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Crunching the Numbers of the Mott "Loan"
(Printed in the Towanda Daily Review on February 21, 2009.)
In 2005, Brenda Mott plead guilty to four felony charges involving the theft from the Canton Borough Authority (CBA) of over $500,000 as contended by the state, with restitution of $659,043 ordered. Currently, Mrs. Mott is repaying $200/mth to CBA, although restitution payments in two previous years were significantly higher.
According to the Review (Jan. 10, 2009), Mrs. Mott had repaid approximately $30,000. Other reports indicate that a slightly higher amount had been repaid. However, it is clear that a significant balance remains, and for the purpose of this letter, I'll use a figure of $630,000.
In arguments to increase the restitution payment amount, State Deputy Attorney General Christopher J. Jones had commented that at the current rate of $200/mth, full repayment would take 261 years.
The above figure is correct, but assumes that no interest is included in the repayment. If CBA had use of the missing $630,000 and invested it at a 2% annual interest rate, they would receive $1050/mth in interest from the investment. If Mrs. Mott still has the money and had surreptitiously invested it at 2%, she would get $1050/mth, pay $200 to CBA, and clear $850/mth -- less income taxes of course.
If Mrs. Mott had borrowed $630,000 from a lender (if any survive) at 2% interest over 261 years, and had somehow negotiated $200/mth payments with a final balloon payment, this final balloon payment in the year 2270 would be a little over $94 million.
If she had gotten a loan with the same conditions as above except for 30 years, the final balloon payment would be a much more reasonable $1.05 million.
The terms of Mrs. Mott's "loan", even if they did include a felony rap and a few months in jail, seem quite reasonable.
John L. Ferri