Loan complaint sparks controversy

Citizen complaint against city council member addressed

By Jennifer Woods - [email protected]

At Wednesday’s Washington Court House City Council meeting, citizen Derek Myers addressed the council regarding a loan complaint he filed with the Fayette County Court of Common Pleas Oct. 2 against council member Kendra Redd-Hernandez.

Myers is involved in this matter in three ways, one of which is the filed complaint and the second is through his speech at the council meeting. The third method is through an article he wrote — quoting council member Caleb Johnson and then sharing the article through his Facebook account which included the information that a complaint had been filed through a citizen’s affidavit.

The complaint detailed in Myers’ article matches the details of the complaint Myers filed.

According to public record, Myers’ complaint was in regards to a subordination agreement that Washington C.H. City Manager Joe Denen signed which allowed Redd-Hernandez to refinance her private loan.

The complaint states that Redd-Hernandez violated the Ohio Revised Code “as a result of the subordination agreement being signed by Denen, Hernandez has committed the acts of conflict of interest” and “unlawful interest in a public contract.”

The complaint also states that violating conflict of interest is a first-degree misdemeanor and the unlawful interest in a public contract is a fourth-degree felony, however “this court must find that probable cause has been met for these (alleged) crimes.”

During his speech to the council, Myers spoke about Redd-Hernandez and her business.

Council chairman Jim Chrisman interrupted the beginning of Myers’ speech to say, “We’re not here to talk names and run people down. You can keep your comments civil.”

This led to a short argument between the two in which a speech that was given from a different citizen prior to Myers was referenced.

Chrisman said to Myers, “I noticed somebody didn’t mention your name but everybody knows who she’s talking about.”

Myers said, “Well, that’ll be handled in a lawsuit.”

That citizen was Brenda Lemay. Part of her speech included the request for council members to work together and handle things between themselves. This came up after she saw an article written by who she called a “blogger” that included an interview with a council member—she did not directly identify or give names of any individuals, businesses, organizations, etc.

During her speech, Lemay further explained, “if there is a story to be told then I think a reputable news place should be contacted and the story be given to them. I don’t agree with it and it’s not the first time it’s happened. There are a lot of us out there that have seen these articles written that don’t have all the facts and are embellished to get attention.”

Following the mention of a lawsuit, Myers then read through a document of various pieces of information on the matter including how Redd-Hernandez allegedly profited from the refinancing. He ended with an “appeal to the chairman to launch an independent query into this whether it exonerates or convicts someone.”

The Record-Herald collected the following information:

In 2006, Redd-Hernandez took out a private loan to purchase the building at 101 E. Court St. where she started her small business, “Back-En-Thyme Flower & Gift Shop.” The only way the bank, Merchants National Bank, would approve the loan was if Redd-Hernandez received a revolving loan fund, according to officials.

Essentially, a revolving loan fund (RLF) acts as a bridge when private financing cannot provide enough funding for a project. It is most commonly used for the development and expansion of small businesses, although Denen explained the RLF is often used locally for equipment purchases.

A subordination for an RLF basically identifies which loan will be paid off first if either loan were to go into default. Denen said during an interview with the Record-Herald that local RLFs are typically made secondary to private financing, meaning the RLF would be paid off after the private loan.

The original RLF loan was for $50,000 and had an interest rate of 6 percent. According to repayment records, Redd-Hernandez began her payments in January of 2007 and has made at least one monthly payment from that time through last month.

Redd-Hernandez shared a letter through a Facebook post which addressed the article Myers wrote.

That letter explained the financial institution she refinanced with was First State Bank. In order to refinance, she needed a new subordination document detailing the private lender as the primary loan. As mentioned above—the RLF loan was already a secondary loan which remained a secondary loan after this process was completed.

In the letter Redd-Hernandez explained, “I discussed this with Mr. Mark Pitstick, the city attorney, and I believe he spoke with First State Bank. Mr. Pitstick prepared the subordination document and then presented it to Mr. Denen for signature. This subordination agreement was recorded with the Fayette County Recorder’s Office just like the 2006 subordination agreement.”

The current RLF still has an interest rate of 6 percent and will continue to require monthly payments. The record shows the balance of the RLF at approximately $25,220. The only change, according to officials, is Redd-Hernandez’s private loan amount and the institution it comes from.

According to Red-Hernandez, the refinanced loan was in the amount of $83,000 and was for the purpose of consolidating debt.

“Kendra has made her (RLF) monthly payments without fail,” said Denen.

According to Denen, Pitstick handles RLF matters and as it is a city matter, even if Pitstick didn’t provide legal advice for the situation, the city would still have had to hire someone.

Denen explained he would have had to sign off on the document to make it possible to refinance regardless of who provided the legal counsel.

“The city attorney prepared it, it’s not an unusual activity,” said Denen. “I didn’t think much about it.”

When asked about alleged conflict of interest in the situation, Pitstick explained he believed there to be none and said, “It doesn’t have to be approved by council.”

When Tom Riley, the city’s finance director, was asked about the subordination, he said that he did not believe there were any inappropriate actions taken during this matter.

Riley further explained that had Redd-Hernandez been a council member at the time she originally asked for the RLF, it may have been a different matter, however Redd-Hernandez received the RLF years prior to being on council.

Since she already had a subordination agreement and that subordination did not change in interest rate, secondary position or payment requirements, and since Redd-Hernandez had not missed any payments from the time they began in January of 2007, Riley did not see anything inappropriate having occurred.

Near the end of his speech at the council meeting, Myers said “this matter’s been referred to the State Ethics Commission as well as the state auditor and they vowed to me that the matter will be looked into.”

There has currently been no legal action taken.

Reach Jennifer Woods at 740-313-0355 or on Twitter @JennMWoods. Woods | Record-Herald file photo
Citizen complaint against city council member addressed

By Jennifer Woods

[email protected]