Jackson, council at-large candidate, defaulted on $140,000 city loan
By Jayed Rahman
Published: April 8, 2014
Having defaulted on a $140,000 city loan issued to his business in 2009, Michael Jackson (pictured), council at-large candidate, has filed for bankruptcy protection, according to court documents.
Jackson, who owns Jacksonville, a restaurant on Grand Street, borrowed the money from the Paterson Restoration Corporation, the city’s loan arm, for seven years at an annual interest rate of 2.25-percent, according to the promissory note he signed on December 22nd, 2009. “I needed some additional funds for furniture, equipment in the kitchen,” said Jackson.
At the time, said Jackson, he was engaged in a major renovation project at his restaurant after taking out a roughly $1 million loan from Sun National Bank. As he was supervising the construction project, Jackson hired a small staff to continue running his core business while he devoted time towards expansion.
Among the staff members was a big name chef Jackson hired in hopes of breaking out as a high-end luxury dinning place in the city. However, when the great recession hit, his bottom line took a beating, resulting in the well-recognized chef and other staff to call it quits.
The staff came aboard to be part of something grand, but when things did not move as fast, they packed their bags and left, explained Jackson. With no staff to continue, Jackson closed shop for a year to complete the renovation. “I was forced to close for a year, and recovering from that year closed has been difficult,” said Jackson. “I lost a great deal of business.”
“I applied for that loan in 2008,” said Jackson, who expected to get his hands on the money within weeks. “When I applied for the loan they promised me the process would take four to seven weeks, it took nine to eleven months,” Jackson said.
Jackson griped that the disbursement was slow.
Jamie Dykes, then chairman of the corporation, said “We don’t generally do different disbursements.” Explaining that during the closing the borrower generally receives a check for the entire amount, Dykes said, “All would have been done at one date.”
Jackson’s first loan payment came due on February 1st, 2010, according to the loan terms. On March 1st, 2010, he began missing payments, resulting in Daniel Kleeman, the corporation’s lawyer, filing a lawsuit in the superior court on August 18th, 2010.
Early in 2011, the corporation obtained a judgment against Jackson. Kleeman sent copies of the judgment to the Passaic and Essex Counties authorities to seize any property owned by Jackson. He was threatening to foreclose on me, said Jackson of Kleeman’s actions. In January 2013, Jackson filed for bankruptcy.
“We bent over backwards because we thought it was a good business for Paterson overall and it was good revitalization in the area,” said Dykes. “So we bent over backwards to work with him.”
Kenneth Morris, finance committee chairman, pushed to have the loan approved through the council. “I’m surprised to learn Mr. Jackson is in technical default of his loan,” said Morris. “It’s disappointing to learn that he’s now in default,” said Morris.
Morris advocated on Jackson’s behalf when the loan resolution came before the council. “In fact, I pushed for it in an effort to support a minority owned business in the city,” said Morris.
“It is my hopes that Mr. Jackson is able to get his finance house in order so that it does not become a distraction as he seeks political office,” Morris said.
Both Morris and Jackson are contesting for the three obtainable council at-large seats in the city’s coming May election.
Jackson is defaulting on more than just the corporation’s loan. According to court filings, Jackson owes $38,000 in taxes to the Internal Revenue Service (IRS) and the State of New Jersey. He owes $1,041,768 to Sun National Bank, $349,487 to Wells Fargo Bank; $157,637 to the corporation (legal fees included); $28,583 to Tower Lien Company, $12,735 to US Bank for Tower DBW; 18,569 to Arque Tax Receivable Fund, and $22,198 to PSE&G for utility, according to court papers.
Sun National Bank which is owed $1 million has filed an objection to any discharge of debts that might occur at the conclusion of the bankruptcy case; the corporation did not file any objections, according to court log.
“We had a very low default rate,” said the former chairman. Dykes said defaults were very uncommon at the corporation, and whenever a company failed to meet its obligations the corporation “vigorously” employed all legal means to secure collateral. “Our default rate was better than that of any other banking institutions,” said the former chairman.
Dykes said when a borrower defaults it reduces the corporation’s ability to lend money to other businesses in the city. Some 30-years ago, the city turned over a federal grant to establish the corporation as a revolving fund program, elucidated Dykes. “So the original money was loaned out, and a revolving loan fund was established with it,” said Dykes, “as people repaid the loans that money was put back into the kitty and then loaned out again and then loaned out again.”
“Many other business people have filed for bankruptcy. It’s not a catastrophe, it’s part of the process, it’s part of business,” said Jackson.