Gary councilwoman says library lawsuit a concern
Cites SEC litigation over Harvey deal as reason for city to undo own pact
The Securities and Exchange Commission is suing a financial adviser over a deal involving the library district in Harvey and that act has at least one Gary, Indiana, municipal official concerned.
Comer Capital Group and its managing partner, Brandon Comer, are among the officials who helped Gary last year and put together the sale/ leaseback deal. Gary hopes to use its Public Safety Building as collateral to obtain a $40 million loan that will provide cash to enable municipal debts to be paid.
Councilwoman LaVetta Sparks-Wade, D-6th, has long opposed the deal, saying it takes on far too much debt to be a financially responsible move.
She said the fact that Comer is now being investigated by federal officials for a Harvey library deal ought to be reason enough to be suspicious of the Gary sale/leaseback deal.
“I find it unsettling to think we’re using the same people who are the subject of an SEC investigation,” said Sparks-Wade. “I think this gives us the perfect opportunity for us to rethink what we did.”
The Common Council and Mayor Karen Freeman-Wilson have signed off on the sale/leaseback as part of a larger deal that includes U.S. Steel Corp. and is meant to bring in significant revenues to city government, Sparks-Wade points out that the bonds generating the $40 million have yet to be sold.
“We don’t have the money yet,” she said. “This is our chance to get out of what is a terrible deal for Gary.”
Her objections focus on the fact that the $40 million would be repaid over a 20-year time period, with interest payments exceeding $27 million on top of the principal payment.
Comer Capital Group advised Gary in putting together the sale/leaseback deal, while also being involved with the Harvey Public Library District.
The SEC lawsuit contends that Comer Capital acted improperly with regards to Harvey, did not meet its responsibilities of meeting its fiduciary duties to the Harvey district and wound up costing the library district at least $500,000 in interest payments.
Specifically, the lawsuit says Comer failed to handle the underwriting of bonds properly — deferring to IFS Securities, which had no experience in handling bonds such as those of the library district. IFS has agreed to pay $50,000 in civil penalties and hire an independent compliance consultant to review procedures.
Sparks-Wade said she viewed Gary’s financial deal with millions of dollars in interest payments likely to be paid by the city as far worse. She even went so far as to compare Comer’s actions to those of Bernie Madoff, who pleaded guilty a decade ago to a multibillion-dollar Ponzi scheme for which he is serving a lengthy prison term.
“That may sound a bit harsh, but I think we need to protect our interests the best we can,” she said.
Attorneys for Comer have denied any wrongdoing.
Council President Ronald Brewer continues to believe the sale/leaseback deal is a financial measure Gary needs to engage in.
Brewer said he has looked at the Comer involvement in Harvey, and said he sees no comparison between what he is alleged to have done in that community compared to his actions in Gary.
“They’re totally different, there’s really no similarity,” he said, while also pointing out that Comer is challenging the SEC lawsuit in court.
“I’m working under the policy that one is innocent until they’re proven guilty,” said Brewer.