A Northgate developer owing more than $2 million to the West Virginia Water Development Authority is looking to convert his April bankruptcy filing from a Chapter 13 bankruptcy case to a Chapter 11 one, a move that caused the WDA and the Charleston-Kanawha Regional Development Authority to file a complaint Friday arguing the money owed should still be paid back to them.
John Wellford, a Charleston resident and the sole owner and president of Corotoman Inc., was sued in December by the WDA and the RDA after he spent years collecting, but not passing on, millions in rental payments from the Ticketmaster office in Northgate Business Park.
Wellford, as well as Corotoman, initially filed for bankruptcy in April. Now the WDA and the RDA argue in a filing with the U.S. Bankruptcy Court for the Southern District of West Virginia that, whether or not Wellford’s motion to convert to Chapter 11 bankruptcy is granted, they should still be paid the money they are owed — a current total of almost $2.1 million, with interest still accruing — since the debt was built through fraud and false pretenses.
In most cases, filing for bankruptcy under Chapter 13 automatically halts all collection action against the debtor for at least 30 days. Chapter 11 allows a company to reorganize and provides for the distribution of remaining assets to unsecured creditors.
The RDA sued Wellford in Kanawha County Circuit Court in December 2018, looking to recoup $1.5 million — which Wellford, as landlord, collected for the Ticketmaster building but did not pay forward — from 79 missed loan payments that were revealed in an internal review of the WDA by Marie Prezioso, its executive director, in August 2018.
The loan in question was $3 million granted to the RDA in 1999 from the WDA, acting for the Infrastructure and Jobs Development Council, for the construction of an office building that would incentivize Ticketmaster to locate a regional call center in Charleston.
The RDA offered to cover real estate taxes for the company for the duration of the 10-year loan to cover the cost of developing Ticketmaster’s office complex. Corotoman agreed to reimburse the RDA for the foregone real estate taxes at the end of the lease, when it would take the title to the property, according to the December civil suit.
Friday’s filing by the RDA states that Wellford personally should not be excused from paying his debts, due to the flagrantly fraudulent and false representations he exercised, intentionally, by not passing on the rent money he collected and instead using those funds “for his own purposes.”
Wellford, personally and separate from his company, agreed via contract to manage the payments for RDA’s loan, as well as to act as guarantor for the debt, per the filing.
The WDA and the RDA claim they were “damaged by their reasonable reliance upon the representations of Wellford because Wellford used and consumed the rental funds instead of providing them” for the loan payments he was contracted to make.
Friday’s filing also states the debts should be nondischargeable due to Wellford’s embezzlement.
“Wellford appropriated the rental funds for a use other than which he was permitted,” the filing reads. “[He] was not lawfully entitled to use the rental funds for himself or his company … in doing so, Wellford intended to permanently deprive [RDA and WDA] of the rental funds.”
The WDA and the RDA, through counsel, are seeking to ensure the debt owed to them by Wellford is nondischargeable, and that Wellford be ordered to pay the $2.1 million he currently owes, as well as punitive damages, attorney fees and other court fees.