A Louisiana judge has awarded part of a judgment to the IRS over a tax lien dispute involving work that was done in the aftermath of Hurricanes Katrina and Isaac.
On Nov. 30, U.S. District Judge Carl Barbier granted a partial summary judgment to SE Property Holdings (SEPH) for a contract agreement it took out with Unified Recovery Group LLC (URG), et al. The bank provided funds to URG for work it was set to perform for St. Bernard Parish in the aftermath of hurricanes Katrina and Isaac.
According to court documents filed in the U.S. District Court Eastern District of Louisiana, the parish first signed on with URG in September 2005 following Hurricane Katrina. A second contract was filed between the parish and URG in December 2005. Following Hurricane Isaac, a third contract was signed for debris removal between the parish and URG. URG also signed three separate security agreements in 2008 with SEPH. All loans signed with SEPH included a security agreement that permitted a lien in the event that the loans were not paid back.
According to court papers, in August 2008, URG executed a promissory note in favor of SEPH in the amount of $10 million. A second loan agreement "stated SEPH would provide revolving loans to URG, up to the $10 million limit of the note," court papers say. The third “Security Agreement” executed by URG in favor of SEPH, secured, "URG’s repayment obligations and “any and all present and future indebtedness and obligations now or hereafter owing by the Borrowers.”
Court papers say URG reorganized on the same day the transactions with SEPH were executed.
"A new entity, JKS, was formed to effectuate the buyout of two other URG members. As part of the contribution agreement, URG "transferred its interest in “[a]ll accounts receivable of [URG] . . . billed on or before” August 29, 2008, to JKS." However, court papers say, no document was ever filed in the public registry or record of any state giving notice of this transfer, making SEPH unaware of the new merger.
Two more promissory notes secured by the security agreement were executed in June 2011 for $4 million and $2.681 million. Court papers say URG failed to pay back the loans and in 2013, SEPH "obtained a money judgment against URG for more than $20 million."
The IRS also filed a notice of tax lien for unpaid federal taxes with interest. .
The IRS contends that whatever security interest SEPH has in the disputed funds is primed by the IRS lien for the tax period. They are seeking $302,803.37 of the $610,081.45 in monies, per its liens, with interest.
In this latest decision, the court also denies a motion for summary judgment requested by URG writing that the government and the IRS "shall submit new motions for summary judgment with appropriate summary judgment evidence, briefing the issue of when the parish approved contested Hurricane Isaac invoices, no later than December 21."
According to court documents, St. Bernard Parish filed a complaint in September 2014 asking the courts to "determine who had priority as to FEMA funds ($610,081.45) that were distributed to the parish so that the parish could pay for the debris removal work."