The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former PLP MP and Senator last night slammed a US financier’s bid to obtain a $4.605 million default judgment against him as “ludicrous”, and promised a “serious court battle” over the issue.

Philip Galanis, principal of the HLB Galanis accounting firm, told Tribune Business he was unaware until informed by this newspaper that Cordell Funding had on Monday filed a motion seeking such a ruling from the south Florida district court.

Effectively denying Cordell’s assertion that he had been served with the relevant court documents in late September 2014, Mr Galanis said he would have to consult with attorneys over his response, having believed the matter was closed some four years ago.

The dispute relates to a personal guarantee Mr Galanis gave to help secure $4 million in loans made by Cordell, which were intended to help finance an upscale, multi-million dollar West Bay Street condominium project known as the ‘Allure’ or ‘The Palms’.

The US financier, in court documents obtained by Tribune Business, alleged that the developer, North Andros Assets, defaulted on repayment of the loans - one for $3.5 million, the other for $0.5 million - which were made in 2005 and 2006.

Following a lengthy court battle with third-party developers who North Andros Assets brought in to take over the project, Cordell and its Bahamian attorneys, Harry B Sands and Lobosky, were finally able to obtain a Supreme Court Order giving it possession of the 5.295 acre ‘The Palms’ property, which is located just east of Caves Heights on New Providence’s northern shore.

The Order was granted on May 9, 2012, but Cordell, unable to find a buyer, was eventually forced to sell the real estate to an entity it controlled, ‘The Palms at West Bay Ltd’, for $9 million in 2013.

This, in turn, found a buyer in the form of David Kosoy’s New Providence-based Sterling Financial Group, which acquired it for $4.5 million on February 25, 2014.

But Cordell, which previously obtained a $150,000 default judgment against Mr Galanis in the same south Florida district court, has now moved to re-open the action in a bid to obtain even more money from the Bahamian accountant.

A November 24, 2014, affidavit by Kim Martin, a Cordell accountant, alleges that some $2.52 million in additional advances - to cover maintenance, repairs and legal expenses incurred by North Andros - should be added to the original $3.5 million loan.

Claiming that the loan agreement provides for these to be added to the principal, and be subject to interest, Martin alleges that this sum, when added to the original principal and $6.359 million in unpaid interest, took the amount owed on the first loan to $12.379 million at July 16, 2013.

As for the second loan, with unpaid interest of $726,108 added to the original $500,000 principal, Martin alleges that Cordell is owed a further $1.226 million.

In total, the Martin affidavit alleges that Cordell is owed $13.605 million in unpaid principal and interest by North Andros. Deducting the $9 million sale proceeds from that figure gives the $4.605 million the financier is trying to extract from Mr Galanis, who it claims is ‘on the hook’ due to his personal guarantee.

Court documents obtained by Tribune Business show two other North Andros executives, Joseph Simmons and Joel Jenkins, also gave personal guarantees, but it is unclear if Cordell is pursuing them.

It is thought it may be continuing to pursue Mr Galanis because he refused to do Cordell’s bidding, and sided with the third-party developers in the two sides’ legal battle.

And, of further interest, the loan guarantee was drawn up by the Chancellors Chambers law firm, with the guarantors represented then by Kenred Dorsett, who is now the minister of the environment and housing.

Mr Galanis, though, told Tribune Business he knew nothing about Cordell’s latest legal manoeveres in south Florida, having believed the matter closed when it obtained the $150,000 default judgment against him.

“All I know is the judgment for $150,000 is what they got against me, and that’s the extent of my liability and involvement,” he told Tribune Business.

“This is the first I’m hearing about this. It’s utterly ridiculous. The asset is well in excess of the value of the loan. They’ve ended up with a property that was appraised for $15 million, and the loan was $3.5 million and change.

“That’s utterly ridiculous, and they can expect to have a very serious court battle in this matter. That’s ludicrous.”

Mr Galanis suggested Cordell was “double and triple dipping”, and reiterated: “I want to understand the facts, and I thought this had been resolved through the sale of the asset, by virtue of the sales price being in excess of the liability.

“I don’t know anything about this new filing, and am going to have to ask my attorneys to look into it.”

Mr Galanis also denied Cordell’s claim that he had been served with documents relating to the case, despite an affidavit by retired police sergeant, now process server, Charles Watson, claiming this was done at HLB Galanis’s Sandyport offices on September, 2014.

Setting out its case in court filings, Cordell alleged: “Defendant Galanis personally guaranteed the August 21, 2006, promissory note as an additional inducement for Cordell to make said loan.

“Pursuant to the terms of the August 21, 2006, guaranty, the liability of Galanis is absolute, primary, direct and immediate and is not subject to a condition of any kind.”

Detailing what had happened to ‘The Palms’ property subsequently, Cordell’s filings added: “Following foreclosure, Cordell attempted to market the real property through commercially reasonable means, having engaged professional brokers in the Bahamas, and having advertised the property by various means, including on the Internet.

“Cordell was unsuccessful in finding a buyer for the property at any price. Due to a history of specious litigation concerning title to the real property, Cordell concluded that in order to obtain unimpeachable and therefore marketable title, it was necessary to form a distinct single purpose entity and then have Cordell exercise its power of sale to that new entity. Cordell formed an entity called ‘The Palm at West Bay Ltd’ for this purpose.”

The US financier then said: “On July 18, 2013, the property was sold for $9 million to the Palm at West Bay Ltd, which is less than the amount owed by the borrower and by Galanis as a guarantor.

“Thus, there remains a balance of indebtedness after applying the proceeds of the sale of the mortgaged property to the borrower’s and Galanis’ outstanding debt. The remaining sum following the aforesaid sale constitutes a deficiency for which plaintiff is entitled to judgment.”

Cordell said the 2014 sale to the Sterling Financial Group “in an arm’s length transaction”, for a gross $4.5 million, generated a net sales price of $3.494 million after brokerage fees, legal fees and Stamp/real property taxes were deducted.