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Bank: Arkansas hotel owner in contempt for withdrawing thousands from account

by David Showers | November 1, 2018 at 4:30 a.m.
The Sentinel-Record/Richard Rasmussen An unidentified man exits The Hotel Hot Springs & Spa Monday. A court has granted a request from the hotel's creditor to put the property into receivership.

HOT SPRINGS -- The Hotel Hot Springs & Spa's mortgage holder filed a motion for contempt last week, saying the owner defied a court order by withdrawing $30,100 from a hotel bank account.

The bank statement Summit Investment Management included with its motion shows Gary Gibbs withdrew $25,000 and $5,100 on Oct. 19 and Oct. 22, respectively, despite Circuit Judge Lynn Williams' Oct. 18 order prohibiting Gibbs and his corporate entities from accessing hotel funds.

Summit Investment seeks a $23,374,719 judgment against the hotel property for two nonperforming loans secured by the hotel at 305 Malvern Ave. and its parking garage at Malvern and Church streets. The Denver private equity firm acquired the hotel's mortgage at an auction after original creditor, First NBC Bank of New Orleans, was put into receivership last year by the Federal Deposit Insurance Corp.

Gibbs was unable to attend the Oct. 22 hearing on the foreclosure action. The court continued the matter to Friday. The complaint Summit Investment filed earlier this month said Gibbs has defaulted on the loans by being more than $50,000 in arrears on county property taxes, owing the Hot Springs Advertising and Promotion Commission $61,444 in unpaid hospitality taxes and failing to make a $65,000 minimum debt service payment by the Sept. 30 due date.

Williams' Oct. 18 order appointed KPartners Hotel Management of San Antonio as the hotel's receiver, or third-party manager, pending Summit Investment's foreclosure filing. KPartners has been running the hotel since its appointment.

The $30,100 was withdrawn from a Wells Fargo account that the motion for contempt said is the depository for all of the hotel's credit card receipts. The account had a negative $337.97 balance as of Oct. 24, according to the bank statement.

The $30,100 is part of the $300,000 that the motion said has been transferred to accounts controlled by Gibbs since last month, requiring the Summit Investment and KPartners to provide working capital for the hotel.

"The defendants know the hotel has insufficient funds to operate or fund the payroll due Oct. 26," the motion said. "Without any legal obligation to do so, the plaintiff will, of course, honor and cover the payroll. Plaintiff has already advanced additional, significant funds to allow the hotel to continue operations and provide a positive experience for all guests."

The motion said Gibbs is in further defiance of the court by refusing to provide information on $320,000 in advance deposits for December bookings. The order Williams entered after the Oct. 22 hearing required Gibbs to provide KPartners with access to all of the hotel's financial accounts.

"The $320,000 has been fully prepaid," the motion said. "However, the receiver has been unable to locate where those funds currently reside. The defendants should be ordered to produce documentation on group booking deposits and turnover said deposits."

The motion said $8,000 deposited into the hotel's operating account at Regions Bank to cover $4,300 in overdrafts has been the only operating capital Gibbs has provided since the receiver was appointed.

State Desk on 11/01/2018

Print Headline: Bank: Arkansas hotel owner in contempt for withdrawing thousands from account


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