Iosco halts fund activity after questions raised about loan

Coverage of the foreclosure of the Tawas Bay Holiday Inn continues with this article from the Iosco News: Iosco halts fund activity after questions raised about loan.

The newest appointee to the Iosco County Economic Development Commission (EDC) alleges its members were deceived into voting for a $250,000 loan for a business which, a month later, was advertised for foreclosure.

In an hour-long presentation to the Iosco County Board of Commissioners last Wednesday, Kenny Schaaf of East Tawas said this particular loan and the way it was handled violated EDC policy, failed to conform with standard financial practices, and was peppered with deceit and conflicts of interest. "We are looking at the potential loss of $250,000 of taxpayer money," he stated.

Schaaf referred to a book-length application he said was prepared by Roger McIntosh, the managing partner of Tawas Bay Associates. The application declared the partnership in default of its loan to Huron Community Bank, according to Schaaf. It stated the county loan would be used to pay for supplies and vendors, allowing the Holiday Inn to keep operating until cash flow could be restored.

As security, the application pledged all hotel furniture, fixtures and equipment, valued by McIntosh at $750,000. It also offered the personal guarantees of the three Tawas Bay partners, McIntosh, Kenneth Myles and Ronald Tyler. Schaaf contended the collateral is not worth the paper on which it is written. The county's interest in the furnishings and equipment is in second position to Huron Community Bank's $2 million debt. It was never appraised, as required by EDC policy and good financial practices, according to Schaaf. If it had been appraised, the forced sale value would have likely come in at less than 10 percent of what Tawas Bay paid for it, he alleged.

The application contained a management projection prepared by the Holiday Inn's accounting firm. Schaaf identified several additional problems within it, calling the projections "wishful thinking."

The application was dated March 26 and was approved by the EDC on April 6, the same meeting at which the board accepted the resignation of Huron Community Bank President Robert Beneson. It is Huron Community which initiated foreclosure proceedings on the Holiday Inn.

Ugly, ugly, ugly. Gets worse by the day.