Corruption dispute between Marion, financial adviser headed to trial

A dispute between a city administration and a financial advising group that allegedly contributed to corruption in the city is headed to trial after the Indiana Supreme Court reversed the award of summary judgment for the adviser.

The dispute involves a lawsuit filed by the city of Marion against London Witte Group LLC, an adviser to the city’s former mayor, Wayne Seybold. The new city administration alleged corruption in the Seybold administration, aided and abetted by London Witte.

While Seybold was in office, he met Michael An, a developer from California who was interested in potential redevelopment of abandoned buildings in Marion. An proposed redeveloping Marion’s old YMCA building into a combination of hotel, restaurant, retail and recreational spaces.

The total project was estimated to cost $5.5 million, and the city was willing to provide $2.5 million so long as An covered the remaining amount. Seybold convened a project team with core members including, among others, himself and Robert Swintz of London Witte, which served as bond accountant and financial adviser for the project.

“During Mayor Seybold’s administration, Swintz never had to bid on a project for the City, and London Witte earned approximately $1,840,825 from his work,” Justice Mark Massa wrote in a Thursday opinion. “London Witte was also involved in Mayor Seybold’s political pursuits, donating more than $25,000 to his various campaigns and hosting a fundraiser. In 2012, Swintz served as treasurer for Mayor Seybold’s congressional campaign, while another London Witte employee did the same for his 2014 state treasurer campaign.”

First Farmers Bank & Trust Co. was buying the city’s bonds for the project and lending the proceeds to An, but the bank began to question whether An had the funds to cover his share of the financing. In December 2009, near the beginning of the project, An’s personal bank account showed $32,356.66 in current assets. But Swintz wrote an email to the bank saying the city had “the comfort they need for the YMCA project,” and later questioned the bank’s continued concerns over the availability of the funds.

Later, when Seybold wanted to refinance the bonds, London Witte was retained. When presenting the refinancing to the city council, Swintz “did not mention that An would be released from all financial responsibility nor that Swintz would receive a contingent fee of $25,000 if the 2011 bonds were issued.”

After he was released from financial responsibility, An hosted a political fundraiser for Seybold and made multiple financial contributions to the mayor. An died in 2015 having never paid into the project, which was never completed.

A new mayor took office in 2016, and a review of the project uncovered $686,000 in bonds that were not spent on construction costs plus $159,000 in unidentified spending. It was also uncovered that thousands of dollars in bond funds were paid to An’s girlfriend.

Thus, the city sued An’s estate and his two companies, then entered into a tolling agreement with London Witte, which tolled the statute of limitations through Sept. 30, 2017. London Witte was also added as a defendant, facing allegations of negligence, breach of fiduciary duty and constructive fraud/unjust enrichment.

London Witte moved for summary judgment based on the statute of limitations, claiming it was not on notice of a potential claim until 2014, when members of the press and city council began publicly raising concerns about the project. But the city argued the doctrines of continuous representation and adverse domination tolled the statute of limitations until Seybold left office at the end of 2015, putting its 2017 complaint within the two-year statute of limitations.

The Grant Superior Court granted partial summary judgment for London Witte. But the Indiana Court of Appeals found all of the city’s claims were time-barred, partially reversing in London Witte’s favor.

Justices heard oral arguments in November, then ruled unanimously in a Thursday decision that summary judgment was inappropriate for all of the city’s claims. It reversed in part, affirmed in part and remanded on the conclusion that there were genuine issues of material fact as to whether Seybold adversely dominated the city and whether London Witte helped him do so.

In making its decision, the high court adopted the equitable tolling doctrine of adverse domination, which would toll the statute of limitations until Seybold left office. It determined London Witte had not met the high court’s heightened standard of affirmatively negating the city’s claims.

But the high court found that London Witte met its prima facie burden of showing the city’s claims were untimely, shifting the burden to the city. It then found found the city established facts to avoid the statute of limitations defense and created genuine issues of material fact.

On that issue, the high court noted that because Seybold’s own brother, Chad, refused to give auditor KPMG the receipts necessary to perform an investigation, it never came close to revealing any wrongdoing.

“And Mayor Seybold never asked Chad to turn over the receipts, further establishing a genuine issue of material fact as to Mayor Seybold’s willingness to redress the City’s injures,” Massa wrote. “The reasonable inference to draw here is that Mayor Seybold would not allow an investigation into the project, and his alleged wrongdoing, to succeed. This inference is bolstered by the designated evidence of Mayor Seybold’s instructions to the Trustee, and by London Witte’s communications to the Bank and the City Council on behalf of Mayor Seybold.”

The court cited several other reasonable inferences, including that Seybold did not want the bank to investigate the deal and that Swintz helped him prevent it from doing so. It also pointed to Swintz’s communication with the city council, in which he failed to inform the members that An would be released from all of his repayment obligations and that London Witte would receive another payment when the refinancing deal closed.

“These communications, along with evidence regarding Mayor Seybold’s relationship with London Witte, create genuine issues of material fact as to London Witte’s complicity with Mayor Seybold,” Massa wrote.

At trial, Massa concluded, the city will have to prove that Seybold adversely dominated the city, and that London Witte was complicit.

The case is City of Marion v. London Witte Group, LLC, Chad Seybold, Estate of Michael Y. An, Global Investment Consulting, Inc., and World Enterprise Group, Inc., 20S-MI-00567.