Barber Blues Continue
by February 9, 2009 12:00 am 72 views
Several banks that said they were burned by a Brandon Barber real estate development have come together to sue him and the Little Rock law firm that put the bond package together.
The banks, which include First Arkansas Bank & Trust, Bank of England, Merchants & Planters Bank and Heber Springs State Bank, have sued Barber and the Little Rock law firm of Gill Elrod Ragon Owen & Sherman for making it appear that a property owners’ improvement district project was in good financial shape when it wasn’t, according to the lawsuit filed in Pulaski County Circuit Court.
The bankers said the law firm didn’t disclose that the project had a $5.2 million real estate mortgage, held by First Federal Bank of Arkansas of Harrison, on a 40-acre site that was going to be developed as the Belclaire Improvement District in Fayetteville.
The bonds would be used to pay for the infrastructure improvements. The bonds were to be secured by a pledge of special assessment taxes and property within the district.
The banks put $4.24 million into bonds for the project in 2006. It wasn’t until late 2007 that the bankers learned of the $5.2 million mortgage on the project, the lawsuit said.
If the debt had been known, “no reasonable investor would have purchased the Belclaire Improvement District Bonds,” the lawsuit said.
In 2008, Barber defaulted on the bond payments. At that point, the banks tried to cancel the bonds and get their money back. But the defendants refused the offer, the lawsuit said.
Barber, his wife Keri, and partners Seth and Laura Kaffka are also still reaping the fallout of the foreclosed Legacy Building.
Legacy National Bank, which wrote the $19.4 million in loans for the seven-story project, is coming after the Barbers and Kaffkas for more than $13 million in debt on the project.
LNB purchased the building at a foreclosure auction on Nov. 12 for $11.25 million, essentially making whole the other banks that participated in the loan.
According to Washington County property records, the owners of the Legacy are now listed as: Metropolitan National Bank, First National Bank in Green Forest and First National Bank of Fort Smith.