Loan made just 93 days before Chapter 11 goes public.
By Celeste Regal
HARRISON – Second Ward Councilperson Steve McCormick filed a Chapter 11 reorganization with the New Jersey U.S. Bankruptcy Court on Aug. 13. One of the creditors named in the bankruptcy petition is Steve Adler, who gave him and his wife Maria, a $250,000 loan at an annual rate of eight percent, according to the petition documents, on May 11, 2009.
Adler was one of the three holdouts that kept the Harrison Waterfront Redevelopment project in the court system for nearly two years by various lawsuits over eminent domain. He was in the forefront of the battle with numerous lawsuits at the state and federal level, along with Anthony DeRose and Manny Amaral. Adler owned the bulk of the property near the PATH station, at 9.3 acres.
All three lawsuits were settled in Judge Maurice Gallipoli’s court in Jersey City on Sept. 12, 2008. That’s when Harrison Common’s developer Richard Miller paid $5 million to Adler so the project could move forward.
As part of the settlement of the cases with Adler, rather than stay in court, the town and developer opted to go to arbitration since it is a quicker and more effective way to get the loose ends settled.
A year later, almost to the date, the pending arbitration hearing on the environmental remediation on Alder’s property is scheduled for the middle of this month but the additional valuation of the property does not yet have a start date.
The loan to the McCormicks, according to the Chapter 11 public documents, was to start a restaurant on a parcel of land at 101-103 Frank E. Rodgers Blvd. South, which at one time was McCormick’s clothing store. “The McCormicks” secured the loan by a second mortgage on the parcel. There is also a first mortgage held on the same mortgage held by the Harrison Police and Fireman’s Federal credit Union.
According to the McCormick-Adler agreement, Adler, an attorney living in Manhattan, “agrees to provide consultation and advise to McCormicks as requested by them, with respect to the establishment and operation of the restaurant.”
One of the things that is perhaps entitled to a bit of scrutiny is the fact that the bankruptcy was filed 93 days after the agreement with Adler for the quarter of a million dollars was signed – as the bankruptcy petition indicates it was. That has significance because there is a provision in the bankruptcy code called the 90-day preference period. If a debtor goes to bankruptcy court and makes preferential transfers within the first 90 days when the debtor (McCormick) was insolvent, the court can void them, where if it’s past that window of time its harder to do that, ie., Adler is protected because of the timeline when the second mortgage was made – just outside the 90 days – it makes him a secured creditor for the money he loaned the McCormicks on the mortgage (the collateral) gives him a security interest in the property. Alder has a “preference” over an unsecured creditors in the lineup of creditors they owe money to. To put it more bluntly, Adler doesn’t have to get in line with those less fortunate unsecured creditors.
It must be noted that if you take the documents at face value, it does not appear that the McCormicks could have voted on any redevelopment issues that would have been beneficial to Adler from the time of their declared insolvency because when the three lawsuits concerning the Harrison Redevelopment was settled a year ago, Richard Miller took control of the property.
But the inference could be made that the loan from Adler is of interest when two town council member’s received a substantial loan from the person who put the town’s desire to proceed in a headlock every step of the way on a redevelopment project. A project that was designed to benefit Harrison taxpayers through ratables – those coveted properties that keep taxes low.
No mention of the $250,000 was made in any kind of Financial Disclosure Statement. Neither McCormicks filed one by the April 30 deadline for 2009, according to Harrison Town Attorney Paul Zarbetski. Over the three years that Steve McCormick has been a councilmen he only filed one such statement in 2008 but not in 2007. Marie McCormick also filed a disclosure statement in 2008 but not in 2009 when the loan popped up.
When Adler was asked why he loaned such a large amount of money to the McCormicks, he said didn’t understand the nature of the question. When asked whether he would answer the question posed, Adler hung up.
McCormick on the other hand said that he had a personal agreement with Adler through the lien on the 101-103 FER Blvd. parcel because “he knows what I’m going through” and that the arrangement was above board, that Adler had the title to the property. This is a piece of property that has been in conflict with the town of Harrison construction code official, who said the renovations were in violation since before McCormick ran for council. The 2nd Ward councilman had said in the past was one of the reasons he ran for the office.
“I have an issue with the town taking all this time having to redraw and redraw. I was given the okay to go ahead and then they backtracked,” and the renovation was not getting anywhere because McCormick says what he did to the property was not in violation and Harrison Construction Code Official Rocco Russamano said it was. The violations were kicked over to Hoboken in 2007 to rule on but did not. It has been in the Bayonne construction code violation court since that time and after repeated calls last week, no information has been can be found on the status of the case.
“I saw what was happening to him (Alder) through eminent domain and we started talking about stuff,” McCormick said. “I’m basically caught up for four-and-a-half-years on my building because of a variance process and they’re (the town) are trying to bankrupt me, which they did. Okay?”
McCormick said he couldn’t go to a bank to show them his assets to get a loan, “especially today. So I had to go to personal lenders. The only thing I have are equity and assets.”
As far as the restaurant goes, McCormick said he’s in the initial stage of getting the ball rolling and get his building finished.
“When my business was open we never had a problem. Once my business was closed – you know what I mean,” he said. “They knew what they did.”