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Home My WebLink AboutR-2013-001 Authorized Finance Department to Write-Off and Delete Balance of $125,000.00 from X Video as a result of Litigation & Code Settlement Agreement RESOLUTION NO. 2013-001 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF DANIA BEACH, FLORIDA, AUTHORIZING THE CITY FINANCE DEPARTMENT TO WRITE-OFF AND PERMANENTLY DELETE FROM THE CITY'S ACCOUNTS RECEIVABLES RECORDS, THE BALANCE OF $125,000.00 DUE FROM A TO X VIDEO, AS A RESULT OF A LITIGATION AND CODE SETTLEMENT AGREEMENT; PROVIDING FOR CONFLICTS; FURTHER, PROVIDING FOR AN EFFECTIVE DATE. BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF DANIA BEACH,FLORIDA: Section 1. That the Finance Department is authorized to write-off and permanently delete from the City's Accounts Receivables records, the balance of$125,000.00 due from A to X Video, as a result of a litigation and Code Settlement Agreement. An explanatory Memorandum related to the matter is attached and incorporated by this reference. Section 2. That all resolutions or parts of resolutions in conflict with this Resolution are repealed to such extent of such conflict. Section 3. That this Resolution shall become effective immediately upon its passage and adoption. PASSED AND ADOPTED on January 8, 2013. ATTEST: LOUISE STILSON, CMC AALTERKE, III CITY CLERK MAYOR p'S F1RSr G� APPROVED AS TO ORM AND CORRECTNESS: Z THOMAS J.} S CITY ATTORNEY� ` Weiss Serota Helf nan Pastoriza Cole & Boniske, P.L. Memo To: Tom Ansbro From: Matthew H. Mandel Date: November 30, 2012 Re: A to X Pursuant to your request, the following memorandum outlines the relevant events relating to A to X. A to X was a retail operator selling adult videos and related paraphernalia at 1920, 1922, 1924 and 1926 Stirling Road, Dania Beach, Florida 33004 (the "Property"). On November 13, 2001, the City passed City Ordinance No. 2001-032 (the "Ordinance"), which, among other things, regulated the location of specific types of adult uses. Under the Ordinance, regulated adult uses after the expiration of the Ordinance's three (3) year amortization period (September 15, 2004) were only allowed to exist in the City's Industrial-Research-Office-Marine ("IROM") zoning district subject to specific distance restrictions. As the Property was not located in the City's IROM zoning district, it became a prohibited use as of September 15, 2004. The City, on or about August 25, 2006, cited Stirling Center, the Property's owner, for not being in compliance with Section 28-34.10 of the City's Code of Ordinances (i.e. operating an adult use establishment as set forth in Section 28-34.10 of the City's Code of Ordinance in a zoning district other than the IROM zoning district)("Zoning Violations"), and the City prosecuted the Zoning Violations under City Code Enforcement Case No. 06-1234 ("Zoning Code Enforcement Proceedings"). A to X intervened into the Zoning Code Enforcement Proceedings and challenged the basis for the Zoning Violations. The Code Enforcement Special Magistrate in the Zoning Code Enforcement Proceedings found Stirling Center and A to X in violation of Chapter 28, Article 31, Section 31.40 of the City's Code of Ordinances and found both Stirling Center and A to X jointly and severally responsible to pay the City a fine of$250 per day commencing October 18, 2008 ("Zoning Code Fine"). 2 RESOLUTION#2013-001 The City, on or about April 13, 2007, cited Stirling Center for various building code violations by A to X at the Property ("Building Code Violations"), and the City prosecuted the Building Code Violations under City Code Enforcement Case No. 07-092 (`Building Code Enforcement Proceedings"). The Code Enforcement Special Magistrate in the Building Code Enforcement Proceedings found Stirling Center and A to X in violation of various sections of the City's Code of Ordinances and found both Stirling Center and A to X jointly and severally responsible to pay the City a fine of $200 per day commencing October 18, 2008 until December 7, 2009 (`Building Code Fine"). The Zoning Code Fine (as of May 4, 2010)was $140,933.50, and the Building Code Fine (as of May 4, 2010) was $83,234.00 ("Building Code Fine"), and the City placed valid liens on the Property relating to the Zoning Code Fine and Building Code Fine. Thereafter, Stirling Center filed an eviction action against A to X in Case No. COCE-06- 016236 in Broward County Court (the "Eviction Action") seeking to evict of A to X based upon the Zoning Violations, Building Code Violations and A to X being a purported illegal holdover tenant. While the Eviction Action was pending, the court in the Eviction Action entered an order on August 14, 2009 requiring that A to X on a weekly basis beginning on 7/27/09 Deposit $3,150.00 into an account titled"Your A to X Video Outlet, Inc. Escrow Account." This amount reflected the per diem charges for A to X's code violations (which also included separate violations of the City's building code). Importantly, the Court in the Eviction Action stated in bold lettering — "The funds in the Account shall not be disbursed unless ordered by the Court." On May 4, 2010, there was approximately$115,000.00 in the Escrow Account. A to X also brought an action in the United States District Court, Southern District of Florida, Case No.: 09-61611-CIV-CORN/SELTZER (the "Federal Action"), and asserted various federal claims against the City, including but not limited to, facial and as-applied claims relating to the constitutionality of the Ordinance and for just compensation relating to the amortization provisions of the Ordinance. The parties subsequently entered into a global settlement ("Settlement Agreement") in May 2010 as to everything (including the Eviction Action, the code enforcement matters and the Federal Action). Pursuant to the Settlement Agreement, the parties submitted an agreed order to the Court(signed on June 3, 2010), which incorporated the terms of the agreement. Under the Settlement Agreement and agreed order adopting same, A to X agreed to pay the City $35,000.00 within two (2) business days of the order and also agreed to continue to deposit $3,150.00 into escrow account and then pay the City $125,000.00 once the escrow account reached that amount. The Settlement Agreement provided that A to X was to deliver the $125,000.00 to the City by August 13, 2010 "irrespective of whether A to X is still occupying the Property or regardless of whether A to X is able to obtain any disbursal from the Escrow Account." 3 RESOLUTION#2013-001 While A to X did pay the City $35,000.00, it failed to pay the City the second payment of $125,000.00. A to X also stopped depositing $3,150.00 into the account after July 19, 2010. A to X defaulted under other obligations of the Settlement Agreement and was thereafter evicted in September 2010. A to X never, despite repeated demands by the City, paid the City the second payment of$125,000.00. Not receiving any payment from A to X, the City, on August 26, 2010, filed a motion with the court in the Eviction Action, seeking the release of the escrow funds to the City. At the hearing on the motion (on October 21, 2010), A to X's attorneys represented that they did not know the whereabouts of their client nor could they tell the Court where the escrowed money was located. The Court deferred ruling pending the discovery of the location of the escrowed monies. Through extensive discovery, we found that A to X's last known officer and director, Steve Sievers (and sole signator on the account for A to X), on August 9, 2010 wrote a check for $115,000.00 to Regions Bank, which, in turn, issued a cashier's check for $115,000.00 to a Mr. Terry Barnett out of the Regions' escrow account without Court permission. Terry Barnett thereafter on September 27, 2010 deposited the $115,000.00 into a bank account at a PNC Bank in Ohio. From that PNC account, Barnett, on October 6, 2010 and November 3 and 9, 2010, issued numerous checks to A to X's attorneys (about $30,000.00 in total) and other venders of A to X (about $10,000.00). It was also discovered that Barnett paid the remaining funds (approximately $78,000.00) to a "James Cornett." Corporate records did not show that either Barnett or Cornett had any interest in A to X; however, subsequent discovery indicated that Cornett secretly ran the business and that Sievers was merely a "front man" making $1,000.00 per month. On December 13, 2010, the City filed a motion for contempt and sanctions against Sievers, the individual who withdrew the funds in violation of the court order. On March 2, 2011, the court in the Eviction Action entered an order against A to X awarding $189,000.00 to the City as sanctions. On May 13, 2011, the court in the Eviction Action, after conducting an evidentiary hearing, entered also an order and final judgment against Sievers finding him personally liable to the City for $125,000.00 as a result of his improper withdrawal of the funds from the escrow account. The final judgment against Sievers was recorded in all counties in which he resides or works (Broward County, Osceola County and Orange County) on May 25, 2010. Further discovery efforts were made to find Mr. Cornett and Mr. Barnett, but such efforts were not successful. In addition, bank records were obtained to locate the $78,000.00 given to Cornett, and it was discovered that such funds had been withdrawn from various ATMs throughout South Florida. We then contacted various law enforcement agencies regarding the actions of Messrs. Sievers,Barnett and Cornett and were referred to the North Miami Beach Police Department as it was the jurisdiction in which Mr. Sievers withdrew the escrow funds. Unfortunately, the investigation by the North Miami Beach police did not yield a location for Cornett or Barnett nor 4 RESOLUTION#2013-001 did it find the whereabouts of the escrow funds. Similarly, extensive efforts were made to discover Sievers' bank records and real property assets; however, no collectible assets were discovered. We do not believe that there is anything else we can do with respect to the missing $125,000.00 owed to the City. The City and the Court were simply defrauded in this matter. Subsequently, the City and the property owner (landlord of A to X) settled the liens that remained on the real property in the spring of this year for a total sum of$15,000.00. Soon after, the entire building was renovated and a furniture store that sells modern furniture has been operating at the site. Ultimately, the City achieved its goal, which was to terminate the business operations;the total payments received($50,000.00)were used to defray the enforcement costs. 5 RESOLUTION#2013-001