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WJBD - Local News - Salem Sues To Try and Recover Money From Defunct Klassic Kollections II Project

During happier times, Former Salem City Councilman Kip Meador displays one of the personalized Italian Ice Blocks Klassic Kollections II told city officials they would be making at their Salem plant.

Salem Sues To Try and Recover Money From Defunct Klassic Kollections II Project

By Bruce Kropp, WJBD News

The City of Salem has filed a civil lawsuit against Klassic Kollections II and four of its principals in an attempt to recover $450,000 in loan money given to the now defunct company as incentives to get them to move to Salem.  

The complaint filed in Lawrence County Circuit Court in Bedford, Indiana seeks to have a judge find the companies principals Laverne Lessig, Randy Martin, Lisa Martin and Cindy Rout in breach of the loan agreements and guarantees.  The city then seeks to have the judge foreclose on the security interests and to have the collateral sold at sheriff's sale to help satisfy the judgement.  All four live in the New Bedford area.  

The city contends Klassic Kollections II is in default of the CDAP agreement for failing to apply all disbursed funds toward financing the project as well as not maintaining business operations or creating and retaining the promised jobs.  The suit says the company has failed to pay the balance due under the CDAP agreement.  Once in default, the interest rate on the $275,000 low interest loan increases from 3% to 12%.  

The portion of the suit dealing with the $175,000 Tax Increment Financing District Agreement, has some additional allegations.  It claims Klassic Kollections II is in default because it failed to spend all dispersed funds on TIF eligible activities and failed to provide Salem with evidence of costs incurred on the project as well as required payroll information.  

Salem City Manager Bill Gruen says while nothing is certain, there is optimism that collection efforts will be successful in recapturing at least a portion of the loan proceeds disbursed.  He notes it is the policy of the City of Salem to pursue recapture of defaulted loan proceeds for as long as it is financially responsible.  

The city is utilizing the Koch Law Firm in Indiana to handle the litigation.  

Klassic Kollections was given the incentives to open a business to make personalized Italian Ice Blocks in a leased building in the Westside Industrial Park.  Klassic Kollections later abandoned their operation and the city has been seeking to recover the loan money made through the CDAP Low Interest Loan and Tax Increment Financing programs.  The company had promised to create 140 jobs through the business within a two year period, but were closed in less than a year after getting the loans.  

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