says. "It was just a matter of getting the right location."

And money. So the Williamses began looking for a bank to help them out.

Although he didn't see it at the time, Richard Williams says he can now look back on the way Bank of America treated Scratch Bake and discern a pattern of prejudice.

Indeed, the experience of Scratch Bake Bakery could be a textbook example of the frustration that small businesses face when trying to secure loans from banks. For minority businesses, Richard Williams says, that frustration is especially burdensome and often ends in heartbreak.

The couple first considered going to Bank of America after some bank representatives came to a business meeting in Oak Cliff, talking about how the bank wanted to lend more money in the minority community.

In 1993, the couple went to Bank of America with the plans for expanding Scratch Bake.

The Williamses say they were told they could establish a good relationship with the bank by applying for a small loan or line of credit and paying it back. So they did, applying for and receiving a $45,000 line of credit, and making payments on it. The money was used to buy equipment and pay off some bills, Richard Williams says.

A year later, the Williamses were ready to get serious about their planned expansion. They calculated that it would take $200,000 to open a second, larger Scratch Bake location.

But when they went to Bank of America with that projection, the bank hesitated, they say. They were told Scratch Bake wouldn't qualify for that much money through the Small Business Administration's loan guarantee program. Instead, the bank suggested they apply for two smaller loans of $100,000 each.

The Williamses say they were told not to worry. Since they had already qualified for the earlier, $45,000 loan, the process for the next loans wouldn't take too long.

But the process was slow. It was months before Bank of America funded the first $100,000 loan, they say. Before approving the loan, the bank required Richard Williams to take out a life insurance policy for $100,000. Loan officers also requested several revised financial statements from them, and required both of them to submit a statement of personal history, an autobiographical sketch. The Williamses jumped through hoops, and in August 1994 finally got their first $100,000.

The money was earmarked for buying equipment and paying contractors to fix up the 4,400-square-foot building on Elm Street where Scratch Bake intended to open its newest, biggest bakery. The Williamses bought huge new stoves, counters, tables, chairs, refrigerators, and mixers, all industrial in size and strength.

The first loan put the company on the verge of being able to move into its new location. But the second loan was vital if the expansion plan was to work. The second $100,000 was slated to pay for supplies for the cakes, increased staff, and the $1,000-a-month rent on the new store.

Richard Williams says that, before taking the plunge and moving, he asked Don Ford, then vice president of the commercial lending department at Bank of America, if the second loan was going to be delayed. Once the company moved its baking operations to the new location, it would need the cash infusion right away, Richard Williams says he told Ford.

"He told me to sign the [rental] contract," Richard Williams says. "The loan would be approved."

But in January 1995, when the couple submitted a formal application for the second $100,000 loan, delays began.

The bank raised questions about things the couple felt had already been resolved during the previous loan application process.

The bank shouldn't be faulted for being careful. The Williamses did not have a sterling credit history. A credit search turned up a 10-year-old car repossession against LaJeanne Williams, and more recent troubles for her husband. In 1990, Richard Williams was hit with a judgment for $46,721 sought by Cedar Ridge Properties, Scratch Bake's former landlord in Duncanville.

Cedar Ridge sued Richard Williams and Scratch Bake Bakery, claiming the bakery owed it 10 months' back rent, plus attorney fees for bringing the suit. Cedar Ridge won.

Richard Williams has an explanation for what happened. His contract with Cedar Ridge, a shopping center in Duncanville, had a noncompetition clause forbidding the landlord from renting space in the shopping center to anyone else who wanted to sell whole pies and cakes, Richard Williams says. But an Italian restaurant began to encroach on Scratch Bake's turf, in essence breaking the shopping center's contract with the bakery, he says. So, unable to negotiate a new agreement, the bakery closed up and left the shopping center, Richard Williams says.

The case should have come as no surprise to Bank of America, he adds. "It's on my credit report," he says. "And they knew about it." Richard Williams still has not paid any of the money owed Cedar Ridge Properties.

Bank representatives also questioned the Williamses about a loan they had received from the Southern Dallas Development Corporation, and why it was delinquent.

Scratch Bake was behind on the SDDC loan, Richard Williams says, because the bank's delays in funding the first $100,000 loan had forced him to take money out of his own pocket to pay company expenses.

There was also the matter of a questionable 1992 tax return. But Richard Williams says there was simply a typographical error, and that he sent the bank a corrected tax form.

The bank's questions were troubling because they seemed totally unnecessary, the Williamses say. Bank of America had already provided their company with two loans based on essentially the same information.

But still, the bank had questions and wanted more paperwork, like copies of the letters of intent the bakery had to make desserts for American Airlines, Concessions International, and others. The bank also wanted to call those clients to find out if they were guaranteeing that they would use the bakery.

While Richard Williams was offended that his letters of intent were not good enough for the bank, he gave it permission to call his customers to verify their plans to buy from Scratch Bake.

"They seemed to want to take every possible step to deny the loan," Richard Williams says. "But we could explain everything."

The explanations seemed good enough. On April 13, 1995, the loan was approved, according to a letter sent by the bank. The letter said only some routine paperwork remained.

But the loan still didn't come through.
Instead, Richard Williams was asked to submit even more paperwork. The delays and demands were particularly inexplicable, Richard Williams says, because the final $100,000 loan--like the first loan--was to be backed by a Small Business Administration guarantee. If for some reason the couple couldn't pay the loans, the SBA had agreed to pay up to 90 percent of the remaining principal, says Larry Miller, deputy director for the SBA's district office.

It would seem that the bank was covered. So what happened?
"It doesn't make any sense," Richard Williams says. "We don't have a sensible answer."

LaJeanne Williams is a bit more blunt.
"I don't think they ever intended to give us the money," she says.
Her conviction stems in part from a meeting the Williamses had with Miller and James Breedlove of the SBA when the loan problems were at their height. The SBA wanted to know why the loan had not been funded, and set up a meeting that was supposed to include the Williamses, the SBA, and Bank of America. No one from Bank of America showed up.

But Bank of America had a copy of Scratch Bake's business plan, and should have known that the second loan was crucial to the continued life of the business. It seems more risky for the bank to deny the second loan than fund it, since a thriving business would be more likely than a dead one to pay back the money that Bank of America had already loaned to Scratch Bake.

Breedlove of the SBA notes that a bank is perfectly within its rights to change its mind. He remembers being contacted by Bank of America after the bank decided to deny the second loan to Scratch Bake. Breedlove says the bank told him it was not going to fund the loan.

"They said that they discovered information that was either inconsistent or different than what they had made in their initial details," Breedlove says. "They did not feel with that new knowledge they could actually complete the deal." Breedlove could not remember what these new details were.

In May 1995, the Williamses received a letter from Bank of America saying that the loan was now denied. By that time, Scratch Bake Bakery had long since moved into its downtown location and fired up all its new ovens. Money was getting tighter and tighter because the company had bought, built, and hired on the belief that a $100,000 cash infusion was on its way.

The bank's behavior caused Scratch Bake's finances to begin toppling like dominoes. The company fell behind in payments to Bank of America on the first loan, because the bakery needed all its cash to keep its doors open. The cash crunch also caused the company to be a month late on a rent payment.

The Williamses scrambled to keep afloat. They contacted Bank of America to find out why the loan had been denied, and were given a nebulous statement about credit problems. The couple contacted the SBA hoping the agency could help find another bank to fund the loan. For another two months, the couple lived by means of the fax machine and prayers, shunting aside past-due bills and hoping money would arrive.

Bank of America again flip-flopped and began telling the Williamses they would receive the money. On July 14, 1995, Richard Williams' secretary left him a note saying that a loan representative from Bank of America had called saying that--once again--the bakery's loan had been approved.

But it was too late. The bank's delays had dragged on for too long, and Scratch Bake was broke.

The next day, Richard Williams and his manager told company employees that this would be their last day of work. Scratch Bake Bakery was closing its doors.

"It was devastating," he says. "Me and my family went through a lot of anguish. A lot of people later came up to me and said it hurt them personally. It had shaken their confidence."

These days, Scratch Bake Bakery is nothing more than a sweet memory in the minds of those who tasted it.

"It could have been bigger than life," says Chapman, the former downtown manager.

Scratch Bake's location on Camp Wisdom Road is now a deli. The downtown store--the linchpin of the Williamses' confectionary dream--is now a restaurant. Richard Williams says he can't bear to see it.

Bank of America auctioned off the stainless-steel tables, the mixers, and other equipment, Richard Williams says.

The closing was rough on the family, and the pain continues. "We're losing just about everything we own," Richard Williams says. The family cobbled through just enough money to send its last son off to college this year. The Williamses are living on what LaJeanne brings in from her job at Southwestern Bell, a job she held during much of the bakery's life.

Like a groom left standing at the altar, Richard Williams wonders what he could have done differently. Nothing, he concludes. He played by the rules, jumped through all the necessary hoops, gave the bank everything it asked for.

Did Scratch Bake receive such harsh treatment from Bank of America because it was minority-owned? Richard Williams doesn't hesitate with his answer.

"Yes. I think that our growth potential was a little bit more than other people wanted it to be," he says.

Scratch Bake wasn't a fly-by-night company. It was within striking distance of reaching $1 million in sales in 1996, Richard Williams says. When he approached the bank, the company had more than a decade of success and customer satisfaction behind it. It had letters of intent from big buyers. It had the good will of many in the business community.

"Why would they not fund us?" he asks rhetorically. "They can't say I was a risk. I fought closing until they broke me. Only they can answer that for themselves."

There are new worries. Unpaid vendors have sued for bills amounting to tens of thousands of dollars. And the SDDC has filed its own suit against the Williamses and the bakery seeking payment of the remainder of its loan. And the loans that Bank of America made to the bakery--the initial $45,000 and the later $100,000--are both in default. Yet Richard Williams says he won't declare bankruptcy. He's going to fight on.

"I sacrificed everything," he says. "That [second] $100,000 would have been worth their time. In my opinion, they didn't really care about the money. They cared more about putting us out of business."

Then Richard Williams gets a prophetic tone in his voice, and a calm spreads throughout his 6-foot-9 frame. Scratch Bake will live again one day; he knows it. "I ain't worried," he says. "It's all going to be all right.

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