Where did the money go?

Where did the money go?

After reading through the various Rhinos-related documents — the mortgage from the original NBT Bank loan, the NBT lawsuit, the ground lease with the city, the multi-party agreement, the LeChase lawsuit — I have some new questions and concerns about the whole Rhinos/PAETEC Park mess.

But I have one overriding query for the Rhinos: Where did the money go?

Let's do the math. The Rhinos originally received a $15-million grant for the stadium. They then received about $4 million in state money that was brokered by the area's state Senate delegation. According to NBT's lawsuit, the team then borrowed a total of roughly $10.3 million from the bank.

Added up, that means the Rhinos have already received about $29.3 million from various sources. (That doesn't include the $4 million the city kicked in for neighborhood improvements or the $4 million from the state Assembly that's currently being held by the city.)

Now, according to the mechanic's lien LeChase Construction has put on the stadium, the Rhinos agreed to pay the construction company roughly $22.8 million to build the first phase of the stadium. According to the lien, the Rhinos still owe LeChase about $579,000. That means the team has so far paid LeChase about $22.34 million.

So, the Rhinos have spent $22.34 million, but they've taken in about $29.3 million. That's a difference of roughly $7 million. $7 MILLION!

So, I ask the Rhinos: Where did that $7 million go?

Maybe city officials are wondering the same thing. Maybe that's why Bob Duffy wants a state audit. Maybe that's why the city refuses to release yet another $4 million to the Rhinos — because it fears the money will disappear into a black hole.

Of course, the Rhinos might have a valid explanation for that $7 million. If so, then let's hear it.

That's probably my biggest question after reading all those documents, but I have a few others ...

• A question for NBT Bank: What the heck were you thinking? The bank first loaned $4 million to the Rhinos in December 2004. In August 2005, NBT increased the total to $6 million and extended the maturity date to June 1, 2006.

The bank then extended the maturity date two more times. In June 2006, it was extended to September 1, 2006. But when Sept. 1 rolled around, the Rhinos still hadn't repaid a dime, so the bank extended the maturity date to Dec. 1 of that year. Each time, the Rhinos promised to pay back the full $6 million, plus interest.

But here's where I seriously question NBT's motives. On Jan. 29, 2007, the Rhinos AGAIN promised to pay the loan back, and for some strange reason, the bank apparently BELIEVED them and gave the team until Feb. 1, 2009 to pay the whole $6 million back. Keep in mind that the Rhinos hadn't paid back a dime up to that point.

But also on Jan. 29, 2007, the bank gave the team even MORE money, in the form of three additional loans of $300,000, $2,019,000 and $2,281,000. The bank apparently gave the Rhinos all this money even though the team hadn't repaid anything yet.

But there's more — on May 23, 2007, NBT gave even MORE money to the Rhinos, this coming in the form of a $250,000 advance. Again, the team apparently had yet to repay single cent. So why in the world would NBT Bank keep giving the Rhinos more and more and more money? What could the bank POSSIBLY have been thinking?

Maybe what happened was that, when January 2007 rolled around, the Rhinos were hoping to get that $4 million from the state Assembly fairly quickly, so they probably assured the bank that once that $4 million arrived, the team could start making loan payments. But again, it's hard to believe a huge corporate lender like NBT would fall for that.

• It seems like NBT Bank AND the city of Rochester might each have a legal claim to stadium at this point. According to the mortgage note the bank issued when it gave the Rhinos the original $4 million in December 2004, Rochester Rhinos Stadium LLC put up the stadium up for collateral. (However, there's another disturbing clause in the note — it seems like Donner and DuRoss also put up the Rhinos and Rattlers teams themselves as collateral, which might mean the bank has a legal right to seize the teams, too.)

But according to the ground lease between Rochester Rhinos Stadium LLC and the city dated Feb. 9, 2004, the city clearly has a right to seize the stadium if the Rhinos default on the lease.

The lease agreement lists five examples of possible default; the one the city would most likely use is the fourth one, which has the Rhinos failing to comply either with the grant disbursement agreement they accepted when they received the initial $15 million from the state OR with the multi-party agreement the team signed with the state and the city. (I should note here that I have NOT read the grant disbursement agreement.)

If the Rhinos so default, under the ground lease the city has the right to "take any action at law or in equity to terminate this lease and evict the Tenant (the Rhinos) from the disposition parcel (the land on which the stadium sits)."

Further, under the "end of term" section of the lease, if the Rhinos default and the city terminates the lease, the city can force the Rhinos to do one of two things: Hand the stadium over to the city for $1 or — yikes! — demolish the stadium.

So, at this point, who would get the stadium, the bank or the city? The lease between the city and the Rhinos does provide for and allow the Rhinos to sign a mortgage with a third-party lender — with the city's consent, of course. But the lease doesn't appear to address the right of said mortgager to the stadium if the team defaults on the bank loan. (If there's any independent legal types out there who have read the lease, correct me if my interpretation is incorrect, which it might be given my lack of legal training.)

As a result, the city and the bank might be hashing that out at this point. Tomorrow (Monday) night, I'll discuss this matter further and suggest (with the help of Bruno Sniders) a possible future chain of events regarding the stadium.

• If things continue the way they're going, the Rhinos might legally be required to PAY BACK the original $15 grant from the state. According to the multi-party agreement, dated Feb. 9, 2004, if the Rhinos default on the agreement, the state's Empire State Development Corporation (the agency that ponied up the $15 million) has the right to terminate the agreement. Then:

"Upon any such termination, (the Rhinos) shall be ... liable for repayment of the Grant and shall immediately repay the same to ESDC ..."

So not only would the Rhinos owe NBT Bank $10.8 million, they might owe the state $15 million. But would that happen? I'll try to discuss that tomorrow.

• It's important to keep in mind that when I say "the Rhinos," we're actually dealing with two different companies — Empire Professional Soccer LLC and Rochester Rhinos Stadium LLC. Empire LLC is the soccer team itself, while Stadium LLC is, obviously, the stadium itself. Both companies are owned by the same people — Donner, DuRoss and Chris Economides.

Now, NBT Bank has sued five parties — Stadium LLC, Rhinos LLC, DuRoss, Donner and Economides— while LeChase has sued just Stadium LLC. The multi-party agreement is between the ESDC, the city (technically the Rochester Urban Renewal Agency), Stadium LLC and Empire LLC.

The ground lease, meanwhile, is between the city and Stadium LLC. I think Empire LLC (the team itself) then leases the stadium from Stadium LLC. Likewise, Empire Professional Lacrosse, dba the Rattlers, also leases the stadium from Stadium LLC. (Empire Professional Lacrosse is also owned by DuRoss, Donner and Economides.)

So, when we say "the Rhinos," we could be referring to the team, the stadium or both. I know, this is confusing — I myself might be interpreting things incorrectly (again, if that's the case, please tell me). Because "the Rhinos" are two different companies, the fates of the team and the stadium might end up being split from each other, i.e. one party owning the team and another owning the stadium.

I guess that's where we have to discuss Dan Williams — would he buy just the team, or the team AND the stadium? And if he buys just the team, who gets the stadium, the city or NBT?

That's all stuff I'll discuss tomorrow ...