Friday, March 12

Jerry Hunt's SIDC Loan - Research

Readers Write - The Courier - Hunt/SIDC - 3-11-10

I find very interesting the reaction to the story in last week’s Courier about the financial problems of Jerry Hunt, the former head of Savannah Industrial Development Corporation (SIDC) and former CEO of Team Hardin County.

Some have commented that this is a personal matter, hinges toward gossip and criticize The Courier for even printing it, let alone on the front page.

Well, excuse me. When a public figure uses public dollars for a personal project and then that project goes belly up in six months, for whatever reason, I think The Courier has an obligation, as a newspaper, to give a heads-up to the public. The public is entitled to know if it was a good loan, that was really a bad loan to start with, or to know why it went bad.

These are tax dollars, folks.

Hunt made himself a public figure in Hardin County a long ago and has now used his current employment with the state along with his knowledge and experience on how to get a loan of public funds from the SIDC, a component of the city of Savannah government and a member entity of Team Hardin County, which is a component of Hardin County government. So far, there is nothing improper about that, at all.

But it turns out all Hunt had to do was tell the SIDC the loan package had already been approved in Jackson, it just needs to be funded by the SIDC, because Hunt worked for those folks that approved it in Jackson. One of those conflict of interest things, you know.

One has to wonder what happens if "the loan package" that was approved in Jackson, was not the same "loan package" presented to SIDC "for funding." What happens when the current CEO of SIDC doesn’t bother to check the details or verify and document the information in accordance with the SIDC and statutory requirements? You end up where they are today.

At the request of the chairman of the SIDC board, over a two or three month period last year, I worked with a team of volunteers to complete a little audit or records research project on this loan. What we found is not a very pretty picture.

There were so many administrative mistakes made by SIDC, SWTDD and the USDA in Jackson that one must conclude that they could not have all been just mistakes. Some of them had to be "just didn’t do their jobs" kind of mistakes and Hunt was less than truthful as to his financial conditions and/or his intent to actually operate a bed-and-breakfast and to create jobs.

To make a long and convoluted story short, the day the SIDC board approved the funding of the loan, a few of the members were heard to comment, after the meeting, that, "We should have never approved that loan. It’s going to come back to bite us."

History has proved those folks right.

The details of how the loan was processed, or not processed as the case may be, is beyond the scope of what can be covered here in this forum, but the big picture should be clear enough—had the current CEO of SIDC, Steve Bunnell, verified the information in the IRP application for completeness and accuracy, the loan would have been a borderline project, at best, for an IRP loan.

Oh, that’s right, the final version of the IRP loan application didn’t get signed by the Hunts until almost 90 days after the IRP loan closed and only a week or two before the Hunts requested SIDC release their second mortgage on nine acres and a reclassification of the loan from an IRP equipment and working capital loan to a real estate loan. SIDC and those folks in Jackson says, OK with us.

SIDC released over $112,000 in real property collateral and tried to release the SIDC lien against all of the furnishing belonging to the Hunts and the B&B. Hunt’s estimated value of these furnishing was $160,000, including an estimated $26,000 in new furnishing in B & B project.

SIDC received no consideration for releasing their collateral or reclassification, but the Hunts picked up about $19,000 in cash and got a $10,000 car loan paid off. The rest of the proceeds of the sale went to principal and interest on Hunt’s past due first mortgage on the real estate.

One might challenge that when one lays this "small or minority business IRP loan" over the statutory template, this loan should have never been made. But, SIDC went completely out of bounds when they agreed to reclassify the loan from an IRP equipment and working capital loan to basically a second mortgage real estate loan and still use the IRP revolving loan funds.

These funds were provided to SIDC by the federal government, with restrictions and requirements, for relending for the benefit of economic and community development Even if the funds were initially loaned for the benefit of economic and community development, within three to four months the Hunts asked for, and everybody else agreed, to reclassify the IRP loan from an equipment and working capital loan, which, if properly structured, could be a qualified IRP project, to a second mortgage real estate loan, which could not be a qualified IRP project.

Where are the checks and balances? Who is minding the store? The total project cost was suppose to be $150,000. A $75,000 IRP loan and $75,000 equity. Where is the equity?

The questions are voluminous, the direct answers from the current CEO, Bunnell, have been avoided or answered as "I don’t know."

As a side note, if one thinks that Hunt and Bunnell have kind of messed up things with this loan, just wait until the research is published locally that shines a bright light on what kind of a mess Hunt, along with some of these same players, managed to leave for Team Hardin County.

Of course, the current group at Team Hardin County, which includes Mayor Kevin Davis among others, doesn’t seem to mind, as long as they don’t have to admit they just went along with Hunt and Bunnell. There is a real mess to be straightened out.

Remember folks, this all involves tax dollars and oversight.
Respectfully submitted for your consideration

Ted
Ted G. Cook

Thursday, March 4

The Misapplication of Tax Dollars by Team Hardin County, et. al.

As a follow-up to discussions at the City Commission meeting early May, 2009 the following summary and time-table was provided to the stakeholdders as an update on the researched fact knowledge base as it relates to the interlocal relations of the City of Savannah and Hardin County through Team Hardin County, Inc. (THC), Hardin County Convention and Visitors Bureau (CVB) and Savannah Industrial Development Corporation, Inc., (SIDC).

Summary of Scope of Loan Research-

The Open Records Act request that was delivered to the CEO of everything Team Hardin County and their member entities, on April 13th and again on the 19th of April, was about 75% complete last week and the required factual record should be completed documented shortly.

The records request and other research efforts has produced over 2,500 pages of data that includes financials, charters, by-laws, board minutes and other relevant records, dating back to fiscal year 2000 for THC, SIDC, CVB, and THC-NAIA

After completing a preliminary review of this data, while at the same time noting more importantly, the records that were not or could not be produced, although required by State statutes and/or their own by-laws, I believe there are certain conclusions that can be drawn, at this time.

The conclusions as to the alleged debt of SIDC to THC for reimbursement of paid operating expenses, and accumulated between fiscal year 2002 thru 2008, can be separated between SIDC and the City of Savannah as they relate to Hardin County and/or Team Hardin County, Inc., and can be summarized as follows:

The first conclusion that can be made is that there is no documentation, of any kind, in the records provided by Team Hardin County (THC) that demonstrates that there was ever any consideration or approval, by anyone, of any transfer to SIDC, or to anyone else, of any funds that THC held in a restricted trust for the benefit the Hardin County Tourism and Convention Bureau (CVB).

There is no record of the Board of Directors of SIDC or CVB authorizing THC to expend any funds, to anybody, over and above the approved and funded budget. In the case of SIDC the necessary approval of the source of funds for SIDC would be the City of Savannah, who owns and is responsible for SIDC. In the case of the use of the CVB surplus funds, it would be Hardin County government, specifically, the Board of County Commissioners and the Board of Directors of CVB.

The custodian of all of the funds of all of the member entities of Team Hardin County, at all times, was, and is, the CEO of THC, on behalf of the Board of Directors of Team Hardin County, Inc. and managed in accordance with the adopted by-laws of THC and it’s Corporate Non-Profit Charter from the State of Tennessee along with it’s federal 501(c)(4) tax exempt status.

The Records Reflect: The first unauthorized transfer of CVB funds by THC during this period was made by the then CEO, Mr. Jerry Hunt in fiscal year 2002. But, it required at least one of the designated board members for signatures on the general fund checking account.

The CVB ended fiscal year 2002 with surplus revenue (hotel/motel tax collections) of approximately $4,500 over and above what THC was obligated to pay for the budgeted operating expenses of CVB. These unauthorized transfers have continued each year through December 2008, when $11,206 surplus funding was received by CVB. This was down from the high of $30,602 in surplus funds in 2007.

As of March 2009, SIDC was $71,293 behind in reimbursement of operating expenditures to THC. CVB was $73,445 ahead of reimbursements to THC, allegedly for future expenses. Neither SIDC nor CVB have checking accounts and THC holds and/or disburses all co-mingled funds from a centralized general fund account.

Team Hardin County, Inc., has no budget or income, no expenses, and yet serves as THE Joint Economic Community and Development Board of Hardin County, (JECDB), or a state approved "similar" organization. This ‘Board’ is state mandated, if Hardin County and/or any of the municipalities in Hardin County want to be qualified and/or eligible for ANY state grant. The statutes also mandates that the County Mayor and City Manager of Savannah each play a major role in the formation and operation of the JECDB.

The research results also revealed what should be considered a major problem area, over and above who owes who what, how much and why. There seems to be a major flaw in the way THC and Hardin County function as a Joint Economic Community and Development Board (JECDB), or a "Sufficiently Similar" organization, as intended by the Tennessee General Assembly or even the by-laws of Team Hardin County, which the Chairmen of the Board admits are, "generaly ignored."

Submitted for your consideration,

Ted

Research Summary of SIDC loan to Hunt Consulting Company, Inc., et.al.

What follows is a partial summary of an open research projected, requested by the Chairman of the Board of SIDC, in order to document the properness of the loan of the federal funds on behalf of SIDC and the Board. Since the research involved only documents available to the public it meets the criteria for informing the public of public infomation.

Records Summary - Loan to Jerry Hunt , et.al., by SIDC of the City of Savannah, TN

(Note: Hunt was the incorporator and former CEO of Team Hardin County, Inc. and CEO of all of their member entities, including SIDC).

On February 19, 2009, a committee of Southwest Tennessee Development District in Jackson, TN, with Jerry Hunt, (also an employee of SWTDD) in attendance, approved a loan to Hunt Consulting Company two ways. First as a SMOB program loan and in the event the SMOB program did not have the funds available, the loan was also approved as an IRP loan. (The IRP program is funded through USDA Rural Development using federal funding.)

It is alleged that Hunt’s employment with SWTDD might have a potential conflict of interest problem and recommended the loan be funded through SIDC in Hardin County where the project is located.

On March 16, 2009, the Board of Directors of Savannah Industrial Development Corporation (SIDC) considered and approved the USDA-IRP loan application of Hunt Consulting Company, Inc., (HCCI) dba Fulton Hunt B & B for $75,000 for the renovation of a residence at 1430 Clifton Rd. Savannah, TN, operating capital and purchase of furnishing.

(Loan app.) - Company formed in early 2004 - contracted consulting engagements with 6 organizations. (Note: The borrower, HCCI, was chartered and formed as a domestic for-profit Tennessee corporation on March 3, 2009). The proceeds of the loan - the purchase of assets and working capital for borrower’s consulting business.

(Business plan) - Project is located on 17 acres.

(SIDC Minutes of March 16, 2009) - This application for loan funds at $75,000 at 3.0 percent interest for five (5) years is for the renovation of the residence and purchase of furnishings. . .

Special Note: The total cost of the project was projected to exceed $150,000 ($75,000 IRP loan and $75,000 equity, i.e. "Furnishings") and the loan would create seven (7) new jobs over a 24 month period. The one year time frame for hiring four new persons began April 1, 2009 and the remaining three new persons hired during the next twelve months.

The amortization schedule was $1,347.65 p/month for 60 months with 1st payment - May1,2009.

To approve the project, the Board of Directors, by statute, had to determined the loan request fit the criteria for eligible loan projects and meets the SIDC requirements of not more than 75 percent of the project cost or $15,000 per new job created over 24 months.

The loan was to be collateralized by the land and residence, the furnishings therein and the personal guarantees of the owners, Jane Fulton Hunt and Jerry D. Hunt. The loan committee of SIDC had met and approved to move forward with the loan pending additional collateral of four (4) lots located at Points of Pickwick in Hardin County. The loan was approved on March 16, 2009.

On March 17, 2009, SIDC executed the statutorily required assignment of collateral to USDA Rural Development.

Some 90 days after funding the loan, on June 20, 2009, Jane F. Hunt and Jerry Hunt on behalf of Hunt Consulting Company, Inc., executed the final version of the IRP Loan Fund Application. The house and property were listed with a local Realtor for sale as residence or business.

The Do Over

About two weeks later, on July 10, 2009, at the request of the Hunts and with the concurrence of the USDA in the Jackson TN office (Mr. Billy Lane), the SIDC Board of Directors held a special called meeting (via internet and/or telephone) and approved "A motion to approve the release the 9 acres and approved the reclassification of the loan from an IRP equipment and working capital loan to a real estate loan."

On July 20, 2009, SIDC, amended the note and trust deed to released their second mortgage on 9 acres of land, reclassified the loan as "a real estate loan" and approved a revised 15 year amortization schedule. There was no monetary consideration to SIDC. The new amortization schedule was for $517.94 p/month for 15 years with 1st payment - retroactive to April 1, 2009.

The 9 acres were immediately transferred to Jane Hunt’s ex-husband, Mike Martin, for $112,500. The proceeds of this sale were distributed as follows: Central Bank - $61,000 principal payment on $341,000 first mortgage loan that had matured and was up for renewal; Central Bank - $22,772 accrued interest; Central Bank - $10,000 to pay off a vehicle loan; and Jerry &Jane Hunt - $18,728 for reimbursement of over budget expenses on B&B project.

The stated rational for reclassifying the loan type was - "since over $60,000 of the SIDC’s loan was actually used to improve the real property, the Hunts are requesting the SIDC loan be reclassified as a real estate loan rather than equipment and working capital. This will change the amortization period from 7 (actually 5) years to 15 years."

(Pending fact verification - there is a real question if USDA Rural Development IRP funds can be used for this type of ‘real estate’ loan, because the property was not being purchased as part of the project, i.e. the B&B, and would no longer fit the criteria for eligible loan projects . Did Jerry Hunt have knowledge of the IRP restrictions?)

Shortly thereafter, a UCC was filed with the state, by an SIDC employee, to release SIDC’s security interest on "the furnishings therein." SIDC received no consideration for this release and the release of the collateral was not addressed or approved by the Board of Directors of SIDC. It was made at the direction of the Hunts attorney who had also prepared all of the incorporation and loan documents, including the March funding of the IRP loan.

There is no record of USDA Rural Development ever releasing their assigned security interest in the 9 acres or "the furnishings therein." That could be a problem.

The Bankruptcy

On October 27, 2009, Jerry D. and Jane Fulton Hunt file Chapter-13 Bankruptcy in Jackson, TN with the nature of the debts as primarily consumer debts, defined in 11U.S.C. 1101(8) as ‘incurred by an individual primarily for a personal, family, or household purpose."

The filings reflect assets of $327,749.28 and liabilities of $713,845.64. Included in the liabilities are credit cards (AmEx and Visa) $105,223; Various casinos around the country - $26,000; and $10,405 in unpaid construction and furnishing creditors for the B & B project.

Current Status

On November 24, 2009, the SIDC Board met in a called meeting to consider an offer from Mike Martin, who also holds a 3rd mortgage on the property of about $67,000, to purchase the house and property for $300,000 which would pay off the first mortgage and apply approximately $18,000 toward the SIDC loan. This would leave the SIDC with approximately $55,000 against the four lots at Pickwick.

The board voted to reject the Martin offer and elected to proceed, subject to the approval of the U. S. Bankruptcy Court, to foreclosure on their 2nd mortgage on the house, land and furnishings and their 1st mortgage on the lots at Pickwick. Central Bank agreed to loan SIDC the necessary funds to clear the first mortgage and help protect the SIDC position.