So, just how much of that controversial $5mil MGM Atlantic City Endowment Fund was actually put to good use? Apparently, not much. Most of those dollars have been connected to questionable allocations.
In the final minutes of his only term, Mayor Don Guardian wants one last crack at spending AC money: the MGM/AC Endowment fund’s remaining $1.32 million.
City records show the fund contained $4.58 million in May 2013. It held $1.32 million as of June 2017. City rules permit the fund to be spent on housing construction, rehabilitation and low-interest loans for small-business development.
Lame duck Mayor Guardian will head north on the Parkway to his new role as Business Administrator of Toms River. Don will soon get to spend their money.
Some background: Back in 1996, MGM/Mirage, aka Borgata, ‘thanked’ Atlantic City for the opportunity to build a world class casino on top of a city dump in the marina district. The tidy sum of $5 million was deposited into a fund designated to help Atlantic City residents and non-casino business.
On Dec 26, 2017, Atlantic City Mayor Guardian and City Council President Small announced their warm and fuzzy ‘Public Purpose Projects’ (see list below), paid for using the last of that MGM/AC endowment fund.
Mayor Guardian says he wants that money spent wisely on behalf of Atlantic City residents and businesses. To date, that $5 million MGM/AC Endowment Fund has seen very little return-on-investment.
Example #1: In 2013, $3 mil of that fund was given to an outside firm to administer small business loans for Atlantic City entrepreneurs. Then Mayor Langford, along with Councilman ‘Speedy’ Marsh, signed off on the murky deal that sent $3mil to freekin’ Tennessee. Local AC entrepreneurs never saw a penny. The City is still in court trying to get that money back.
Arch Liston was Atlantic City’s business administrator at that time. “You can go into almost any bank and get a small business loan. It was just unusual that there was city money that was fronted for this,” Liston said. “It’s just highly unusual he had this kind of money fronted.”
Example #2: Why was $250,000 in MGM/AC fund money handed over to John Schultz & Gary Hill for administering of Atlantic City student scholarships? To this date, there’s still no accounting of which Atlantic City residents received those college scholarships.
WATCH VIDEO >
Atlantic City Councilman calls radio show to discuss $250k scholarship mess. Greater detail was shared about a $250, 000 scholarship fund discussed by Council on Dec 14, 2016. Atlantic City Councilman George Tibbitt called into WOND Radio’s Kevin Hall Show.
Atlantic City Mayor Don Guardian, along with City Council President Marty Small, want to spend the remaining $1.32 million dollars in the MGM / AC Endowment Fund. The $5 mil was given to the City by MGM/Mirage in 1996.
According to a recent Dec. 26, 2017 press release from Guardian and Small: In order to use these MGM funds, the allocations must be agreed upon by three representatives: the Mayor of Atlantic City, the City Council President, and a legal representative from MGM. The legal representative from MGM, Joe Corbo, waived his right to participate. Corbo authorized the Mayor and City Council President to choose projects within the scope of what’s permissible. Corbo confirmed that Guardian’s and Small’s signatures will be all that’s necessary to proceed to fund the appropriate projects of their collective choosing.
Here’s how Mayor Guardian & Councilman Small want to spend remainder of MGM/AC Fund:
- Maine Ave Promenade – $400,000. Increase parking along Maine Ave. Create diagonal street parking. Existing promenade expanded.
- Second Ward Playground/Park/Ballfield – $300,000. Build a future playground.
- Kingston Ave Playground – $250,000. Playground renovations.
- Police Athletic League of Atlantic City. – $150,000. Upgrading gym, upgrading video camera security system.
- Atlantic City Police Foundation. – $75,000. Funding to be used for anti-violence initiatives.
- Vision 2000 CDC – $50,000. Funding to be used for daytime programming.
- Boys and Girls Club of Atlantic City, Inc. – $25,000.
- Art Dorrington Ice Hockey Foundation, Inc. – $25,000.
- Robinson Small Daycare – $25,000.
- In My Care Mentoring Program, Inc. – $25,000.
The Director of Revenue and Finance will issue checks directly to the approved organizations.
CITY OF ATLANTIC CITY vs. ZEMURRAY STREET CAPITAL
Atlantic City Sues to Recover $3 Million. According to Jeannie O’Sullivan Law360 (Jan. 13, 2017)
ZeMurray is partially owned by a family trust run by relatives of an aide to Langford. It was during Langford’s administration, that the failed financing program was launched. The loan program that was supposed to lend up to $40 million to struggling AC homeowners and businesses. Atlantic City’s council approved giving the company $3 million to start the program.
Atlantic City’s suit alleges Zemurray Street, which was tasked with administrating the city’s Community Development Lending Program, refused to comply with the city’s request for required reporting of the accounting and also failed to return the $3 million the city invested in it.
According to the complaint, Atlantic City and Zemurray Street and its owner, New York businessman W. Wesley Drummon, entered into a contract in June 2013 for Zemurray Street to implement and administrate the city’s Community Development Lending Program.
Atlantic City, Zemurray Street and City National Bank of New Jersey in July 2013 executed an escrow agreement that allowed Zemurray Street to withdraw and disburse the $3 million in accordance with the memorandum of understanding. In August 2013, Zemurray transferred the funds from City National Bank to BIDCO’s account in First Bank in Tennessee. Two days later, Zemurray improperly used the loan program funds to purchase Tennessee-based Business Development and Industrial Corp., (BIDCO) and pay BIDCO shareholders for their shares in the company, the complaint said.
The case is The City of Atlantic City v. Zemurray Street Capital LLC et. al., case number 1:14-cv-05169, in U.S District Court for the District of New Jersey.
The Missing 3 Million.
On or around May 22, 2013, the City of Atlantic City authorized the execution of a Memorandum of Understanding (MOU) between the City and Zemurray, the terms of which implemented and administered the Atlantic City Community Loan Development Program (the “Loan Program”).
The Loan Program was intended to provide small business financing and residential mortgage financing to certain eligible business and residents of Atlantic City. Under the terms of the MOU, the City was to provide $3,000,000.00 in loan funds to the Loan Program, which Zemurray would them implement and oversee.
Specifically, Zemurray would oversee loan originations administered by lender Tennessee based, TN Bidco, whom Zemurray selected. Zemurray would then provide the City with quarterly reports accounting for the loan funds.
On August 23, 2013, Zemurray transferred $3mil from the escrow account to a bank account at another bank belonging to BIDCO. Zemurray then failed to provide quarterly report accounting.
The City alleges that before and after execution of the MOU, Zemurray misrepresented to the City the nature of its relationship with BIDCO. Zemurray represented to the City that BIDCO would serve as the loan originator for the Loan Program, knowing that BIDCO had not agreed to do so. When Zemurray failed to provide the quarterly reports, the City decided to investigate Zemurray.
Once the City learned of Defendants’ misrepresentations, the City sought to invalidate the MOU and demanded prompt return of the Loan Program funds to the City.
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