Opinion ID: 3009588
Heading Depth: 2
Heading Rank: 1

Heading: Seidman's Business Dealings

Text: Lawrence Seidman is an attorney in his mid-forties who has been engaged in the practice of banking and securities law for twenty years. During the past decade he has specialized in real estate investments and begun to pursue a career in banking. In 1989, he headed a group of investors who purchased stock in Crestmont, a thrift institution in Edison, New Jersey.3 Seidman became a director of Crestmont and, in November 1989, was named Chairman of its Board of Directors. In 1986, before he became a Crestmont director, Seidman formed a partnership, Fulton Street Associates (FSA), with James Zorlas (Zorlas) and Lawrence Rappaport (Rappaport) to purchase and develop industrial condominiums on a piece of commercial property (Boonton Project). FSA's partners made substantial capital contributions to the Boonton Project and 3 . At the time the parties argued and briefed these cases, Crestmont was not one of the failed thrifts that led to the S & L bailout. We have not been advised of any change in this respect. obtained additional financing from United Jersey Bank (UJB), secured in part by all the partners' personal guarantees. Seidman listed his affiliation with FSA on conflict disclosure forms he filed with Crestmont when he became a director. In mid-1990, Seidman decided to focus his business activities on Crestmont. Recognizing that his outside business ventures could create conflicts that would prevent Crestmont from making otherwise desirable loans, Seidman advised the Board that he had begun to withdraw from his outside business ventures and started disposing of various business interests to his former partners. Rappaport agreed to acquire Seidman's interest in FSA, promising to indemnify Seidman against any continuing obligation on FSA's loan from UJB without any further consideration flowing to Seidman. On June 1, 1991, Seidman's transfer of his interest in FSA to Rappaport became the subject of a formal agreement. Seidman testified that he lost all of the $320,000 he had invested in FSA but that he thought Crestmont offered even greater potential for profit. Months before the June 1st agreement, however, UJB started to worry about its loan to FSA. On January 21, 1991, it sent FSA a notice of default. UJB gave FSA a chance to cure the default, but FSA denied it was in default, contending any default would have been cured if an interest reserve fund had been properly credited against its debt. Though UJB then sent FSA a demand for immediate payment, negotiations between them continued. James Risko (Risko), a Poole & Co. commercial loan broker, handled negotiations to resolve the dispute between FSA and UJB. Poole & Co. was the commercial loan company that had placed the FSA loan with UJB. Roger Eberhardt (Eberhardt), chairman of UJB's real estate management committee, and Thomas Stackhouse (Stackhouse), the UJB commercial lending officer assigned to the FSA loan, were key participants in the negotiations. Risko, Eberhardt and Stackhouse all testified that the participants, including Seidman, discussed end-user financing for FSA's Boonton condominiums.4 Crestmont was mentioned as a potential source of end-user loans, but no one testified that Seidman or Crestmont promised to make any loan. On May 20, 1991, the parties agreed to restructure the UJB loan. As part of the restructuring, the FSA partners, including Seidman, signed personal guarantees covering $4.45 million. Seidman's successful efforts to be released from the guarantee figure prominently in these proceedings, but other ongoing events also play a significant role. 4 . End-user financing permits a person who plans to occupy a unit in a development to buy the unit or rent it to others. The institution that has financed the project has a strong interest in facilitating end-user financing because it usually receives a substantial part of the price the end-user pays, thus reducing its exposure on the loan to the developer.