Three Missoula businessmen who refuse to pay guaranties backing loans to build Ogren-Allegiance Park signed the documents under an “implied threat” from First Security Bank’s senior officer, who misused his position to “shore up a bad loan” for the baseball stadium, according to court documents filed by the businessmen.
Earlier this year, First Security Bank of Missoula took four prominent community members to court for failing to pay their signed guaranties. The lawsuit in Missoula County District Court demanded Joseph Easton pay $150,000, Robert Gillette pay $100,000, Keith Lokensgard pay $50,000 and Bruce Micklus pay $250,000.
Easton filed for bankruptcy this summer, and his petition is being resolved, according to U.S. Bankruptcy Court.
The other defendants are fighting the lawsuit. In their Sept. 19 responses to the court, Gillette, Lokensgard and Micklus also filed counterclaims against the plaintiff, Glacier Bancorp doing business as First Security Bank; a lawsuit against Play Ball Missoula, the nonprofit formed to build the ballpark; and demanded a jury trial.
In three separate but similar court documents, the men made the following assertions:
•Senior bank vice president Hal Fraser, who died in January 2011, used his position of authority with the bank to solicit contributions and loans for the riverfront ballpark from customers and friends who “had an ongoing banking relationship” with First Security, managed by Fraser himself. With approval from the bank, he also held a fundraising position with Play Ball.
•Fraser promised his customers the bank would never make them pay their guaranties and assured them the pledges were “only for purposes of showing community support for construction of a stadium facility.” “However, soon after Fraser’s death, defendant was notified that his ‘obligation’ ... was being enforced.”
•In a breach of ethical and fiduciary duty, Fraser withheld the information that he and the bank had loaned money to Play Ball, and the bank loan was in default or “a problem.”
“In soliciting defendant’s support of Play Ball, (the bank) breached its ethical obligation to an existing customer and placed (the bank’s) interests above the interests of defendant in order to shore up a bad loan or support a loan which was not creditworthy and to minimize its own financial exposure in the event of default,” court documents claimed.
•If the court deems the bank should get money from the guarantors, it should make Play Ball pay, and the three name the nonprofit as the “third party defendant.”
Wes Spiker of Play Ball Missoula said the nonprofit is working with a lawyer to get the claims against it dismissed. He said 15 other people signed the same guaranties and made good on their promises to the bank, and the ones who are not paying are ruining a great man’s reputation to protect their own wallets.
“For these guys to try to make a case that he was being devious or unprofessional just galls me,” Spiker said.
The original lawsuit states Gillette, Lokensgard and Micklus signed bank documents “in triplicate” and were of “sound mind and capable of contracting” when they did so. It quotes the guaranties saying each man “absolutely and unconditionally guarantees full and punctual payment,” and it notes the businessmen received public recognition for securing the loan to Play Ball.
“Each of the defendants materially breached their respective promises to First Security Bank to answer for a share of the debt, default, or miscarriage of Play Ball Missoula on the loan from First Security Bank,” reads the original lawsuit.
Play Ball Missoula formed to raise money to build the stadium and transfer it to the city of Missoula. The nonprofit raised some $6 million and opened Ogren-Allegiance Park in 2004. Earlier this year, the city took ownership of the ballpark.
The project, however, took longer and cost more than expected. At one point, Play Ball found itself drowning in $7.3 million of principal and accrued interest. A finance team worked out a complicated set of transactions to clear the debt, prevent foreclosure on the stadium, and transfer the ballpark free and clear to the city of Missoula as planned.
The deal involved payment on guaranties to First Security, but when some guarantors didn’t pay, the bank sued. The responses from the three defendants outline the reasons they signed guaranties but don’t believe the documents are valid or reflect the full agreement they made with their banker, Fraser, who also served as a primary fundraiser for Play Ball.
According to court documents, Gillette and Lokensgard had friendships with Fraser that dated back to their college years, and Micklus knew Fraser for 19 years as a banker and friend. The three defendants were customers of Fraser and had numerous loans and accounts with First Security.
“Fraser was acutely aware of the financial status” of Gillette, Lokensgard and Micklus, according to court documents:
• “At all relevant times, Fraser and plaintiff (the bank) knew or should have known that Gillette was near retirement and in no financial condition to answer for debts of a charitable or public benefit entity without risk of personal or business financial collapse.”
•“Fraser and plaintiff knew or should have known that Lokensgard was retired and living on a pension and in no financial condition to answer for debts of a charitable or public benefit entity in the amount of $50,000 without risk of personal financial collapse.”
•“Fraser and plaintiff knew or should have known that Micklus was in no financial condition to answer for debts of a charitable or public benefit entity in the amount of a quarter of a million dollars without risk of personal or business financial collapse.”
Yet through Fraser, First Security sought their contributions and solicited the guaranties “with implied threats” to their ongoing business relationships and “with the direct and specific representation that such ‘guaranty’ would never be enforced by plaintiff (the bank) and that execution of such a document was only for purpose of showing community support,” read court documents.
The responses also note this: “Because defendant was both a longtime personal friend of Fraser and a longtime customer with multiple loans and accounts with plaintiff (the bank), defendant felt compelled to cooperate with Fraser’s request and believed Fraser’s assurance of ‘no enforcement’ given Fraser’s standing and position with (the bank).”
Court documents also allege that Fraser personally loaned money to Play Ball Missoula, knew Play Ball had maxed out its credit line with the bank, but didn’t disclose that information to his customers when he sought their support.
“By 2006 ... Fraser had personally loaned Play Ball tens of thousands of dollars which were either due or past due or in default, and Play Ball’s obligation to plaintiff (the bank) remained unpaid,” read court documents.
“During this time, Fraser, with knowledge and consent of plaintiff, combed the records of plaintiff for contributors and set about soliciting contributions from his personal banking customers to Play Ball. Neither Fraser nor plaintiff disclosed to the persons solicited that Fraser had made personal loans to Play Ball or that plaintiff’s line of credit had been maximized.
“Some or all of these loans may have been in default and that fact was not disclosed to Fraser’s solicited contributors, including three who have been sued by plaintiff (the bank) for enforcement of the alleged ‘Commercial Guaranty.’ ”
According to the defendants, the bank used the guaranties to increase Play Ball’s credit line to $2 million, and the transaction “paid off or replaced” the previous $1 million loan “and repaid all personal loans from Fraser to Play Ball.
“None of this information was shared with defendant,” read court documents.
In their responses to the lawsuit, the defendants make several counterclaims against the bank, including “negligent misrepresentation,” “actual or constructive fraud” and “breach of fiduciary duty” to protect the interests of its longtime customers.
“... As defendant’s banker, longtime friend and senior vice president for (the bank), such duty was breached by solicitation of financial support for an improper purpose which benefited ONLY (the bank) and placed defendant at financial risk for no purpose other than to shore up or support an otherwise unbankable loan by plaintiff to Play Ball.
“Such a breach of fiduciary duty – the highest known in law – subjects plaintiff to damages ... .”
In their response to the lawsuit, the defendants also say the bank should have gotten its money in other ways. Instead, it failed to collect pledges supporting Play Ball, and it forgave or waived rents or other collateral.
The three, in turn, are suing Play Ball. They want the court to dismiss the lawsuit the bank filed against them and award them costs and attorneys’ fees; alternately, if the court deems the bank is owed money, they want it to rule that Play Ball is obligated to pay instead of them.
Spiker, of Play Ball, said the nonprofit still exists as a legal entity, and its board met and was served with the lawsuit a couple of weeks ago. The lawsuit is evidence the three businessmen simply don’t want to pay their debt like everyone else did, he said.
“There’s no focus to it. They’re just blaming everybody but themselves,” Spiker said. “I just can’t believe it, and they’re frankly going to run Hal Fraser through the mud is their intention.”
People who couldn’t pay never should have signed bank notes, Spiker said, and he defended Fraser as a professional who always acted with propriety: “The man does not make mistakes. The man does not twist arms. The man knows what he’s doing. I would put my life and my whole financial future in his hands if he was still here.”
Jon Beal, the lawyer representing the bank, said First Security used standard banking documents accepted in the state of Montana, and the majority of the guarantors who signed them stepped up to the plate. He also said future disclosures will show the bank and Fraser were in the right in soliciting support from the defendants.
“I think that the bank and Mr. Fraser both acted ethically and properly, and the facts will come out in the lawsuit to establish that,” Beal said.
He hopes the lawsuit will be resolved sooner rather than later. In the meantime, others paid their guaranties, Beal said: “We have a nice community asset because of that.”
Reporter Keila Szpaller can be reached at @KeilaSzpaller, 523-5262, email@example.com or on MissoulaRedTape.com.