Posted 2/2/2009 12:00 am
Updated 11 months ago
The banks, which include First Arkansas Bank & Trust, Bank of England, Merchants & Planters Bank and Heber Springs State Bank, have sued Barber and the Little Rock law firm of Gill Elrod Ragon Owen & Sherman for making it appear that a property owners' improvement district project was in good financial shape when it wasn't, according to the lawsuit filed in Pulaski County Circuit Court.
The bankers said the law firm didn't disclose that the project had a $5.2 million real estate mortgage, held by First Federal Bank of Arkansas of Harrison, on a 40-acre site that was going to be developed as the Belclaire Improvement District in Fayetteville.
The project touted 96 lots, with two-thirds to be sold to builders and one-third to the public.
The bonds would be used to pay for the infrastructure improvements. The bonds were to be secured by a pledge of special assessment taxes and property within the district.
The banks put $4.24 million into bonds for the project in 2006. It wasn't until late 2007 that the bankers learned of the $5.2 million mortgage on the project, the lawsuit said.
If the debt had been known, "no reasonable investor would have purchased the Belclaire Improvement District Bonds," the lawsuit said.
In 2008, Barber defaulted on the bond payments. At that point, the banks tried to cancel the bonds and get their money back. But the defendants refused the offer, the lawsuit said.
The banks have alleged fraud, negligence and violations of the Arkansas Securities Act. The banks want their money back plus 6 percent interest and the usual court costs and attorney fees.
The Gill Elrod law firm has denied any wrongdoing in its answer. Barber, in his answer, also denied any wrongdoing.
This, of course, is just another chapter in Barber's woes.
One of his top projects, the seven-story Legacy Building in downtown Fayetteville, was foreclosed on in July with total debts of $18.7 million.
After Barber's Chapter 11 filing was tossed out by a federal judge, the building went back to Legacy National Bank in November in a $11.25 million foreclosure sale.