Back in 2013, Atlantic City launched a loan program aimed at providing up to $40 million in financial relief to the city’s struggling homeowners and businesses. But after nearly two years and an investment of $3 million, the people of AC have received little help, leading the city to file a lawsuit against the company hired to administer the program.
The Associated Press reports that Atlantic City is suing ZeMurray Street Capital to recoup the $3 million it gave the company to run the Community Loan Program.
Atlantic City alleges in the lawsuit that the company and operator W. Wesley Drummon misrepresented themselves, failed to deliver the promised services and failed to return the invested money when requested.
The loan program, which was launched by then mayor Lorenzo Langford, was meant to help get the residents and businesses back on their feet during the city’s ongoing economic downfall driven by its floundering casino industry.
At the time the agreement was signed in 2013, ZeMurray claimed it had the “experience and expertise necessary to establish and administer” the program.
Funds from the program were meant to be lent by ZeMurray through the Tennessee Business and Industrial Development Corp. But according to the city’s lawsuit, that never happened.
Instead ZeMurray Street Capital allegedly used most of the funds provided by the city to purchase a finance firm in Tennessee, the AP reports.
To make matters worse, according to the suit, the purchase of TN Bidco was assisted by two brothers of an aide to Atlantic City mayor Langford.
The purchase was delayed by Tennessee regulators, and as of May 2014, has still not received a final approval, meaning the company was unable to make loans outside of Tennessee.
Since then, the company has had management of more than $6.6 million in government-backed loans taken away by the Small Business Association, the AP reports.
A lawyer for the company denies the allegations leveled in the lawsuit, saying the city’s lawyers reviewed the loan program agreement.
Both parties are due in federal court on Friday, the AP reports.
Atlantic City sues over failed community loan program [The Associated Press]
by Ashlee Kieler via Consumerist