DOVER, Del. (AP) - Frustrated with years of legal wrangling, a Delaware judge has given a lender 60 days to decide whether to buy the former presidential yacht Sequoia, which lies rotting in a Virginia shipyard.
DOVER, Del. (AP) — Frustrated with years of legal wrangling, a Delaware judge has given a lender 60 days to decide whether to buy the former presidential yacht Sequoia, which lies rotting in a Virginia shipyard.
The 104-foot Sequoia, built in 1925, is the longest-serving presidential yacht in American history. It was the official yacht for presidents from Herbert Hoover through Jimmy Carter, who had it sold in 1977.
Designated a National Historic Landmark, the vessel has been drying out since December in a Deltaville, Virginia, shipyard amid a legal fight about what it's worth and who should pay for repairs.
"It is not helpful for a wooden boat to be out of the water this long," Jon Farinholt, chief operating officer of Chesapeake Boat Works, told The Associated Press earlier this year.
"It is a vessel that has a lot of history and a lot of prestige for the United States, and my company wants nothing more than to see this boat back in operation and sailing again," Farinholt added.
The vessel is owned by Sequoia Presidential Yacht Group LLC, led by Washington, D.C.-based lawyer and businessman Gary Silversmith.
In 2012, the Sequoia group entered a $7.5 million loan agreement with FE Partners LLC, an investment entity formed by Washington, D.C.-based Equator Capital Group and members of the Timblo family of India, which has interests in the mining and hospitality industries.
Under default terms of the loan agreement, FE Partners can exercise an option to purchase the yacht for $7.8 million. From that amount, FE could deduct the loan amount actually extended to Sequoia, certain attorney fees and expenses, and outstanding and potential liabilities.
Sequoia filed a lawsuit in 2013 seeking to prevent FE Partners from exercising its purchase option, but it later agreed to a default judgment in favor of FE, which alleged that it was fraudulently induced and that Sequoia breached the loan agreement.
Since then, however, FE Partners has refused to exercise its option, which it claims is valid through 2017, to buy either the yacht or the Sequoia LLC.
On Thursday, however, Vice Chancellor Sam Glasscock III gave FE Partners 60 days to decide whether to exercise its purchase option.
"FE Partners has consistently represented that what it wants to do is buy the yacht or the LLC," the judge noted.
FE has argued that the liabilities attached to the yacht far exceed the $171,634 as determined by an independent counsel.
FE Partners has said the independent counsel failed to account for all contingent liabilities. The independent counsel, meanwhile, has suggested that FE's goal was to drive up the liabilities as high as possible so that it could pay little or nothing for the yacht.
"They've been unhappy because they've always wanted to inflate the liabilities," Silversmith said Friday.
The judge noted that FE has claimed the tax liability to the District of Columbia could be as high as $10 million, while the independent counsel concluded that it was $87,000. FE Partners also has argued that the independent counsel failed to account for sales or use taxes owed to Virginia or Maryland, potential liabilities from illegal alcohol sales and other possible liabilities.
Despite Glasscock's ruling and acceptance of the independent counsel's findings, FE Partners maintained Friday that the independent counsel did not identify all the liabilities.
"Additional liabilities have been incurred since the date of the independent counsel's report, and the owner of the Sequoia has failed to maintain it in 'good working order,' as required by our loan documents," FE Partners general counsel Richard Graf said in a prepared statement. "Thus, it is likely that all liabilities exceed the $7.8 million exercise price, and we are considering all possible options."
Silversmith rejected the notion that he hasn't taken care of the yacht, noting that he received a Coast Guard certificate this year recognizing 10 years of annual inspections, since 2005, "without any substantial deficiencies."
Silversmith said that if FE Partners does not buy the yacht, he will pay them off and immediately fund repairs and restoration of the boat.