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City eyes lawsuit to recover loan

First suit filed in October against EDC, CIC

January 16, 2013
By LEVI PASCHER , The Leader Herald

GLOVERSVILLE - As it considers filing a second lawsuit in its effort to regain control of economic development funds, the city awaits a court decision on whether it can gather records from the potential defendants - the Fulton County Economic Development Corp. and the Crossroads Incubator Corp.

"We are presently awaiting a response from the court," City Attorney Anthony Casale said Thursday.

Casale said the information requested in the petition would help the city prepare a possible second lawsuit to recover a $750,000 loan from the EDC to the CIC that was used to redevelop the former Estee Middle School.

In its first lawsuit against the same entities, filed in October, the city is seeking to regain control of 13 other loans and a cash balance of about $940,000 from the economic development agencies. That lawsuit is still pending.

In a Nov. 6 challenge to the city's discovery motion, the EDC, CIC and their new parent corporation, the Fulton County Center for Regional Growth, argue the city lacks a viable reason for asking for the information.

"No act or alleged omissions by [the agencies] caused [the city] to suffer any damages," CRG attorney Charles J. Tallent of Canajoharie wrote in the agencies' response. Furthermore, he wrote, the EDC and CIC "have not breached any contractual or common law duty" owed to the city.

In his October filing in state Supreme Court in Fulton County, Casale sought records from the EDC and CIC from their creation in 1988 to the present day.

In response, the agencies' attorney wrote the city is "conducting a fishing expedition" designed to harass the CIC and EDC over the loan for the Estee Commons apartments that was made while administering the City of Gloversville Urban Development Action Program. It also claims the loan for the Estee Commons project was a "prime example of a proper economic development loan" that benefits the city.

Casale said the city is worried that the EDC is not holding the CIC responsible to repay the loan. EDC officials previously said the CIC would start paying back the loan when the project shows profit. They said if the CIC sells the building, the proceeds would be used to pay back the loan.

Meanwhile, the EDC has been operating the Estee Commons building and collecting rent from the tenants, Casale said. He said the rent collected has not gone toward the principal of the loan.

He also said the city is uncertain how much rent is collected from tenants, but it hopes that information will be revealed during the discovery process. Casale said in the second lawsuit the city may seek to replace the EDC as the collector of rent from tenants.

Tallent's response argues the "pre-action discovery" sought by the city is only permitted in extraordinary circumstances, but Casale said the circumstances are in fact appropriate.

"In a situation like this, where we need more information before we can get the allegations together to put in a complaint, this type of proceeding is appropriate, and that is why we have done it," Casale said.

Casale also disputed the CIC and EDC's request that a special referee be appointed if the city's discovery request is granted. Tallent argued such a referee would help "prevent any harassment" of EDC and CIC officials and employees.

"I see no basis for a special appointment to be made in this case," Casale said.

Tallent, contacted Friday, declined to comment on the petition response.

Levi Pascher covers Gloversville news. He can be reached by email at gloversville@leaderherald.com.

 
 

 

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