A Cautionary Tale

Steve,

Did you ever come across a news article which, like exquisite poetry, says a million things with only a few words?

I just did. And what the article says between the lines is a near sublime precis of political hypocrisy. I urge you to read "9th District candidate, majority leader deny bank's claims in loan dispute", then allow for a moment of silent meditation before I begin...

OK... ready now? Here goes.

Georgia state representative Tom Graves and state Senate majority leader Chip Rogers apparently went together and bought The Oglethorpe Inn - a "$129-a-week motel" in Calhoun, Georgia. In this connection, they formed an LLC corporation, "Tich Hospitality" and applied for a 2.2 million dollar loan. But the loan originator, The Bartow County Bank, required both Graves and Rogers to sign as individual guarantors. As you know, this is common practice in banking. And as you also know, this makes both of them separately liable for the loan repayment.

Well, now it looks like this little venture didn't quite pan out. The inn keeper, one John Edens, reports that the Oglethorpe Inn today is known as the "Methamphetamine 6 ... because of the drug addicts he says live there...". He goes on to say, "Chip and Tom made a bad decision to buy the building to begin with. This is an aging property. They thought it was better than it really was.”

Too bad. This I assume is the darker side of the entrepreneurial spirit. Yet in the grand tradition of personal accountability we expect from our elected leaders, Graves and Rogers are, er, trying to wiggle off the hook. You know I guess that's not really news anymore. Two well connected legislators go in halfsies on a pretty stupid investment, then try to weasel out with a bunch of cockamamie excuses. We could leave it at that - but let's see if there's a little more mirth and merriment in store for us underneath this rock.

For his part, Chip Rogers says, " ...he is not responsible for the debt because he is no longer involved with Tich Hospitality. Which doesn't matter in any case, because, " ...another company called Durrant Demarco now owns Tich Hospitality and the Oglethorpe Inn."

Huh? How'd that happen Chip? He explains, " "I am no longer a part of the corporation," Rogers said Thursday. "It is owned by somebody else. They still own the property. Of course, they have the liability and everything.”

John Edens goes on to confirm Chip's side of the story. He says, " ...he signed a contract with Rogers and Graves in November to transfer ownership of Tich Hospitality and the Oglethorpe Inn to his company, Durrant Demarco. Edens said he did not ask for a copy of the contract because he trusts Rogers."

Mighty trusting of Mr. Edens, don't you think? First, he takes over responsibility for a 2.2 million dollar loan for a business he himself says is a bad investment, then doesn't even ask for a copy of the contract. I wonder if he will ask for copies of the papers his relatives are drawing up to have him committed?

Now I think The Bartow County Bank could probably care less about the contract John Edens says he signed. After all, remember that Tom and Chip signed as personal guarantors. As a matter of fact, John Edens can take his imaginary contract and go pound sand for all they care. They just want their money back, which is sort of their depositor's money, which means it mostly belongs to the upstanding citizens (and voters) of Bartow County. Next cockamamie excuse please...

Before we get to Tom Graves, let's walk a little further down the street with John Edens. According to him, its mostly the bank's problem. He says, "I have called them about 10 times, maybe 15. I would love to make the loan current. They won’t even talk to me...". Now what do you think he was calling to tell them? Was it something like, "Hey, I'll be down there in about 20 minutes with the past due loan payments.", and they just refused to answer the phone? Earth to John Edens: the bank doesn't give a flying matzo ball if the Sultan of Dubai makes the payments. Wrap your head around this: They get their money - they don't sue Tom and Chip. Its as simple as that. Now over to you Tom...

Tom told the bank he can't make the loan payments because he's "insolvent". The bank's not buying that one either. As a matter of fact, the bank claims in its suit that Tom Graves only got to be insolvent because he transferred two of his properties into a trust fund. Tom's attorney clarifies: "Any transfers that were made by Mr. Graves were done completely within the confines of the law, consistent with estate planning and with no intent to defraud anyone at any time." He adds that "the properties Graves transferred were not used as collateral for the loan, (in any case).".

So the ka-ka just keeps getting deeper. Here we have Tom Graves - nice looking guy - married with three kids - thirtysomething... The dude's on the hook for a 2.2 million dollar loan, then suddenly wakes up and one day and decides to do a little estate planning. So he transfers his property out of his name, which by an incredible coincidence protects it from bank seizure.

Uh huh. But the whole thing's irrelevant anyway because the properties "were not used as collateral"?

Newsflash: when you sign a loan for 2.2 million, your assets, unless specifically exempted by the loan agreement, are collateral. When was the last time you filled out an application for a real estate loan of, oh, say a paltry couple of hundred thou, you weren't required to list all your assets? Do you think banks ask for this kind of disclosure because they want something to read in bed? And another cockamamie excuse goes down for the count.

Last but not least on the list of hair brained excuses is Tom and Chip's so called "counter claim". " In court papers, they allege the bank improperly declared the loan in default after reneging on a promise to refinance it at more favorable terms. The bank, Graves and Rogers said, failed to live up to a promise to convert it to an interest-only loan with a 2.5 percent interest rate." This of course is the same loan Chip says he doesn't owe and Tom says he can't pay anyway, no matter what the terms.

When I read this whopper I almost expected to turn around and see Rod Serling standing there, accompanied by that creepy intro music for the Twilight Zone. For Pete's sake, why on Earth would The Bartow County Bank re-finance a valid commercial loan to an interest only loan (and at a drop dead rate of two and a half points at that), for two guys - one of whom claims he doesn't owe it and the other who says he can't pay it? And what possible difference could it make if the bank ever even made such a ridiculous offer? "Boys, it sez right here on the contract you signed that you owe us 2.2 million plus interest. We thought we would try to make it easier on you, but now we've changed our minds. Pay up."

Sound harsh? You decide for yourself, but last time I checked, there aren't any laws on the books for letting you wiggle off the hook just because a bank demands you live up to the contract you signed originally.

Now I think we have enough material here to stop laughing and start thinking.

First off, 2.2 million bucks might be chump change to a man of your unlimited resources Steve, but to me its a Mount Everest of dough. And if for some reason The Bartow County Bank gets stuck holding the bag, its coming right out of their depositor's hides - which means ordinary schmoes like you and me. Which makes it all the more hysterical when you realize guys like Tom and Chip are always belly aching about government bank bail-outs - while at the same time doing the very thing which puts a local bank in the condition of needing one.

I mention the size of the loan because these guys aren't talking about just skipping out on the monthly grocery tab at the Piggly Wiggly. In some ways I feel for them. They made a bad investment and now not just them, but their families as well are in trouble financially. Lord knows I've been there before, and spent many a sleepless night worrying about how I would provide for my wife and kids. But that's not the point, is it?

Tom Graves and Chip Rogers have both been involved in the Tea Party Movement. You might just say the fundamental ideal behind this movement is to get government out of our lives and allow us the liberty to succeed or fail on our own.

Well, maybe the "or fail" part was deleted when Tom and Chip got the memo. You see Steve, liberty doesn't really mean much if all it requires of us is to reap the reward when we succeed - but not pay the penalty when we fail. And you and I both know that a two million plus loan doesn't just disappear like the prime rib at the Golden Corral on Sunday afternoon.

Backed into the same corner, Steve Green would sell everything he owns, including the shirt off his back, to pay off that loan. I'd like to think I would do the same. Now compare that with what we'll have to call "The Tom Graves Approach". Sure, he's a nice guy who probably doesn't deserve the kind of financial ruin he's headed for. But the true character of a man is measured by how he reacts to failure. Faced with the option of selling off his assets to pay down the loan he himself promised to repay, he chooses instead the shabby gimmick of hiding them in a trust. Would you have done that?

If there's anything noble in what the Tea Party Movement stands for, it has to be the acceptance of personal responsibility for the consequences of our actions. Is it too much to ask that we should expect the same thing from those we elect to govern us?

-Chris