City to announce plan to recoup defaulted loans following FOX19 - Cincinnati News, FOX19-WXIX TV

City to announce plan to recoup defaulted loans following FOX19 investigation

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(PHOTO: FOX19 NOW/Jody Barr) (PHOTO: FOX19 NOW/Jody Barr)
LAWRENCEBURG, IN (FOX19) -

It was three weeks ago that a FOX19 investigation dug into the city of Lawrenceburg’s loan portfolio, exposing nearly $16 million in taxpayer-funded loans to private businesses across the city. We also uncovered proof that most of those loans were in default.
 
Tonight, at a city council meeting that starts at 6, the mayor is expected to detail a plan to collect those tax dollars. The mayor, through his attorney, has refused multiple to answer multiple questions from FOX19 to explain what his administration’s plans are to collect these loans since taking office in January.
 
Tonight on FOX19 NOW at 10, we’ll have a complete report on the city’s plan to collect the money it lent to private citizens, starting a decade ago.

THE LAWRENCEBURG LOAN INVESTIGATION:


For the past several weeks, the city of Lawrenceburg’s worked to figure out what to do about some of the $16 million in tax payer-backed loans it lent private businesses in and around the city. The city started lending tax money in 2006.

As of this report, two of the 17 loans are paid off, two others are currently still within the terms of the loan agreement and the rest are “technically in a default status,” according to Lawrenceburg City Attorney, Del Weldon.

Last June, the city hired the Gerner and Kearns law firm to investigate each of the 17 loans and recommend to the city how to handle each loan. The firm recommended “immediate foreclosure” on two men who borrowed a total of $5.2 million.

During a Dec. 7, 2015 city council meeting that law firm read its recommendations to the city’s Revolving Loan Committee for each of the 17 loans. Council records show a vote that night to implement the law firm’s recommendations on multiple loans.

That recommendation: send default notices out and begin the process of collecting the outstanding balances.

CITY PAYS LAW FIRM $80K TO INVESTIGATE

“We were looking for ways to extradite the city of Lawrenceburg from this loan program as quickly as possible with hopefully no loss or minimal loss,” Davis Shelton of the Gerner and Kearns law firm told council during the Dec. 7, 2015 meeting.

Shelton made a 45 minute presentation to council that night, laying out the details of his investigation on each of the 17 loans.

We submitted an open records act, requesting from the city, all work product and spending records related to the city’s Gerner and Kearns investigation. Those records show the city spent $79,433.50 with the firm. That spending went for: research, trips to Lawrenceburg, emails and phone calls with borrowers and banks, title searches and the firm’s time to look over the paperwork related to each loan.

The invoices show Gerner and Kearns charged city tax payers $250 an hour for the majority of the work shown on the invoices.

Some examples of the spending:

  • $625 for a June 2, 2015 meeting with former Mayor Dennis Carr “and others”
  • $2,500 for a June 23, 2015 trip to Lawrenceburg to “review loan files at city office”
  • $1,300 to “file review and copying” and email former city attorney Leslie Votaw on June 23, 2015
  • $1,000 to “review loan files for statuses of loans on June 24, 2015
  • $200 to email bank representatives on July 15, 2015
  • $250 to read emails on July 17, 2015
  • $950 to attend the July 20, 2015 city council meetings
  • $125 for an August 26, 2015 phone call to former city attorney Leslie Votaw
  • $300 to email banks and city officials on Oct. 14, 2015
  • $2,125 for attendance at the Dec. 7, 2015 council meeting

 Shelton told council he recommended “immediate foreclosure” on two loans to Steve Linkmeyer and two loans to Davis Holding Company, a company registered to Gregory Davis. The four loans total $5.2 million, city records show.

The attorney told council the city should send a 30 day notice to Linkmeyer and Davis, warning them that if they did not pay off the balance in 30 days, the city would begin foreclosure filings to collect collateral used to secure the loans.

“It’s to set a deadline that says we expect to be paid and we need to be paid by this date,” Shelton told council.

Council, in a unanimous vote, decided to implement the law firm’s recommendations and gave the city a deadline of Dec. 18 to send notices of default to the borrowers the city determined were in default.

By Jan. 18, 2016—if the city followed council’s order—the first foreclosure action should have been filed if the borrowers did not respond to the city’s default notice or paid off the loan balance.

As of this report, the city confirmed to FOX19 NOW, not a single notice was mailed.

60 DAYS LATER, CITY HAS NO PLAN OF ACTION

We found out last month that the city never sent a default notice to any borrower, despite council’s legislative action of Dec. 7. The city’s new attorney, Del Weldon, confirmed that fact to FOX19 NOW in a Jan. 29 phone call.

Weldon told FOX19 NOW, he made the decision against sending default notices, despite the Dec. 7, 2015 council vote to do so.

“We may not do that,” Weldon told us when questioned about whether the city would follow the recommendations regarding the Linkmeyer and Davis loans. Weldon said he wanted to review the Gerner and Kearns investigation.

“It’s a request I personally made,” Weldon said in a phone call, “I didn’t want litigation I’d be forced into.”

We caught up with Weldon at the city council’s Feb. 22 meeting where Weldon told FOX19 NOW that he did not currently have a timeline on when the city could act to collect the loans.

“I think it’s a question of when, not if,” Weldon said. “When,” FOX19 NOW investigative reporter Jody Barr asked, “We don’t know,” Weldon responded.

Weldon told us during the interview that he never knew about the notice of default deadline former councilman Mike Lawrence had council add to the motion that passed in December, “I didn’t even know Mike added; let’s do it by a certain date. I just found that out by listening to the tape,” Weldon said.

We questioned Weldon several times about the details of the “city’s plan” he made reference to during the interview, but Weldon could not provide those details, “We have a plan to carry out a plan that is going to help us get back the money,” Weldon told FOX19 NOW.

THE BREAKDOWN OF THE 17 CITY LOANS

We filed multiple open records requests with the city for payment histories, collection history and legal action filed against any of the 17 business owners who make up the city’s $16 million loan portfolio. On Feb. 26, the city turned over the final record to us.

As of this report, the city has not sent formal foreclosure letters to any of the borrowers, but the city’s attorney said most of the loans are “technically in a default” status.

This is a comprehensive breakdown of each of the 17 loans, all based off the public records provided to us by the city from the Gerner and Kearns report:

STEVE LINKMEYER: TANNER CREEK PROJECT

City records show this $3 million loan was signed Nov. 30, 2009 and was supposed to provide financing for a large development behind the Wal-Mart location in Aurora. The project was to excavate 21.5 acres of city-owned property to prepare the acreage for “future development,” the loan agreement shows.

The payment history shows no payments made between April 5, 2012 and May 2, 2015, when a $175,000 payment was made on May 1. City records show no other payments made since May 1, 2015.

“I want to tell my story,” Steve Linkmeyer told FOX19 NOW’s Jody Barr on Feb. 25 while out shooting video of the Tanner Creek Project. Linkmeyer said he was “calling my partner who is in Indianapolis today,” and would interview with us over the weekend.

The next day, Linkmeyer called from his attorney’s office, declining the interview. Linkmeyer’s attorney, Matthew L. McDaniel, sent us a statement: “The failures of the last City administration created this financial fiasco. The Linkmeyer Entities have since filed a lawsuit against the City seeking damages and judgment on the principal loan amount after the City breached its utility agreement necessary for developing the Waterview Apartments. At this time, the Linkmeyer Entities and its officers are advised to withhold further comment as they pursue all available legal remedies.”

The loan was supposed to be fully paid off by Oct. 1, 2015. The balance today is: $3,062,947.21.

COLLATERAL: first mortgage on 95 acres. Personal guarantees from: Steve Linkmeyer, Valerie Linkmeyer, Brian Bischoff and Holly Bischoff.

RECOMMENDATIONS: send a 30 day default notice, then foreclose.

STEVE LINKMEYER: TOWER ROAD STORAGE BUILDINGS

City records show this $250,000 loan was signed Feb. 8, 2008 to finance a 136 unit self-storage building project on Tower Road in Lawrenceburg. The project is complete, but the loan has not been repaid.

The loan was supposed to be fully paid off by Feb. 1, 2015. The balance today is: $125,598.93.

COLLATERAL: The city could own the buildings and the 2.7 acres where the buildings are located if the city successfully foreclosed. 

RECOMMENDATIONS: send a 30 day default notice, then foreclose.

DAVIS HOLDING COMPANY: HIGH STREET AND WALNUT STREET PROPERTIES

City records show this loan was signed March 31, 2010 for a total of $1,165,171.21 and went to Wagner & Lamping, LLC. On Feb. 15, 2012, Greg Davis took over the loan through the Davis Holding Company, LLC with a loan balance of $1,137,250.38.

The loan is supposed to be fully paid off by April 1, 2017. The balance today is: $1,165,171.21. City payment records show there were no payments made between Nov. 1, 2014 and July 1, 2015 and again between Nov. 1, 2015 and Feb. 24, 2016 when Davis made a $3,000 payment on two of his outstanding loans.

We went to the Davis property on Feb. 26 looking for Greg Davis. Davis later called us back, but declined an interview. Davis did tell FOX19 NOW that he’d made “other payments that weren’t logged in,” Davis said in a Feb. 29 phone call. Davis said he had canceled checks to prove the city’s records are incorrect, but admitted he did not have receipts for the payments.

“I don’t dispute I’ve missed payments,” Davis said, but disputed whether his loan would be considered in default,” I’m not going to comment further,” Davis said over the phone.

COLLATERAL: secured by property located at 1 E. High Street, 3 E. High Street, 9 E. High Street and 110-112 Walnut Street, the Gerner and Kearns report shows.

RECOMMENDATIONS: send a 30 day default notice, then foreclose. The “payment status also precludes consideration for refinancing,” the Gerner and Kearns report states.

DAVIS HOLDING COMPANY: E. HIGH AND 9 SHORT STREET

City records show this loan was signed June 12, 2007 for a total of $717,000 to purchase and renovate city-owned properties located at: 9 Short Street, 30-34 High Street and 36 High Street. The loan was increased to $767,000 on April
27, 2011.

City payment records show there were no payments made between Nov. 1, 2014 and July 1, 2015 and again between Nov. 1, 2015 and Feb. 24, 2016 when Davis made a $3,000 payment on two of his outstanding loans.

The loan is supposed to be fully paid off by Dec. 1, 2014. The balance today is: 694,686.97.

COLLATERAL: secured by property located at 9 Short Street and 79-98 High Street.

RECOMMENDATIONS: send a 30 day default notice, then foreclose.

TRI-STATE CARBONIC

City records show this $340,000 loan was signed Sept. 29, 2009 and was to provide financing to house the company’s offices at 40 Doughty Road. That did happen.

The payment history shows no missed payments in the more than six years since the loan was signed. Although the loan payments were made on time, the city considers the loan in a default status because the date for the loan to be repaid has passed.

“I can’t find a bank to make a loan,” Tri-State Carbonic owner Barry Nanz told FOX19 NOW. Nanz said he’s tried to borrow the $258,442.98 from a bank to pay the city off, but hasn’t been able to do so. Nanz also said his records show he’s ahead by 10 payments to the city and has “fulfilled all promises to the city.”

Nanz agreed he could be in default, but the city has not called his loan and he continues making payments on the principal and interest to the city.

City records show Nanz has tried to refinance his loan with a bank and pay the city off. In a Nov. 6, 2015 letter to the city, Nanz offered to refinance his loan and increase the percentage rate from 4 percent to 4.5 percent.

The loan was supposed to be fully paid off by Oct. 1, 2014. The balance today is: $258,442.98.

COLLATERAL: mortgage on the 40 Doughty Road property.

RECOMMENDATIONS: send a “formal notice of default providing 60 days for the borrower to pay the remaining balance in full,” the Gerner and Kearns report states. The firm also recommended refinancing Nanz’s loan, but “this option is not
recommended unless the borrower provides evidence that outside financing was attempted and the loan denied by providing a loan denial letter,” the report states.

MARTHA J. REYNOLDS: THE SIGN SHOP

City records show this $350,000 loan was signed in May 2007. Reynolds’ payment history shows she paid the loan off in Dec. 2015. Reynolds wanted to pay the loan off around the maturity date, the report shows, but was not able to get an accurate payoff amount from the city, the Gerner and Kearns report shows.

The loan was supposed to be fully paid off by June. 1, 2014. The balance today is: $0.

COLLATERAL: mortgage at 101 and 111 E. Eads Parkway.

RECOMMENDATIONS: “No further action is needed,” the Gerner and Kearns report shows.

HOME FURNITURE COMPANY

City records show this $1,144,898.77 loan was signed in July 2007 and was to provide financing to expand and remodeling of the company’s Eads Parkway location. That expansion was completed shortly after the loan was made and allowed the company to make one hire and expand its business, returning tax revenues to the city, owner Chuck Brandel told FOX19 NOW.

The payment history shows no missed payments in the history of the loan. Brandel started doubling up payments to $10,000 a month at the end of 2015.

The loan was supposed to be fully paid off by August 1, 2015. The balance today is: $567,735.94.

COLLATERAL: mortgage on the Home Furniture Company property.

RECOMMENDATIONS: send a “formal notice of default providing 60 days for the borrower to pay the remaining balance in full,” the Gerner and Kearns report states. The firm also recommended refinancing Brandel loan, but “this option is not recommended unless the borrower provides evidence that outside financing was attempted and the loan denied by providing a loan denial letter,” the report states.

EUSON HOLDINGS, LLC

City records show this $325,000 loan was signed May 11, 2006 and was to provide financing for the Euson family to purchase and renovation of property at 120 Moore Street in West Harrison, Indiana. A company named 3S Incorporated occupies the address today.

When contacted by FOX19 NOW, Mathew Euson said the city told his family to “continue making payments,” despite the loan due date being May 11, 2011. “The city never asked to collect or refinance the loan,” Euson told FOX19 NOW over the phone.

“The city of Lawrenceburg’s making money on me,” Euson said. He’s referring to the interest the city’s collecting on his loan with each monthly payment. “We grew jobs, brought jobs to Dearborn County,” Euson said, arguing that aside from the loan’s due date, he’s complied with the terms of the agreement and made his payments on time.

The payment history shows missed payments, but Euson said he’s got proof he “may have been late,” on payments, but he’s always doubled up afterward.

The loan was supposed to be fully paid off by May 11, 2011. The balance today is: $203,340.94.
 
COLLATERAL: mortgage on the 120, 106, and 108 Moore Street properties.

RECOMMENDATIONS: send a “notice of default providing 60 days for the borrower to pay the balance,” the Gerner and Kearns report states. The firm also recommended refinancing the Euson loan, but “this option is not recommended until the borrower had attempted to obtain outside financing and provided the City with proof of loan rejection,” the report states.

DEARBORN GOLF RESORT

City records show this $3,260,000 loan was signed Dec. 22, 2011. The agreement is a zero percent interest loan with $5,000 monthly payments.

The loan’s pay off due date is Sept. 1, 2032. The balance today is: $3,065,000.

RECOMMENDATIONS: collect monthly payments.

USA LAND COMPANY NO. 2, LLC

City records show this $350,000 loan was signed in May 2009. The company also got a $50,000 grant from the city and another $20,000 small business grant. The loans and grants were for Bittner to purchase Jackson Hardware and operate it as a hardware store.

The payment history shows a perfect payment history, despite the loan becoming past due more than a year ago.

Last week, we went to Bittner’s hardware store to request an interview regarding his loan. Bittner never returned the message. We called Bittner’s office again today and as of this report, Bittner has not responded for comment.

The loan was supposed to be fully paid off by Jan. 1, 2015. The balance today is: $257,469.70.

COLLATERAL: mortgage on three separate properties.

RECOMMENDATIONS: send a “formal 60 day notice of default to establish a firm deadline for resolution of this balance,” the Gerner and Kearns report states. The firm also recommended refinancing loan, but “this option is not recommended
unless the borrower provides evidence that an attempt was made to obtain outside financing and that loan was denied,” the report states.

BF MESS, LLC & DORMAN PROPERTIES, LLC (LOAN ONE)

City records show this $1,500,000 loan was signed August 8, 2008. The loan was to expand a door manufacturing business at the Top Quality Building Products location on Rudolph Way in Lawrenceburg. The loan required interest only payments each year up until the loan’s due date of August 2011. The entire loan would come due after August 2011.

The payment history shows a perfect payment history, despite the loan becoming past due four and a half years ago. The owner, Mark Branscbach, has continued making payments through August 2015, the city’s payment history shows.

The city considers Branschbach in default: “Although payments have been received on this loan after the maturity date, per the loan agreement the loan is in default and was due to be paid in full no later than August 8, 2011,” the Gerner and Kearns report shows.

We tried to contact Branschbach at his office two separate times. Neither message was returned to include Branschbach’s comments in this investigation.

The loan balance today is: $1,387,460.30.

COLLATERAL: mortgage on the Top Quality Building Products building at 891-895 Rudolph Way. 

RECOMMENDATIONS: send a “formal notice of default should be sent to borrowers allowing for 60 days for the balance to be paid in full,” the Gerner and Kearns report states.

Branschbach offered to “settle this loan for $825,000,” city records show, but Gerner and Kearns recommended the city reject the loan “as it represents a loss of principal to the City of approximately $564,000.”

DORMAN PROPERTIES, LLC (BF MESS, LLC) (LOAN 2)

City records show this $750,000 loan was signed February 2010 to construct a row of townhomes on Williams Street in Lawrenceburg. The payment terms required annual interest payments of 2 percent, plus all profits earned from the operation of the townhomes. The agreement also required Dorman Properties, LLC to submit to the city “an accounting of profits” by Oct. 30 of each year to “determine the amount of principal payment due, according to the Gerner and Kearns report.

The city does not know whether the payment amounts are accurate and the borrower is in compliance because none of the accounting from the townhomes is on file with the city.

On August 31, 2015, the borrower sent a letter to the city, asking to settle the debt for $465,000. The Gerner and Kearns report recommended the city reject the offer since it would be giving away $200,000 in tax payer dollars to Dorman Properties, LLC.

The loan is supposed to be fully paid off by Nov. 1, 2016. The balance today is: $672,985.25.

COLLATERAL: mortgage on townhomes.

RECOMMENDATIONS: Not settle the loan with the borrower. Require the borrower to pay the remaining balance on the loan by Nov. 1, 2016.

JETS PROPERTIES, LLC

City records show this $1,010,000 loan was signed Dec. 6, 2007 to construct a strip mall along Highway 50. The loan principal and interest is paid in full, but the city shows $5,875.93 in late payment charges.

Council voted in December to hold the borrower, John Anevski to paying the late fees. The city has not provided us records that a payment was made.

Calls to Anevski’s published phone numbers have not been returned.

RECOMMENDATIONS: “It is completely at the City’s discretion to waive the late charges,” the Gerner and Kearns report states. The city should hold the mortgage on the strip mall until the charges are paid, the report recommended.

WHISKEY’S, INC.

City records show this $100,000 loan was signed Jan. 16, 2009 to purchase a lot and home at 319 Water Street to create a parking lot behind the Whiskey’s restaurant. The borrower, Jim Schwier, was required to make annual interest payments on the loan and the entire balance was due Jan. 16, 2014.

City records show that balance was not paid by the due date.

We made a trip to Whiskey’s restaurant last week and left a card with an employee who was working behind the bar. We were told Schwier was in Florida and unavailable, but would be back in town the next day. Schwier never returned the message or a phone message left Feb. 29.

The balance today is: $102,082.13.

COLLATERAL: mortgage on the parking lot built with the loan revenues.

RECOMMENDATIONS: send a “formal notice of default and demand letter providing that the full delinquent balance of the loan be paid within 60 days,” the Gerner and Kearns report states. City can modify the loan, but the Gerner and Kearns report recommended against that unless Schweir can show a denial letter from a bank once he attempts to have the debt paid off by taking a new loan out at a private bank.

SPARTA COMPANY, LLC

City records show this $100,000 loan was signed in June 2007. The loan was to remodel a building at 325 Walnut Street. The loan came due in April 1, 2013, but “Per agreement with the city, the interest only payment period was extended,” the Gerner and Kearns report shows. The loan was not paid off by April 1, 2013, but “verbal agreement, the borrower continued to make monthly principal and interest payments after maturity,” the report states.

The loan was supposed to be fully paid by April 1, 2013. The balance today is: $55,737.61.

COLLATERAL: mortgage on 325 Walnut Street location. 

RECOMMENDATIONS: send a “notice of default allowing 60 days to make arrangements to pay the remaining loan balance in full,” the report states. City can modify the agreement and extend the terms if the borrower can’t obtain bank financing to pay the loan off, then shows proof of the denial to the city.

OHIO VALLEY PRECISION, INC.

City records show this $600,000 loan was signed Jan. 16, 2007.

The payment history shows a perfect payment history, despite the loan coming due February 2014. The loan was paid in full in January 2016.

We spoke with the business owner Scott Allen two weeks ago. Allen told FOX19 the loan allowed him to hire more than a dozen employees and purchase equipment to operate two shifts.

The balance today is: $0.

RECOMMENDATIONS: None.

LELAND, LLC

City records show this $650,000 loan was signed May 14, 2008 with Leland, LLC and David Zerbe. The loan was to pay off the mortgage at 15 W. Center Street and renovate a historic building there. Payment history shows on time monthly payments, which were to end by the loan maturity date of June 1, 2015.

By that date, “all remaining principal and accrued interest is due and payable,” the Gerner and Kearns report states. City records show payments continued on time after the maturity date.

The Gerner and Kearns report shows Zerbe sent the city a letter on May 29, 2015--the day before his loan came due—telling the city “he was not in a position to satisfy the balloon payment due June 1, 2015 and requesting that the city extend the existing loan agreement for an additional 7 years with the same loan terms,” the report states.

Gerner and Kearns recommended against modifying the loan unless the law firm could not obtain outside financing to pay the loan off.

The loan was supposed to be fully paid off by June 1, 2015. The balance today is: $468,081.13.

COLLATERAL: mortgage on the Zerbe Law Firm property at 15 W. Center Street.

RECOMMENDATIONS: “Send a formal notice of default allowing 60 days for the borrower,” to pay the loan off, the report shows.

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