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.
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