Manchin, Puccio’s names don’t appear on latest listing of investors in defaulting hotel

CHARLESTON, W.Va. — A recent bankruptcy filing in the case of a troubled Morgantown hotel shows an earlier listed investment by Senator Joe Manchin and longtime adviser Larry Puccio is no longer active.

AA Properties, an investment partnership of Manchin and Puccio, was listed in the initial filing of a lawsuit over the Hilton Garden Inn in Morgantown, as well as in the original $15 million loan agreement.

A list of investors that was filed this week by Mountain Blue Hotel Group no longer lists AA Properties among its investors.

The document lists William Abruzzino with a 32 percent stake in Mountain Blue, his wife Rebecca with a 1 percent interest, a generation-skipping trust for William and Rebecca Abruzzino with a 10 percent interest, Jaron Smalley with a 2 percent interest, Peachtree Village Partners with 6 percent, a trust for Robert Abruzzino with 10 percent, Connor Abruzzino with 7.5 percent, Maria Reyeo with 2.5 percent and WAA Family Trust with 29 percent.

That’s a different group of investors than what was listed in the original civil lawsuit over the Hilton in Morgantown. The investors were listed in the original civil suit to establish geographic diversity for the filing in federal court. If Manchin and Puccio, West Virginia residents, are removed  then that potentially muddies the jurisdiction issue.

“It’s clear from the filing the whole story got started on the basis of a mistake in the complaint,” said Steve Ruby, a former assistant U.S. attorney who now does legal work for Manchin.

What remains unclear is when and under what circumstances Manchin and Puccio left the hotel deal. Manchin, offered a chance to elaborate Tuesday on MetroNews’ “Talkline,” said he could not.

The $15 million hotel case is notable for several reasons.

William Abruzzino, the head of Mountain Blue, and his co-investors are involved with several simultaneous bankruptcies or civil suits over hotels in Morgantown, Clarksburg and Elkins, plus the Crossings Mall development in Kanawha County.

Manchin and Puccio were also listed through AA as investors in the Clarksburg and Elkins hotels, although not at Crossings Mall.

The Morgantown Hilton had been subject to bankruptcy just a few years ago, meaning that its ownership group was going through its second bankruptcy in short order.

Monongalia County was trying to collect thousands of dollars in back taxes that the hotel had collected from guests but had not properly passed on to the county. And hotel workers said their pay and insurance coverage had been spotty during the troubled times.

Manchin and Puccio, along with the rest of the investors, have not been considered defendants in the civil proceedings against limited liability corporation Mountain Blue over the default on its $15 million loan.

But their stake in the property and level of involvement have been unclear.

The lawsuit filed August 8 in federal court in Clarksburg listed Manchin and Puccio as investors in AA Property. The lawsuit, in turn, listed AA as an investor in Mountain Blue Hotel Group, the corporation that borrowed the money for the hotel.

The original loan document also lists AA with a 12 percent interest in Mountain Blue Hotel Group — and Manchin and Puccio with a 50-50 investment in AA. Their names were also on a 2013 facility letter for the Hilton project that’s now the subject of the lawsuit.

Their explanations over the past few months haven’t made matters clear.

Speaking Tuesday on MetroNews’ “Talkline” about the hotel investment, Manchin again cited his blind trust.

“My financial investments are in a blind trust and always have been. My understanding is, the complaint that was filed was in error,” Manchin said. “It’s hard for me to comment beyond that. I’ll just say it was a mistake for us being named on that.  That’s all I can say and that’s all I know.”

The blind trust is a perplexing answer.

Manchin’s partnership that’s listed as an investor in the hotel is plain to see for anyone — including Manchin — in his annual Senate financial disclosure form.

Manchin’s latest financial disclosure form does list the Joseph Manchin III Qualified Blind Trust. AA Properties is listed separately on the financial disclosure form with a value of $50,001 to $100,000 and producing income of $11,200.18.

Those who file the annual financial disclosure forms have to check a box indicating they “certify the statements I have made on this form are true, complete and correct to the best of my knowledge and belief.”

In other words, senators are supposed to be aware of what they are filing.

Manchin went on to say on “Talkline” that he believed the matter of his investment in the Morgantown hotel would be clarified in the court system.

“This whole thing is by error, and that’s supposed to be removed through the court system. I’m not involved with the bankruptcy whatsoever,” Manchin said. “I just assume we’re waiting to the court system, which if it operates like the legislative branch, it could be a while.”

Larry Puccio

Puccio, speaking in late August about the hotel deal, said patience would show the two were no longer part of the investment group.

“I’ve made it clear as I could that we have no ownership, and I think if you’re patient you’ll see I was right and no ownership,” Puccio said in a telephone interview then.

Manchin and Puccio initially said they are not investors in AA but then revised their positions to acknowledge investment in AA but to say they are not investors in the hotel.

“Senator Manchin has part ownership in AA Property, but AA Property has no ownership or affiliation with the hotels,” Manchin spokesman Jonathan Kott stated in an email to MetroNews in mid-August.

A motion to have the case dismissed from bankruptcy court filed by lender U.S. Bank National Association included an original certificate of organization for Mountain Blue. It was filed in Georgia in 2013.

That document listed AA Property with a 12 percent stake, William Abruzzino with 1 percent, Rebecca Abruzzino with 29 percent, Martha Hughes with 10 percent, the generation-skipping trust for William and Rebecca Abruzzino with a 10 percent interest, Judy Nunnally with 10 percent, Jason Smalley with 2 percent, Peachtree Village Partners with 6 percent, a trust for Robert Abruzzino with 10 percent and Mark Abruzzino with 10 percent.

The organizational agreement says no member has the right to sell or transfer its interest in the limited liability corporation except to someone else within the organization or their relative or a trust without the prior written consent of all the other members.

The original loan agreement for the Morgantown hotel specifies how minority investors could get out of the deal without notifying the lender.

“Lender’s consent shall not be required in connection with one or a series of transfers, of not more than forty-nine percent in the aggregate of the direct of indirect ownership interests in any restricted property,” according to Section 8.2 of the loan, which has to do with transfers by borrowers.

Such transfers may happen, the loan document goes on to say, as long as default or an event of default has not occurred. That’s key in this case because the lawsuit is all about the hotel currently defaulting.

With a 12 percent total investment, Manchin and Puccio would fall within that range where consent of the lender to transfer ownership interests is not required.

Another section of the loan deals with the use of proceeds.

Borrowers were to use the $15 million to acquire the property and pay off any other existing loans, pay any past due costs on the property, deposit the reserve funds, pay costs and expenses related to the closing of the loan, fund any working capital requirements and “distribute the balance of the proceeds, if any, to the borrower.”

That seems to allow the possibility that, in a $15 million deal, there might have been cash left over after other expenses to be distributed among the original investors.

A federal bankruptcy judge this week filed a dismissal order for Mountain Blue’s case because its lawyers missed a deadline to prove the hotel had workers compensation insurance. Mountain Blue’s lawyers filed a motion to reconsider on Tuesday that included proof of that insurance.

If the bankruptcy judge’s decision stands, the case is likely to bounce back to a federal civil proceeding, which is what happened in the case of the Clarksburg and Elkins hotels.

On Tuesday, in the civil proceedings, an order from U.S. District Judge Irene Keeley placed the Morgantown hotel into receivership.

 

 





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