Manchin says he’s also in the dark on $15 million hotel deal gone bad

SOUTH CHARLESTON, W.Va. — Senator Joe Manchin says he’s no more enlightened than anyone else about whether he’s still an investor in a $15 million Morgantown hotel that’s the subject of a lawsuit.

“I have no idea. I’m in a blind trust,” Manchin said today following an economic development announcement at the West Virginia Regional Technology Park.

“I have no idea on that. The only thing I’m told is that we have no involvement whatsoever, and we were very passive investors. Blind trust, and no involvement. I’ve paid all the taxes I’ve ever been sent a tax bill on. I always will and always have, so I have had no notification of any of this.”

Manchin spoke after making brief comments to local reporters about N3, an Atlanta-based sales and marketing firm that was announcing plans to locate at the tech park. Dignitaries were still milling about, as was at least one tracker who has been following Manchin to generate opposition material for his upcoming U.S. Senate race.

Manchin and longtime aide Larry Puccio are listed among the borrowers in the original $15,470,000 loan for Hilton Garden Inn Morgantown at Suncrest Town Center that is now going bad.

A lawsuit filed August 8 on behalf of the original lender continues to list Manchin and Puccio as if they remain investors.

But Manchin’s staff and Puccio have said repeatedly that they are not investors in the hotel.

The lawsuit filed August 8 in federal court in Clarksburg lists Manchin and Puccio as investors in AA Property. The lawsuit, in turn, lists 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.

MORE: AA Property, Manchin and Puccio are listed on pages 58 and 59 of this loan document

The notarized deed for the hotel does not specifically list Manchin and Puccio.

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 earlier this month.

On Monday afternoon in South Charleston, Manchin said he does have a lawyer, former assistant U.S. Attorney Steve Ruby, trying to sort out the matter. Ruby now works for the Bailey Glasser law firm.

“Steve Ruby handles it for us, so he’d be the person to talk to,” Manchin said.

The lawsuit, filed by trustee U.S. National Bank Association, alleges a commercial breach of contract over the loan for the Hilton at Sun Crest Town Center in Morgantown. The lawsuit states default actions have occurred, endangering the property.

Developer William Abruzzino signed a 2013 loan for Mountain Blue Hotel Group, the defendant in the lawsuit.

“Yeah, I know him,” Manchin said Monday afternoon. “Sure, I’m concerned absolutely. That’s his concern. I’m not involved in any way, shape or form — or the blind trust I have is not involved. But I’m told — it is really blind. But Steve Ruby handles all of that. I understand everything is fine.”

Others involved with the situation also have not been illuminating so far.

The original lender, UBS Real Estate Securities, is being represented by trustee U.S. National Bank Association. Its lawyers Christopher P. Schueller and Timothy P. Palmer were contacted last week by telephone and email in an attempt to clarify the status of the original 2013 Manchin and Puccio investment.

“Hi Brad, We cannot comment,” Schueller wrote back.

Puccio, a lobbyist and former state Democratic chairman, was also asked about the investment’s status last week during a short telephone call.

In that conversation, he was asked specifically about the original loan agreement listing his name and Manchin’s. He was asked if the original loan was false or if the original investment was somehow withdrawn — or if the link was severed some other way.

Puccio wouldn’t elaborate.

“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. “I’m not going to keep doing this. I’m out, bud.”

The loan agreement 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.

All indications are the lawyers for Mountain Blue are trying to figure out many of the connections in the deal.

Mountain Blue is being represented by Charleston attorneys Michael J. Del Giudice and Timothy J. LaFon. In legal filings, they said they weren’t retained until August 14, a little more than a week after the lawsuit was filed.

On August 15, they filed a motion to continue an evidentiary hearing originally scheduled for Aug. 18 — in part because they need to familiarize themselves with who they’re representing and what their interests actually are.

“This the first time this law firm has represented the Defendant and it will take a considerable amount of time to become acquainted with the business and review the Complaint, attachments, Emergency Motion for Appointment of Receiver and Memorandum,” the attorneys wrote.

U.S. District Judge Irene M. Keeley granted the motion to continue. She then set an evidentiary hearing date for 9 a.m. Oct. 5.

By Sept. 14, the lawyers for Mountain Blue are supposed to file a brief in response to the original lawsuit. The lawyers for the lender are supposed to file a response to that by Sept. 21.

By Sept. 28, both sides are supposed to file a list of exhibits and witnesses.

More News

Monongalia County health leaders concerned about presence of variants
Officials at the local, statewide and national levels have shared concerns about the variants because the strains can be more infectious and deadly.
April 12, 2021 - 8:40 pm
Sponsored by WVABLE
New program helping empower West Virginians with disabilities
April 12, 2021 - 8:00 pm
DHHR: Child Welfare Service workers terminated in connection with child death
DHHR released a statement on Monday.
April 12, 2021 - 4:26 pm
Pittsburgh man wanted by Wheeling PD for alleged terrorist threats
Cornforth called several schools and businesses Monday morning.
April 12, 2021 - 3:56 pm