Two court fights fol­low the fail­ure of a loan pro­gram in At­lantic City

The China Post - - BUSINESS - BY JOSH CORN­FIELD

The fu­ture of a com­pany that At­lantic City’s for­mer mayor gave US$3 mil­lion to run a loan pro­gram that has yet to make a loan is be­ing sorted out in two courts.

Af­ter At­lantic City sued Ze­Mur­ray Street Cap­i­tal last year to get back its money, a fed­eral judge on Fri­day or­dered owner W. Wes­ley Drum­mon to cer­tify by Mon­day that he has given all com­pany doc­u­men­ta­tion he has to At­lantic City af­ter he missed pre­vi­ous dead­lines.

Fed­eral Mag­is­trate Judge Anne Marie Do­nio warned Drum­mon’s lawyer, Felix Gon­za­lez, that his client may be sanc­tioned if he doesn’t de­liver all of the rel­e­vant in­for­ma­tion that he has about the op­er­a­tions of the Ten­nessee Busi­ness and Industrial Devel­op­ment Corp.

A re­view by The As­so­ci­ated Press found that most of the city’s money was used to buy that com­pany and that Drum­mon’s com­pany is par­tially owned by the fam­ily of one of for­mer At­lantic City Mayor Lorenzo Lang­ford’s aides. Lang­ford launched the pro­gram in 2013.

Tom Mon­a­han, an at­tor­ney for At­lantic City, told the judge that he had ob­tained ad­di­tional in­for­ma­tion through sub­poe­nas that Drum­mon failed to turn over.

Gon­za­lez and Mon­a­han both said they had been told that fed­eral in­ves­ti­ga­tors have been look­ing into the case and Gon­za­lez said Drum­mon may ex­er­cise his Fifth Amend­ment right against self-in­crim­i­na­tion. A spokesman for the U.S. at­tor­ney’s of­fice said it does not con­firm or deny the ex­is­tence of in­ves­ti­ga­tions.

Mean­while, in Ten­nessee, a bank has gone to court al­leg­ing that TN Bidco de­faulted on a US$1.5 mil­lion loan.

A judge in Se­quatchie County, Ten­nessee, or­dered TN Bidco last month to pro­vide all of the records and full ac­cess to its servers to the Farm­ers and Mer­chants Bank. The bank asked that the case pro­ceed to trial last week, while TN Bidco has asked for more time to find the in­for­ma­tion, ac­cord­ing to court fil­ings.

Gon­za­lez and a spokesman for the com­pany said that they are no longer com­ment­ing to the press about the case and did not com­ment on the de­fault fil­ing.

Ze­Mur­ray paid US$1.54 mil­lion to buy out the stock­hold­ers of TN Bidco in Au­gust 2013, ac­cord­ing to records ob­tained by the AP, and it also spent nearly US$700,000 to par­tially pay off one line of credit. But the loan with FMB re­mained, records show.

It re­mains un­clear what hap­pened with the rest of the money from At­lantic City and how Drum­mon be­came in­volved with Lang­ford.

Jim Thig­pen, the founder of TN Bidco who sold it to Drum­mon in 2013, said that Drum­mon never told him he planned to run the loan pro­gram through TN Bidco. At­lantic City’s agree­ment with Ze­Mur­ray was ap­proved two months be­fore Drum­mon and his part­ners had pre­lim­i­nary reg­u­la­tory ap­proval to take over the com­pany.

“It’s been un­be­liev­able,” Thig­pen said. “To give 20 years of your life to a com­pany and its rep­u­ta­tion and in a pe­riod of just months the rep­u­ta­tion of the com­pany is shot and the com­pany you built is prob­a­bly on the verge of col­lapse.”

Ze­Mur­ray is par­tially owned by a fam­ily trust run by rel­a­tives of an aide to Lang­ford. Gary Lax, the aide’s brother and a cor­po­rate fi­nance at­tor­ney in Wash­ing­ton, D.C., be­came chair­man of the board in June 2014 and then asked Thig­pen to sign a con­tract to pay his other brother Michael US$4,000 a month, doc­u­ments show. Their brother Ed­die served as Lang­ford’s aide and was the point of con­tact for mem­bers of the press seek­ing in­for­ma­tion about the loan pro­gram in 2013.

Gary Lax, who served on the board of the Miss Amer­ica Or­ga­ni­za­tion from 2004 to 2006, hasn’t re­turned calls, emails and a hand­de­liv­ered let­ter seek­ing com­ment. Michael Lax said that his brother in At­lantic City had noth­ing to do with the pro­gram.

Ed­die Lax, who re­mains a clerk in the of­fice of new At­lantic City Mayor Don Guardian, said that he didn’t know his broth­ers were in­volved and is not in­volved with the com­pany.

Lang­ford de­clined to com­ment on the loan pro­gram and the law­suit this week.

AP

In this July 23, 2014 file pho­to­graph, a pair of bi­cy­clists pedal past older at­tached homes, some with boarded win­dows on the north end of At­lantic City, New Jer­sey.

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