Lawsuit: Groups mishandled loan; Gloversville wants money
GLOVERSVILLE Gloversville filed a lawsuit Thursday in the hopes of recovering $750,000 from any of three county economic development entities.
The complaint, filed in state Supreme Court in Fulton County by City Attorney Anthony Casale, names sister agencies Fulton County Economic Development Corp. and Crossroads Incubator Corp., along with their recently formed parent organization, the Fulton County Center for Regional Growth.
According to CRG Chairman Dusty Swanger, the suit stems from a controversial loan the EDC made to the CIC in 2006.
“The city really doesn’t like that loan,” he said.
The EDC manages a $1.5 million revolving loan fund for the city. Seven years ago, CIC officials decided to convert the former Estee Middle School on Main Street into Estee Commons, an apartment complex with 39 units.
The renovation cost $3.1 million, most of which was raised through a private-sector mortgage.
To help the process along, the EDC pitched in a $750,000 loan.
“In the contract,” he said, “there’s a stipulation that the CIC won’t have to pay back our loan until a certain cash flow is reached.”
According to court paperwork, “CIC has not repaid any money whatsoever with respect to the loan it obtained from [the] EDC.”
Swanger said the apartment complex is only at about 75 percent capacity, making just enough to cover costs and pay back the private mortgage, but hasn’t met stipulated cash flow levels.
Basically, the suit demands the CIC pay $750,000 back to the city, rather than the EDC’s revolving loan fund.
It also takes the EDC to task for failing to “take reasonably appropriate steps to cure the default on the part of [the] CIC.”
Since the loan was issued, EDC and CIC officials have formed the CRG. While Swanger said the original corporations are still separate entities, the EDC is looking to dissolve, transferring its assets and responsibilities over to the parent organization. CIC officials are in the process of selling all their assets as well.
“If you look outside Estee Commons,” Swanger said, “there’s a ‘for sale’ sign out front.”
The lawsuit suggests that even at the time of the loan, the two corporations were intimately connected, causing a conflict of interest. As a result of that conflict, the suit claims, all three organizations “were unjustly enriched.” It asks the court to rule against each one.
The lawsuit comes after peace talks between CRG officials and Gloversville Mayor Dayton King.
“We’re trying to repair the relationship,” Swanger said.