City officials will be deposed in bankruptcy battle: SIST seeks information on racetrack, apartment complex

The Shawano Leader, Wisconsin/May 18, 2011

By Tim Ryan

City officials are reluctantly being drawn into the receivership fight over two properties owned by subsidiaries of the Samanta Roy Institute of Science and Technology.

Midwest Properties of Shawano LLC and U.S. Acquisitions and Oil (USAO) Inc. last week served subpoenas demanding depositions from Mayor Lorna Marquardt, City Administrator Jim Stadler, Clerk-Treasurer Marlene Brath and Shawano Municipal Utilities.

Midwest and USAO are seeking to wrest control of a Shawano apartment complex and the USA International Raceway in Wescott from creditors in their respective bankruptcy cases in Delaware. A hearing on their motion for turnover of the properties is scheduled next month.

The subsidiaries are seeking to question city officials regarding racetrack operations, taxes collected from the properties and the alleged impact of the receivership – particularly of the racetrack – on Shawano's business and tourism economy.

The city filed a motion to quash the subpoenas, arguing officials are not parties to the bankruptcies and have no information relevant to either bankruptcy case. But a federal bankruptcy court judge issued a ruling late Tuesday denying the motion, setting the stage for the depositions to go forward.

"We are being asked to provide information we don't even have access to regarding the operation of a business that isn't even located within the city of Shawano," Marquardt said. "To expend so much time, energy and legal fees on this seemingly never ending mockery of the judicial system is disheartening."

It was not known Tuesday where and when the depositions would take place. However, city officials said they wanted a neutral location. The subpoenas initially called for them to be deposed at the Kiryat Hotel, which is owned by another SIST subsidiary.

Midwest and USAO filed a response to the city's motion to quash the subpoenas, arguing the racetrack "is the single largest property that has the greatest impact on traffic and tourism in the City of Shawano."

The response, which was filed May 12, maintains city officials are in the best position to know how the receivership has affected the local economy.

"City officials do have knowledge of relevant information in relation to amusement park/racetrack property as they collect room tax from all hotels in the area and oversee and monitor the tourism industry," the response states.

The court filing also maintains city officials "have chosen to repeatedly inject themselves into the business affairs of this property" and alleges the city provided Shawano police officers to assist with enforcing the receivership of the racetrack, even though the property is located outside the city limits.

Police Chief Ed Whealon said the allegation is not true.

The subsidiaries also allege that "a good portion of the proceeds from the last racing season" were donated to an organization operated by a city official.

Though the May 12 court filing did not specify the official or the organization, an earlier motion seeking turnover of the racetrack property alleged that "during the summer's largest karting event, the receiver unlawfully donated all food proceeds from the event to a local charity headed by a city official named Charlene Helms."

Helms, who is the coordinator of Shawano's downtown Business Improvement District, said she and other members of the Wolf River Harmony quartet operated a food stand over the course of two weekends last summer at the racetrack in hopes of raising money to participate in an international competition in Canada.

She said the members had an agreement with the racing group holding the event, but had no arrangement with the receiver of the property. She said there was no money donated to the group.

Regarding the apartment complex, the subsidiaries are seeking information they believe city officials may have learned from tenants or other third parties related to the property's management, according to the May 12 response.

"Debtor also seeks information concerning payment of property taxes and the history of the payment of taxes on these buildings which (city officials) specifically have knowledge of," the court filing states.

The apartment buildings at 463 Humphrey Circle and 1024 East Fifth Street were put into receivership in September 2008 as a result of a civil suit brought by Fox Communities Credit Union of Appleton.

The racetrack property at W5901 County Road BE in Wescott was put into receivership in June of last year as a result of a foreclosure suit filed by Southwest Guaranty Ltd. against SIST and its subsidiary U.S. Acquisitions and Oil Inc.

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