The Arizona Democratic Party is comparing the way Republican gubernatorial candidate Doug Ducey ran Cold Stone Creamery to a Ponzi scheme.
To push the point, the party held a bit of an ice cream party at its Phoenix headquarters today, showing off gallons of ice cream labeled: "Doug Ducey's Pistachio Ponzi Scheme."
This stunt comes on the heels of reporting from the Wall Street Journal on the high default rate on Small Business Administration loans used for franchises. Cold Stone Creamery, with a 29.4 percent default rate, was behind only three other franchises for the highest default rate. Taxpayers then footed the bill for the loan charge-offs.
According to the WSJ story, "Cold Stone owner Kahala Franchising LLC said the problems caused by the recession were compounded by the 'extreme growth' that occurred in the years immediately preceding the downturn."
DJ Quinlan, the executive director of the Arizona Democratic Party, pointed to the dictionary definition of a Ponzi scheme, which calls it "an investment swindle in which early investors are paid off with money put up by later ones in order to encourage more and bigger risks."
"That's what a Ponzi scheme is: basically, you bring in new investors so you can pay off the original ones, and that's the story of Cold Stone under Doug Ducey," Quinlan says. "This was Ducey's plan to push out this expansion, to get franchises to take out these [Small Business Administration] loans to prop up the stores, so that he could continue to make money and walk away, selling the company, making tens of millions of dollars. To me, that fits the model of a Ponzi scheme."
Quinlan says he's not claiming Ducey did anything illegal, but that he believes the dictionary definition is applicable here.
The state Democratic Party has consistently gone after Ducey's business record. Even when Ducey was first running for Treasurer in 2010, the party hosted several former Cold Stone franchise owners who blamed the company for their personal financial downfalls.
We've reached out to the Ducey campaign for a response to the "Ponzi scheme" allegations, and this story will be updated if we get a response.
Ducey's time as the CEO of Cold Stone Creamery has been the foundation of his campaign; he's touted his business experience as his main qualification as a candidate for governor.
Many Democrats supporting his opponent Fred DuVal obviously don't portray Ducey and Cold Stone as an American success story.
For example, Democratic Senator Katie Hobbs -- who was at the Dems' ice cream unveiling today -- issued a statement further blasting Ducey's experience.
"Doug Ducey might think that a thirty percent failure rate is a success in business," Hobbs says. "I am a parent with two children in our public schools and we cannot accept a thirty percent failure rate in our schools. Our schools are not a ponzi scheme and cannot be treated like one."
Quinlan says the Arizona Democratic Party will be releasing more Ducey-themed ice cream flavors throughout the week.
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