DDA loan controversy needs another lawyer
By WILLIAM F. AST III - H-P Staff Writer
Published: Thursday, February 10, 2011 1:06 PM EST
STEVENSVILLE - The Stevensville Village Council is going to hire an outside lawyer to determine whether its regular lawyer has a conflict of interest over the controversial $691,435 loan from 1st Source Bank to the village's Downtown Development Authority.
The council on Wednesday voted to name a committee to come up with a recommendation for an outside lawyer. The village's lawyer, David Peterson Sr., told council members he may have a conflict of interest in the case and advised hiring an outside lawyer to determine whether there is a conflict.
But before the vote, several property owners and residents, including three former council members, peppered the council with questions about the loan, complained about what they said was a lack of transparency on the council, and said the loan was illegal in the first place.
"Where's all that money going to come from?" Realtor Don Kamp wanted to know. "...Who's going to pay for it? The taxpayers. I'm really upset because I don't think the old way of doing business has been changed."
Kamp said he wrote a letter to the village in April 2009 asking questions about the loan, and said those questions were never answered.
Resident Jim Muldoon said residents should have been given a chance to force a referendum on the loan itself.
"I don't feel I need to pay the bill because I've never been given my rights," he said.
"I would hope the Village Council would be very transparent," former council President Dave Boelcke said. "It seems you're being very evasive."
The council voted to name trustees Pat Arter and Don Meyer and Muldoon to the committee that will make the recommendation. Arter cast the lone dissenting vote against that motion.
"I have been to a lot of places where Mr. Muldoon has been at different meetings, and I find him to be a difficult person to work with, not a team kind of person," Arter said after the meeting.
The DDA used the line of credit from 1st Source Bank to buy several properties, most along St. Joseph Avenue. Officials hoped to extend the downtown area with those properties, but then the recession hit and the village found it can't recoup the money by selling them.
The village got at least two loans with only one signature from a village official, former manager Todd Gardner.
Village Manager Derrick Perry after the meeting said a respected bond lawyer in the state has said the loan was illegal.
"It was his belief the loans were illegal when they were actually taken out because there's specific ways municipalities can borrow money, and an unsecured promissory note is not one of them," Perry said.
Gardner in July was convicted in federal court of embezzling $272,758 in village funds, and a federal judge in November sentenced him to 4 years and 4 months in prison. He also has to repay $272,758 in restitution and another $272,758 as punishment.
Prosecutors said Gardner had used village funds to pay utility bills, make credit card payments, buy a vehicle, take vacations, buy groceries and to help pay his mortgage.
The council in January 2010 had approved extending the $693,000 line of credit from 1st Source Bank. Council President Lori Gibson said it had to do so or the full amount would have become due immediately.
Kamp said it was a mistake for village officials to sign for the extension because the bank before then "was in a weak position" with a loan he considers illegal.
Once the committee makes its recommendation for an outside lawyer, the council will have to vote to hire the lawyer, Perry said.
Everyone at the meeting was at least in agreement about how the matter will be settled.
"It's going to end up in a court of law to make a determination," Perry said.
wast@TheH-P.com