Cherokee County, along with the county Resource Recovery Development Authority (RRDA), filed suit Nov. 13, 2012 against brothers Jimmy and David Bobo and their associated companies, charging them, among other things, with fraud and conspiracy to commit fraud.
“Damages will be determined as we proceed through litigation,” said County Attorney Angie Davis.
The civil suit stems from the bankruptcy of Ball Ground Recycling (BGR), a recycling venture of the Bobos and the county, which declared bankruptcy in May. The county, in 2007, backed the Bobos with an $18.1 million bond issue. The bonds were issued by the RRDA through an intergovernmental agreement with the county.
Jimmy Bobo quit paying the debt service on the bonds as his business failed during the recession. Currently, the taxpayer tally for BGR stands at $2 million as the county searches for a new operator for the plant, which reverted to county ownership after the bankruptcy.
The total balance due to pay off the bonds, the suit notes, including principal, interest and debt service, is $30.04 million.
When asked for comment on the litigation, Jimmy Bobo responded to the Ledger-News saying, “We regret that the downturn in the economy ultimately killed the business that we were operating with the county.”
He said BGR stayed in operation, to its own detriment, much longer than most businesses in the construction industry.
“Regardless of the lawsuit, we remain focused on helping the county find a replacement tenant and new jobs for all of the people we had to lay off,” he added.
As defendants, the suit names Woodtech LLC, Jimmy L. Bobo, David G. Bobo, BG Land LLC, Bobo Grinding Equipment LLC, Upland Development Group Inc., Georgia National Trucking LLC, Prime Management LLC, J. Bobo LLC, D. Bobo LLC, and Sheffer and Grant Architects P.C.
The lawsuit states that BGR is the “alter ego” of the Bobo companies, as well as Jimmy and David Bobo, and that they operated interchangeably as one and the same entity, and as such “the separateness between BGR, and the Bobo Companies, Jimmy Bobo and David Bobo should be disregarded.”
It sues the defendants for breach of contract, noting the default of the Bobos is costing the county $100,333 a month. Counts two and three sue Woodtech for back rent during its occupancy of the BGR project land at $100,333 a month, the exact amount of the plaintiffs’ stated monthly damages, as well as breach of contract.
Count three sues all defendants for fraud and conspiracy to commit fraud.
It outlines why the plaintiffs believe the Bobos’ draws from the bond were fraudulent and charges the Bobo brothers were concealing the fraud from the plaintiffs, by furnishing invoices and bills represented as encompassing legitimate costs for the project as draw requests and by “utilizing the proceeds of the bonds obtained by fraud for their personal use.”
Additionally, in count five, the suit claims negligent misrepresentation and conspiracy to commit negligent misrepresentation by the defendants for participation in supplying “false information” to support draw requests.
Count six charges conversion against the defendants, by using funds dedicated for the project outside the scope of the project.
The suit contains 12 counts in all.
The complaint for damages states provisions in the bond issue and lease agreement executed in 2007 were not upheld, and zeroes in on the “draw requests,” where money would be taken from the bond proceeds to acquire, construct and install the new recycling center in Ball Ground.
“Each … draw request concerning construction work on the project included the certification of BGR, by and through Jimmy Bobo, that the work covered by the application was completed in accordance with the contract documents (including the lease),” the suit states.
It then charges, based on the draw requests, the Bobo Companies and the Bobos themselves were paid for work undertaken and services performed that were outside the scope of the BGR project. It claims the Bobo Companies were paid for work on the project “in excess of charges that are reasonable and customary.”
“Upon information and belief, the Bobo Companies as well as … Jimmy and David Bobo were paid a profit out of the disbursements of the proceeds of the bonds to BGR with respect to (the project),” the lawsuit states.
Once the project became operational, it continues, Woodtech was supposed to pay rent to the RRDA. Rent payments were not paid as of January 2011, the suit states.
However, the suit continued, Woodtech continued operations on the property and generated revenues until the business was legally removed from the property in June.
The county is in the process of choosing a forensic auditor to examine the financial records of the BGR project, as recommended by District Attorney Garry Moss and the Cherokee County Grand Jury. Both the April Grand Jury and the September Grand Jury have been monitoring the county commission’s handling of the failed project.
Post 2 Commissioner Jim Hubbard said he could not comment on the recently filed lawsuit.
Post 1 Commissioner Harry Johnston said he must limit what comments he makes regarding pending litigation.
“Our objective is for the county to be paid, and we believe the legal strategy we are pursuing is the best way to make that happen,” Johnston said.