HSBC: dealer owes $10.2m
A commercial lender is seeking a $10.2 million judgment against DealMaker Auto Group, claiming that the car dealership defaulted on a series of loans and notes provided in 2006.
A spokesman for one of DealMaker's owners disputes the amount owed and claims the action is "retaliation" for a separate legal action initiated last week by the owner, P.J. Simao.
HSBC Bank USA, National Association, Buffalo, filed the state Supreme Court action Tuesday at the Jefferson County clerk's office against DealMaker Auto Group LLC, DealMaker Dodge LLC, V.M. Paolozzi Imports Inc., which does business as DealMaker Honda, and DealMaker owners Mark V. Picarazzi and Mr. Simao.
According to court documents, HSBC provided several loans totaling more than $12 million, primarily for floor-plan financing, to DealMaker Dodge and Paolozzi Imports in 2006. Mr. Picarazzi and Mr. Simao were guarantors of the loans.
In February 2007, Mr. Picarazzi and Mr. Simao signed confessions of judgments acknowledging the debt. HSBC contends in court documents that there is still $10,235,029, plus interest, due on the loans.
HSBC is asking a state Supreme Court judge to award a judgment in that amount or else award it assets of the two car dealerships, which were used as collateral for the loans.
A spokesman for Mr. Simao, David Grandeau, contends that the action is retaliation for Mr. Simao making mention of HSBC in a Supreme Court action filed Jan. 5 in which he asked a judge to clear the way for Mr. Simao to sue his former accountants for alleged malpractice.
"I can't help but think that with the timing, part of this, if not all of it, is retaliation for that action," Mr. Grandeau said.
Mr. Simao filed action against Bonadio & Co. LLP, Pittsford, claiming the accounting firm withheld a personal financial statement that was needed in order for Mr. Simao's businesses to obtain financing for continued operations and developing new business.
Before releasing the statement, the firm demanded in December 2007 that Mr. Simao pay $324,440 for accounting services previously provided, something it had never requested before, according to court documents. The firm also had Mr. Simao sign an agreement never to take legal action against it. Mr. Simao claims he signed the agreement under duress and is asking a judge to annul it so he can bring a lawsuit against Bonadio.
At the time of the dispute over the agreement with Bonadio, HSBC Bank, which provided floor-plan financing to DealMaker Dodge, conducted an audit that "found some internal control issues" at the dealership, according to court documents. Mr. Simao and HSBC executed a forbearance agreement that called for the placement of a financial monitor at the Dodge dealership. Bonadio placed one of its employees at the dealership, with the employee reporting directly to HSBC.
Mr. Simao contends that because Bonadio continued to oversee its business affairs at DealMaker Dodge and was in a position to possibly make "misleading representations" to HSBC if a business dispute should arise between Mr. Simao's companies and Bonadio, Mr. Simao remained under duress until HSBC hired another accountant in November to act as financial monitor.
Mr. Grandeau, an attorney and ethics professional who formerly served as the executive director of the state Lobby Commission, has been investigating financial irregularities at DealMaker for about the past year after being hired by Mr. Simao, a real estate developer who until that point was not involved in the day-to-day operations of DealMaker.
Mr. Grandeau contends that HSBC, like Bonadio, was in a position to know about DealMaker's financial problems, but never informed Mr. Simao.
"I believe as a result of my investigation that HSBC knew long before P.J. that there was a problem with the floor-plan financing," he said. "They were aware of problems and never made P.J. aware of them."
He said the reference to the lender in the action against Bonadio likely tipped HSBC off to a possible lawsuit against it.
"They are trying to beat us to the courthouse steps, and good for them," he said. "We just want the truth to come out."
Mr. Grandeau also disputes the amount of money HSBC claims it is owed. He said about $5 million allegedly owed by Paolozzi Imports was paid about a year and a half ago.
"It's my understanding from talking to my client that V.M. Paolozzi has nothing to do with HSBC. That loan has been paid off for a long time," he said.
Mr. Grandeau stressed that HSBC's action is a dispute over a security agreement that enables DealMaker to finance vehicles for sale at its showrooms and that the lawsuit "has absolutely no impact on DealMaker's customers."
DealMaker also is facing a suit brought in December by GMAC over floor-plan financing provided at its Seaway Chevrolet dealership in Theresa. The finance company is seeking a judgment of nearly $2.4 million.
Mr. Simao previously said he believes that action is retaliation against DealMaker for litigation the company is involved in with General Motors Corp. over the proposed move of the dealership from Theresa to Route 11 in the town of LeRay, across from the Wal-Mart Supercenter and near Fort Drum's main gate. GM owns a 49 percent stake in GMAC.
