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Secondary lender sues Chase over fire sale

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A secondary lender that backed American Sentry Guard of Greenwood says JP Morgan Chase acted improperly when it repossessed the security firm's assets and auctioned them in 2008 for less than $200,000.

Indiana Community Business Credit Corp., a mezzanine lending group based in Indianapolis, filed suit against Chase bank May 28 in Marion County Superior Court. The lawsuit alleges that Chase breached its contract with ICBCC, the junior lender, and that it violated the Uniform Commercial Code by failing to give ICBCC notice of its plans to dispose of American Sentry Guard's assets.

The lawsuit goes on to accuse the local operations of New York-based Chase of unjust enrichment and asks the court to void the asset sale to Integrated Security Solutions, a small Indianapolis security firm. ICBCC claims that although the auction netted a fraction of the $1.5 million American Sentry owed, Chase stood to benefit financially from a credit relationship with Integrated Security Solutions.

ICBCC's investors are 32 banks that are based or have operations in Indiana, and it typically gets involved in deals in which one of its members is the senior lender. ICBCC's attorneys at local law firm Katz & Korin did not return calls seeking comment.

Chase's attorneys at Kroger Gardin & Regas in Indianapolis have successfully moved the case to U.S. District Court in Indianapolis. The allegation that Chase and ISS have or ever had a business relationship is false, attorneys said in a July 1 filing. In an affidavit backing the defense, ISS partner Armando Perez said he learned about the August 2008 auction through an Internet notice. 

Attorney Jim Knauer at Kroger Gardis said he wasn't authorized to provide further comment on the case.

American Sentry Guard, which made and sold digital surveillance systems, landed on Inc. magazine's list of fastest-growing private companies in 2006. That year it also received a $1.1 million loan from Chase, and ICBCC provided $750,000 to develop new technology.

According to ICBCC's complaint, American Sentry, led by Jack Brummett of Indianapolis, expected Chase to extend its line of credit in 2007 and prematurely extended credit to its own dealer network. Chase declared American Sentry in default in February 2008, but ICBCC worked to line up a buyer.

The Department of Defense had expressed an interest in American Sentry's product, and the rescue deal looked promising. American Sentry had valued its assets at $1.9 million, but in July of that year it notified Chase that it couldn't meet payroll. Shortly thereafter, the bank repossessed the firm's assets.

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  1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

  2. I appreciated the article. I guess I have become so accustomed to making my "pit stops" at places where I can ALSO get gasoline and something hot to eat, that I hardly even notice public rest stops anymore. That said, I do concur with the rationale that our rest stops (if we are to have them at all) can and should be both fiscally-responsible AND designed to make a positive impression about our state.

  3. I don't know about the rest of you but I only stop at these places for one reason, and it's not to picnic. I move trucks for dealers and have been to rest areas in most all 48 lower states. Some of ours need upgrading no doubt. Many states rest areas are much worse than ours. In the rest area on I-70 just past Richmond truckers have to hike about a quarter of a mile. When I stop I;m generally in a bit of a hurry. Convenience,not beauty, is a primary concern.

  4. Community Hospital is the only system to not have layoffs? That is not true. Because I was one of the people who was laid off from East. And all of the LPN's have been laid off. Just because their layoffs were not announced or done all together does not mean people did not lose their jobs. They cherry-picked people from departments one by one. But you add them all up and it's several hundred. And East has had a dramatic drop I in patient beds from 800 to around 125. I know because I worked there for 30 years.

  5. I have obtained my 6 gallon badge for my donation of A Positive blood. I'm sorry to hear that my donation was nothing but a profit center for the Indiana Blood Center.

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