JCC responds to Bank of America suit over contract

By David Baugher, Special to the Jewish Light

Financial giant Bank of America has filed suit against the Jewish Community Center for breach of contract over issues related to repayment of bonds and a revolving line of credit, according to court documents.

The bank launched the action against the JCC Thursday in federal court, alleging the organization is withholding some $4 million in payments in order to force the restructuring of tens of millions of dollars in bond loans related to capital improvements the JCC made to both its Creve Coeur and Chesterfield locations.

“Even though JCC may profess concerns over its future financial uncertainties, it unquestionably has the ability to live up to its obligations to Bank of America,” said the suit. “JCC has simply chosen not to do so. In short, JCC is using the specter of financial uncertainty to shirk its current obligations to Bank of America, with the goal of forcing Bank of America to accept either an unacceptable restructuring of the $45 million loan or a substantial discount of the $45 million loan.”

In a letter issued the same day to board members, the JCC said it had done everything possible to settle the issue reasonably. The letter was signed by Jonathan Deutsch, chairman of the JCC board, and Lynn Wittels, President and CEO of the JCC.

“We are surprised and disappointed for many reasons,” the letter stated. “But the first is that we and other J representatives have been trying for nearly 18 months to get the bank to work with us to find a solution to this matter.”

According to the suit, the dispute revolves around $1.6 million in redemptions due on $45 million in bonds issued in 2007 as well as more than $2.4 million owed on a line of credit issued the year before. It said the JCC was informed in December that the payments were due and further alleges the organization’s 

financial resources are such that it is “capable of making all current payments.”

“The refusal of JCC to meet its current obligations ignores the simple fact that it requested, received, and spent all of the monies at issue,” the suit said. “The commitments JCC made in exchange for the money have not changed.”

The suit comes following a time of substantial change at the JCC. The organization concluded an extensive, wide-ranging, multi-year rebranding in 2010, highlighted by changes in everything from programming to staffing and crowned by a massive facilities revamp that included the construction of the new Staenberg Family Complex and the restructuring of the old Wohl edifice into an associated arts and entertainment building.

The moves paid off for the organization, which has bolstered its membership rolls substantially and stabilized its budget after a decade of operating losses.

The JCC’s letter said that, despite the bank’s claims, the economic crisis, which decimated property values across the country, has made the original terms of the loan too onerous to maintain. Though the successful turnaround of its operations was part of its plan for repayment, other parts were tied to the sale of a 50-acre plot of land and proceeds from the endowment, both of which were negatively impacted by the darkening financial climate.

“The bank alleges that we have withheld our principal payments in order to force it to restructure our loan on more favorable terms or discount the principal,” said the JCC’s letter. “The fact is that the bank knows that the ramifications of the 2008 crisis have made the original terms of the loan impossible over the long-term but has refused to even consider a change, and is avoiding good-faith discussions of the issue by litigating it instead.”

Wittels said that the land sale, originally slated to net $9.5 million, evaporated when home values cratered while a second deal secured at less than half that price last year also fell through.

“We were going from $9.5 to $4.3 million and selling more land,” she said. “That contract didn’t go through because the value of homes went down so significantly that the developer felt like they couldn’t take the financial risk.”

She said the organization had kept the bank informed of every development and made every effort to work with the financial institution, including two weeks ago when Wittels said she called to ask for 90 days to develop a blueprint to buy out the bank’s interest. She said the offer was turned down.

“It’s almost as if they never listen to us,” she said. “It’s almost as if they completely ignored what we were saying, what we were sharing with them and all of the sudden said, ‘Well, this is our only recourse.’”

The suit said that Bank of America “has attempted on several occasions to reach an acceptable resolution of these issues” with the JCC but had not been able to do so.

Wittels said the bank’s only proposal to the JCC operated on a five-year window though the bond could be called before then.

“That doesn’t give the agency sufficient time to see turnaround in the value of its land so we can sell the land or to raise enough money from the community,” she said. “It was totally insufficient and would have likely put the agency out of business within a five-year window. That’s something we told them our board would never accept.”

The letter said the bank also contended the JCC could fundraise to acquire the necessary funds.

“But the gap is currently much too large,” said the letter. “The fact is that we do expect to go back to our donors and the community for assistance, but only after we have reached an agreement with the bank on a compromise plan that provides a permanent solution.”

The letter said the JCC had continued to make annual interest payments of about $2.4 million. Wittels said she could not comment on the status of payments or whether principal was also being paid.

Both Wittels and the letter stressed that no changes in service or operations would occur at either of the JCC facilities due to the suit.

JCC board chair Jonathan Deutsch and former board chair Michael Staenberg referred requests for comment on the matter to Wittels.

“Operations are strong and the board remains committed to serving the agency’s mission,” said Deutsch.

Wittels added that the JCC had made incredible strides over the past few years and that the organization played a vital role in the Jewish community.

“We have been trying to bring Bank of America to the table to come up with a solution that would allow the agency to continue to serve its mission while recognizing the financial expectations of the bank,” she said. “We’ve made several proposals to the bank all of which were summarily dismissed.”

Diane Wagner, a spokesperson for Bank of America, said the bank had tried working with JCC to resolve its financial issues but said she could not comment further on the pending litigation.