Council candidate James 'Smuggie' Mitchell failed to repay loan after demand, records show




  • In Business
  • 2022-05-14 10:00:00Z
  • By Charlotte Observer
 

A former Charlotte city councilman hoping to get reelected this year failed to repay a $375,000 loan he received in late 2020 from a construction company he served as president of after leaving office, according to documents obtained from the City of Charlotte with a public records request.

In December, James "Smuggie" Mitchell first received a letter demanding he pay back the loan in five business days, plus about $7,000 in interest, according to the records. The investment firm, Bright Hope Capital, that purchased the construction company considered him as failing to pay back the loan in subsequent weeks until saying it took control of Mitchell's stake in the construction company, records show.

News of the loan default was first reported by The Charlotte Business Journal, which obtained the records from the city. The records include several pages of emails and letters from Robinson Bradshaw, a law firm representing Bright Hope Capital. It also included letters from Malcomb Coley, one of the investment firms leaders.

Mitchell told the Charlotte Business Journal and WFAE that he still owns a 25% share of the construction company.

He's one of six Democrats running for an at-large council seat. He previously served on the council, representing District 2 from 1999-2013 and then as an at-large member from 2015-2021.

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Mitchell abruptly resigned from his council post in January 2021 after taking a job as co-owner and president of RJ Leeper. The construction company had been purchased by Bright Hope Capital LLC, which was created by local business leaders. Its primary investors included Hugh McColl, former Bank of America CEO, as well as Coley and Lloyd Yates, a former leader at Duke Energy, the Observer previously reported.

At the time he resigned from City Council, Mitchell owned 25% of RJ Leeper. State law prevents public officials from directly benefiting from a contract with the public agency they serve. The law considers an ownership stake greater than 10% to be a direct benefit.

Mitchell said the statute would have prevented RJ Leeper from doing business with the city if he had stayed on council, the Observer reported when he resigned.

"The opportunity was too great to take a 30-year minority-owned company and continue the legacy," Mitchell said in January 2021. "I think I can impact Charlotte in a different way."

Mitchell later left his executive position atop RJ Leeper, while saying he would continue to own 25%, the Observer reported in July.

Attempts to reach him Friday were unsuccessful. An attorney representing him, Bobby Robinson, wrote in an email to The Charlotte Observer Friday afternoon that he was unable to comment at this time "due to pending litigation."

Reducing interest

Mitchell's ownership in RJ Leeper matters because, if he's elected, the ties could affect the company's ability to do business with the city.

In interviews with the Charlotte Business Journal, Mitchell said he would be willing to reduce his interest below 10% if he gets elected. He also told the news organization that he doesn't want to get in the way of RJ Leeper's ability receive and work on bids for city contracts.

RJ Leeper has been involved in work on public projects such as the Charlotte Convention Center and Charlotte Douglas International Airport expansions, the Observer has reported.

The construction company was founded in 1993 by former City Council member Ron Leeper, and has become one of the major minority-owned contractors in the Southeast.

Failure to pay loan

In early 2020, Bright Hope loaned Mitchell $375,000, according to documents obtained through a public records request. It's not clear what the loan was for. The loan was secured by, among other things, Mitchell's 25% stake in the construction company.

A year later, Robinson Bradshaw, the firm representing Bright Hope, wrote an email to Mitchell demanding payment of the loan. At that point, documents show, Mitchell's loan stood at around $382,000, including interest. The payment was due within five business days, the documents state.

Failure to pay would mean Bright Hope would pursue ways to recover the loan, including filing a lawsuit against Mitchell and "foreclosing on your member equity in Bright Hope Construction, LLC," documents state.

On Jan. 24 of this year, Robinson Bradshaw wrote a letter to Mitchell stating he failed to make a payment or even respond to the letter. He had until the end of the month to make a payment or Bright Hope could pursue the lawsuit and the foreclosure on Mitchell's member equity in Bright Hope, documents state.

On March 1, Bright Hope wrote another letter to Mitchell stating the loan was still outstanding. The letter states Bright Hope's right to accept Mitchell's 25% stake under the terms of the loan agreement.

Later that month, Bright Hope wrote to Mitchell that it had accepted - or, essentially, taken control of - his 25% stake in the company, per terms of the loan agreement. The effective date was March 22.

The loan agreement includes a paragraph about the loan payment. Mitchell agreed to pay the $375,000 loan "on demand, but in any event no later than 12/31/2024," documents show.

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