For failed Atlantic City loan program, big promises fizzled
CAMDEN, N.J. (AP) -- When Jim Thigpen first met with an investor in early 2012 to discuss selling control of the Tennessee financial firm he had run for more than 20 years, he said W. Wesley Drummon boasted of a business plan that involved $2 billion from the Bank of China. Nothing was said about running a loan program for Atlantic City.
But as Drummon negotiated with Thigpen to purchase the Tennessee Business and Industrial Development Corp., Drummon was working with former Atlantic City Mayor Lorenzo Langford to get $3 million from the city to launch a community loan program.Most of that money -- not cash from China -- was used to purchase the finance firm in 2013, a review by The Associated Press found. None of it has been used to make loans in Atlantic City.
Atlantic City is suing to get the $3 million back, alleging in a federal lawsuit that Drummon, of New York, and his company ZeMurray Street Capital, misrepresented themselves, failed to deliver promised services and didn't honor requests to return the money. The city had planned to give the company up to $40 million to make loans, but so far none have been made.
Felix Gonzalez, the lawyer for the company and Drummon, denies the city's claims. He said in a filing this week that Atlantic City had lawyers review their agreement and that the city is not a victim.
Tom Monahan, an attorney for Atlantic City, said after a court hearing in Camden on Friday that Drummon has not turned over all of the information needed to determine where the $3 million went.
Federal Magistrate Judge Anne Marie Donio gave Gonzalez until Monday to have Drummon certify that the city has received all of the information he has. She also asked for certified proof that he missed Friday's hearing because he was serving jury duty in New York.
Gonzalez says he sent information to Atlantic City last week, but Monahan says he received additional information through subpoenas that Drummon didn't turn over.
Gonzalez and Monahan both said they had been told federal investigators have been looking into the case. Gonzalez said Drummon may exercise his Fifth Amendment right against self-incrimination. A spokesman for the U.S. attorney's office said it does not confirm or deny the existence of investigations.
"It's been unbelievable," Thigpen said. "To give 20 years of your life to a company and its reputation and in a period of just months the reputation of the company is shot and the company you built is probably on the verge of collapse."
Thigpen said that he was never informed about Drummon's plan to run the community loan program through TN Bidco, even though Atlantic City's agreement with ZeMurray was approved two months before Drummon and his partners had preliminary regulatory approval to take over the company. Atlantic City's agreement said that ZeMurray would make the loans through TN Bidco, which was able to make government-backed loans through the Small Business Administration.
It was around that time, in May 2013, that Thigpen said he first heard from Gary Lax, a Washington, D.C., corporate finance attorney with an ownership stake in Drummon's company. He is the brother of one of Langford's aides and previously served on the board of the Miss America Organization.
Lax became chairman of the board of TN Bidco in June 2014 and asked Thigpen to sign a contract that paid his other brother Michael $4,000 a month for consulting services, documents show. In September 2014, he gave Thigpen's management responsibilities to Michael Lax, and Thigpen resigned a month later.
Gary Lax, who has previously done legal work for the Bank of China, has not returned calls, emails and a hand-delivered letter seeking comment. He also was the trustee of a family trust with an ownership stake in ZeMurray. His other brother Eddie served as Langford's aide and was the point of contact for members of the press seeking information about the loan program in 2013.
Willard "Chuck" Lewis, a consultant who was involved with TN Bidco and said he was speaking on its behalf, said that Drummon first mentioned Gary Lax to him in 2012 and described him as "someone that (Drummon) trusted." He said that Lax's name was mentioned but "he wasn't involved in anything that I saw" regarding the Atlantic City program until 2014.
"He's been making a lot of efforts to resolve the issues with Atlantic City to make sure that everybody comes out of this with a positive result," Lewis said.
Michael Lax said that he was asked by Drummon to be the registered agent for the company. He said that Eddie Lax was not involved in the transaction and that he never discussed TN Bidco with anyone in Atlantic City.
Lewis said that Michael Lax "did a lot to help keep that company afloat. I think he did a lot to help keep things moving."
Eddie Lax is paid $53,600 a year as a clerk in the office of Atlantic City Mayor Don Guardian, according to payroll records. He said that he knew about the loan program because "it was something that (Langford) did," but that he didn't know his brothers were involved. "I have no ownership or involvement in that company," he said.
Langford declined to comment on the loan program and the lawsuit this week.
(Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)