MARION — The City of Marion on Wednesday responded to the adversarial complaint filed July 10 by lawyers for the owners of the Star Centre Mall in Marion.
The lawsuit comes after the owners of the mall, Illinois Star Centre Mall LLC, on May 4 filed for Chapter 11 bankruptcy following years of working to keep the financially challenged shopping center afloat.
The adversarial complaint sought an equitable accounting from the city of Marion as it related to the financing of the Illinois Star Centre Mall and surrounding area in Marion.
In legal documents filed by Marion city attorney Steve Green, the city has made a motion to dismiss the adversarial complaint.
According to court documents, the city alleges that complaints made by Illinois Star Centre Mall LLC are insufficient in several ways.
Those documents state that Illinois Star Centre Mall LLC does not allege fraudulent behavior of the city with sufficient specificity, and neglects to cite the occurrences of this fraud, the accounts from which the fraudulent activity took place, and the alleged amount that has been fraudulently used.
Court documents also state requests by Illinois Star Centre Mall LLC for an accounting of the SSA#2 bonds as well as other bond funds, accounts, ordinances, and materials for the creation thereof, should not be granted because Illinois Star Centre Mall LLC signed a waiver with the city of Marion.
Per those documents, on April 25, 2011, Illinois Star Centre Mall LLC entered into an agreement with the City of Marion for the refinancing of the 2002 SSA bonds with the issuance of the 2011B series bonds.
The city alleges that in that agreement, Illinois Star Centre Mall LLC “irrevocably waived certain rights with respect to all past bonds with any relation to the SSA#2 bonds.”
Further, the city said that the claim by Illinois Star Centre Mall LLC for equitable remedy is insufficient, as that remedy can only be granted when there is insufficient remedy available by law.
They state that Illinois Star Centre Mall LLC has not made a single FOIA request to the city and has not stated that a FOIA request would be insufficient.
Finally, the documents claim Illinois Star Centre Mall LLC has failed to show specific harm, and does not list any counts of harm that are identifiable and recoverable.
According to earlier reports, Dennis J. Ballinger Jr., the managing partner of Illinois Star Centre Mall LLC, said he authorized the filing of the adversarial complaint because the city would not voluntarily cooperate with requests for additional financial information to determine what, if anything, was still owed on the bonds related to the development of the mall and surrounding area.
Ballinger said he informed the city that the additional information was needed because a potential buyer of the mall had been identified and needed the information to perform its due diligence.
A July 10 news release from Illinois Star Centre Mall LLC attorney Paul T. Slocumb of Hoffman & Slocomb LLC, said “a review of the available ordinances, financial documents and bonds related to the financing of the mall reveal potential fraud,” including:
● Several unexplained transfers, totaling several million dollars, out of designated accounts established to fund the development of the mall and surrounding area.
● Continued assessment and levying of taxes on the mall when it appears that all of the bonds related to the development of the mall and surrounding area have been satisfied.
● The appearance that bond fund proceeds earmarked for the development of the mall and surrounding area were not used in accordance with the requirements of Illinois’ Special Service Area Tax Law.
● The appearance that the city of Marion has improperly commingled bond fund proceeds.
● The appearance that the city of Marion unfairly gerrymandered the special service area established to fund the development of the mall and surrounding area, which unfairly burdened Illinois Star Centre LLC with all of the tax liability, while arbitrarily excluding three of the four anchor stores and other surrounding businesses that clearly benefited from the improvements.
● It appears that the city of Marion assessed a 1 percent sales tax on the Illinois Star Centre LLC property to retire a series of general obligation bonds even though the city previously enacted an ordinance that specifically excluded such property from additional taxation.
Historic challenges facing the Illinois Star Centre Mall owners include a failed sealed-bid auction in November 2017, in which the buyer backed out of purchasing the property during the due-diligence period, and the 2015 conviction of some of the Illinois Star Centre Mall owners or their relatives for a bid-rigging scheme in Madison County.
The bankruptcy petition refers only to what is effectively the center portion of the mall. Anchor stores Target and Dillard's, both of which own their own parking, as well as Sears, Pirate Pete’s and the remainder of the parking area are, as of now, unaffected.
According to documents, the declared value of the debtor’s interest in the property, including real and personal assets, is $5,605,127.04. Notices of the petition were sent to 37 different businesses and government agencies.
According to Marion City Clerk Alice Rix, city employees and officials have been advised that they may not comment on the Star Centre Mall lawsuit.
Neither Ballinger nor his attorney, Paul Slocomb, have comments at this time.