Mick Mulvaney Took An Old Man's Money For 'Land Deal' Too? Just The One?
Donald Trump's budget director, acting chief of staff, former acting CFPB director, and general taker-of-shitty-jobs-Jared-doesn't-want Mick Mulvaney is maybe in some hot water, or would be if Team Trump hadn't scissored "ethics" out of all White House guidelines. You see, the Washington Post published a great big exposé yesterday about some shady maneuvers by Mulvaney, following a South Carolina land deal that went south (as it were) over a decade ago. As with virtually all real estate fuckery, it's a bit complex, but the upshot is that it sure looks like companies owned by Mulvaney made some very creative moves to avoid paying back an old man whose family firm loaned Mulvaney $1.4 million, a debt that, with interest, now amounts to $2.5 million.
Oh, and then Mulvaney allegedly misled the Senate about the debt during his 2017 confirmation hearings, claiming the issue was all in the past and not disputed. Funny thing! The guy who made the loan was and is still very much suing Mulvaney in South Carolina.
We won't go into the weeds of the legal maneuverings here since WaPo's Michael Kranish explains it all, but the basics are this: Way back in 2005, while he was first getting involved in politics, Mick Mulvaney really impressed this auto parts distributor, Charles Fonville Sr., with his real-estate investing acumen. They did a profitable deal, and Fonville subsequently got interested in another deal: developing 17 acres of land into a strip mall in a town called "Indian Land." We can only imagine how Donald Trump would tweet about that if the deal had worked out, but it didn't. Fonville says he loaned the money to the company, called Lancaster Collins Road LLC, mostly because Mulvaney was in on the deal and he considered Mulvaney a top-notch trustworthy guy. At the time of the loan, Mulvaney had just been elected to the South Carolina state lege.
Yes, this is where we're obliged by the Irony Act of 2017 to note Fonville is a lifelong Republican who voted for Donald Trump, because after all, America would be in better shape if it were run by smart businessmen.
While Mulvaney wasn't the head of Lancaster Collins, he said in his Senate hearing that he had picked out the land. And here's where the financial deal started getting complicated:
To buy the land, the Mulvaney-connected company, called Lancaster Collins Road LLC, borrowed $3.7 million from Paragon Bank, a financial institution based in North Carolina, as well as $1.4 million from Fonville & Co., according to a foreclosure suit filed in South Carolina court. Fonville & Co. became what is known as the "mezzanine" lender, meaning it held a secondary mortgage, while Paragon held the primary note.
The strip mall never happened, and over the next 10 years the land, thanks in large part to the 2008 financial collapse, lost a lot of its value. The LLC kept up its payments to the bank, but let its payments to Fonville lapse; Fonville says he let that slide because after all, Mick Mulvaney was an honorable dude. Mulvaney got himself elected to Congress as a budget hawk in the Tea Party psycho wave of 2010, so surely a wise personal-responsibility fellow like him would pay his debts.
Lancaster Collins had been making regular payments to Paragon, according to the foreclosure suit. But by October 2016, as Mulvaney was running for his fourth congressional term, Lancaster Collins still owed the bank $2.1 million — and faced the prospect of missing a payment and being subject to foreclosure, according to the suit.
The possibility that Mulvaney would be involved in a foreclosure — an act that might muddy his public image — alarmed him. As he later told Congress: "I did not want a company in which I was an owner to default on a bank loan."
This is where we waggle our fingers and the screen goes wavy to indicate flashback mode, and we send you to WaPo to look at the gross financial entrails. In essence, to avoid a default, Mulvaney and the other guys in the LLC that bought the land formed a new company, "Indian Land Ventures" (add your own Trump tweet about Elizabeth Warren, haw haw!) and secured financing to buy the loan from the bank, so now the land investors owed that money to themselves. Then "Indian Land Ventures" foreclosed on the loan to "Lancaster Collins," so the investors could make the debt go away, avoiding the embarrassment of Fiscal Conservative Mick Mulvaney defaulting on a bank loan.
In other words, one Mulvaney-connected company sued another, alleging "refusal" to pay on time. As Mulvaney explained to Congress: "A company in which I am a minority owner filed a foreclosure action against another company in which I am a minority."
The foreclosure had another effect, as Mulvaney also acknowledged in his written statement to the Senate Budget Committee: "As a result of that foreclosure, the mezzanine financing provided by the Fonville & Co. will go unpaid."
After all, Fonville was only a secondary lender, and the land had lost value, so he was left out in the cold, oh bummer (again, see WaPo for the lawsplaining).
Fonville tried to contact Mulvaney's office in late 2016, before Mulvaney was chosen for OMB, but Mulvaney never got back to him.
Fonville said he felt blindsided by the foreclosure action — and said he believes that the Mulvaney-connected companies were trying to avoid paying him the $2.5 million he was owed.
"I'm disappointed in Mick for not contacting me," Fonville said. "That would have been the ethical thing to do. I've been a successful businessman, and I did so by dealing with people I thought were honest. And I trusted people. And it never occurred to me that I would have to have any question about trusting Mick Mulvaney."
So then in 2017, three days before Mulvaney was confirmed to OMB, Fonville's company sued over the whole mess, alleging the deal was designed to deceive and defraud Fonville & Co. and avoid responsibility for the debt.
Mulvaney claimed in his confirmation hearing that it was just tough cheese for that secondary loan, which he said was "unsecured," although in fact Fonville had a lien on the property. He later amended his testimony to note the property was actually "secured by a second mortgage."
But wait, more fibs! Mulvaney also said under oath that his one company's foreclosure on his other company was "uncontested." Well, maybe not exactly:
Fonville called that a disingenuous statement because he said he did not know about the foreclosure effort — and took action once he did. A month after Mulvaney's statement to the Senate committee, Fonville's company contested the foreclosure in South Carolina court.
And in fact the foreclosure was put on hold by the South Carolina court in June, so it's still very much contested, and now ethics watchdogs and members of Congress are calling for the whole exotic deal to be investigated.
Sen. Jeff Merkley (D-Ore.), who posed a written query to Mulvaney about the loan during the confirmation hearing, said in an interview that "based on Mulvaney's response in writing he delivered to me, I'm very concerned he didn't give the complete story, that he implied that the transaction had been completely resolved, and it was not."
Gee, maybe Fonville should have spent some money to lobby Mulvaney back when he was in Congress, since he acknowledged in an April speech to bankers,
We had a hierarchy in my office in Congress: If you were a lobbyist who never gave us money, I didn't talk to you. If you're a lobbyist who gave us money, I might talk to you.
He also insisted that his constituents never had to pay to play, but then Fonville wasn't just a constituent, he was a guy to whom Mulvaney owed money, and if there's one thing Donald Trump has taught America, it's that you don't need to pay your debts if you can find a creative way to stiff the losers who trusted you.
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