IBJNews

Secondary lender sues Chase over fire sale

Back to TopCommentsE-mailPrintBookmark and Share

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.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  2. If you only knew....

  3. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

  4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

  5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.

ADVERTISEMENT