Bank Invokes Its Own Gag Order Pending Further Litigation Over Heritage Park Foreclosure

Ford City Heritage Industrial and Technology Park

by David Croyle

Since the Kittanning Paper broke the story about the foreclosure on the Ford City Heritage Industrial and Technical Park last week, people are lining up to take sides.

Richard Krauland, President and CEO of the Farmers and Merchants Bank of Western Pennsylvania (F&M), said there were few options left for them since the bankruptcy of the Greater Ford City Community Development Corporation.

“We don’t believe there is another solution,” Krauland said yesterday. “We have tried to work things out and don’t believe there is a solution and we believe foreclosure is the only course of action available to us.”

Krauland said that banks only consider foreclose when all other means have been exhausted.  

“The last thing we want to do is foreclose on property,” he said. “This was the last resort.”

Krauland said that a few people from Ford City tried to meet informally, but that his attorney advised the bank not to enter into conversations.

“Because of allegations being made by some groups, we have counseled the bank to not comment or hold meetings regarding the foreclosure,” James Grenen said yesterday from his Pittsburgh law office. Grenen is representing F&M Bank and filed the foreclosure paperwork with the Court of Common Pleas in Armstrong County on November 6. “There have been rumors of other filings. Since the matter is subject to litigation and a defense is to be raised, we are not commenting further.” Grenen did say that he has not been approached by anyone else about the foreclosure.

Leechburg attorney Chuck Pascal said last night there is the possibility that some taxpayers of Ford City may seek to intervene in the foreclosure.

“The process is a group of people that would file a “Petition to Intervene” with the court,” Pascal said. “They would have to show that they have an interest in the case to the court. No party would argue the same thing that the Borough would argue.  They would have a different argument that for whatever reason Ford City Borough would not make.”

While Pascal said he has had discussions with several individuals, his legal services have not been retained. “There is nothing official yet.”

“I want to see what the Borough files as a response to the foreclosure,” Pascal continued. “I want to see if Ford City Borough is going to oppose the foreclosure.” Pascal said that the Borough must file the response by first week of December.

If Pascal files a Petition to Intervene, then the court will have to halt the foreclosure until a determination is made that the mortgage was legal.

Council President John Lux said the Borough does not intend to stop the foreclosure at this point.

“We tried to work with the bank,” he said. “That’s why we needed the CDC audit. The bank could only work with us if the Department of Community Economic Development (DCED) approved. We kept getting stonewalled by the CDC. The CDC actually caused the Borough from being able to step in.”

Pascal, also the attorney for the bankrupt CDC, said he feels the Borough acted improperly in permitting the Park to be used as collateral in the loan. “The Borough would have to apply to the State to encumber a piece of property,” Pascal explained. “The only way to do it is through a substantial process with the DCED to incur debt of that size. The purpose of the Local Government Unit Debt Act is to insure that the assets of a municipality (borough property) is not put at risk. The Borough is allowed to pledge their taxing authority, not their property.  If they would have guaranteed the loan through their tax revenue, that would be ok. We know there was nothing submitted to DCED to encumber the property.”

According to Lux, the actual monthly payment amount is $14,800, “The bank did not want us to make payments,” Lux said. “They called in the entire note as due and payable.”  He said the bank waited on proceeding with foreclosure because there was the possibility of the sale of the building at one point.

“No one has stepped up to express interest in the property,” Krauland said. “I hope it will get into the hands of someone who would continue its original mission. No one is in the wings. No one has been asked to take it.”

“Whose interest is it – other than the bank – for the bank to control this piece of property?” Pascal questioned. “If I am right and the mortgage is illegal, then the bank certainly should not get the benefit of the bargain. They are getting a multimillion dollar property that was paid for and developed by government and state grants. Now they are taking it on what I feel is an illegal mortgage.”

Lux disagrees. “I think this is actually a good thing. Maybe the bank can sell the property and they can bring someone in. This is also a good thing because it puts the building back on the tax roles next year. After next year, the KOZ (Keystone Opportunity Zone) goes away. The bank or a new owner will have to pay taxes.”

Nearly half of the Ford City Heritage Industrial and Technology Park was not completed. Dirt floors and structural steel are exposed through this section of the building.