CHARLESTON — The owner of a bankrupt mall where the state paid almost $1 million for rental property not actually being used has failed to provide a variety of financial documents, a trustee wrote in a newly filed motion.
The motion also accuses Pin Oak Properties’ former owner Dietrich Fansler of intentionally misdirecting rental checks valued at a $500,000. It presses for Fansler to be held in contempt.
The property, Middletown Mall in Fairmont, has been subject to an investigation by the state Auditor’s Office, which revealed state government was paying a combined total of $30,907.34 a month for use of multiple office suites it had vacated.
The motion filed Tuesday by bankruptcy trustee Robert Johns doesn’t make specific reference to the auditor’s investigation or the controversy that resulted.
But it covers some of the same ground, with suspicion over where the money from rental checks went.
Last month, Johns filed a motion in U.S. Bankruptcy Court in the Northern District of West Virginia requesting a variety of information about Fansler’s finances, including all documents related to rental payments.
Pin Oak and Fansler were asked to provide the documents by Aug. 10. That deadline past, with a new attorney for Fansler contacting the trustee Aug. 9.
The new motion accuses Fansler of misdirecting rent checks that should have been sent to Pin Oak Properties, which is now operating under the trustee.
Part of the misdirection was possible because of the similar names of Pin Oak Properties LLC, termed as “the Debtor” in the filing and under the control of the trustee, and Pin Oak LLC, still under the control of Fansler.
“The Trustee has reason to believe that post-petition rent checks, which were to be deposited into the Debtor’s account were instead deposited in the account of Pin Oak — an account owned and controlled by Fansler — and that such funds were then dispersed in some cases to the Debtor, but in many cases, to parties other than the Debtor for the benefit of Fansler and other parties related to Fansler,” the trustee wrote.
“Moreover, there is evidence that funds of the Debtor were improperly expended and diverted — pre-petition.”
Pin Oak’s former attorney told the trustee that about $172,000 of rent is missing, according to the filing.
“It appears that Fansler obtained the rent checks and deposited them into the bank account of Pin Oak by typing or writing the words ‘Pin Oak Properties’ on the deposit slip but then typing or writing the account number of non-debtor, Pin Oak, on the deposit slip instead of the correct account number for the Debtor’s account, causing the deposit to be credited to Pin Oak’s account, rather than the Debtor’s account.”
The filing is blunt about what the trustee thinks happened next:
“Fansler then used that account to pay funds for personal and business purposes unrelated to the Debtor.”
Pin Oak Properties filed for Chapter 11 bankruptcy in June 2017.
On May 8, as part of the bankruptcy, Middletown Mall was sold to General Acquisitions LLC for $13.7 million.
The scenario described by the trustee aligns with some of the findings of the state Auditor’s investigation.
The state paid almost a $1 million total for office suites at Middletown Mall in Fairmont that the Department of Health and Human Resources vacated in 2015.
The state continued to send out rent checks until this past January, when the investigation by the Auditor’s Office halted the routine.
During that time, the rent checks went not only to Pin Oak but sometimes to lenders who collected the rent checks as collateral.
For example, BB&T received rents, leases and revenues from Middletown Mall starting in 2014.
In 2017, there was a change in where the rent checks were going.
Pin Oak Properties owed on a loan by General Acquisitions of Morgantown. Again, the leases and rents at the mall were collateral.
As the state auditor noted, starting at the beginning of 2017, DHHR changed the invoices to reflect payment to General Acquisitions even though the agency had, two years earlier, vacated the property.
The rent checks went directly to General Acquisitions until June 2017, when a “request for special processing form was submitted.”
When the lease check was issued by the Treasurer’s office, a DHHR
employee picked-up the check that the invoice had directed to be sent to General Acquisitions.
The money was instead deposited into a different account.
“The investigation later revealed that a DHHR employee sought the special handling request after speaking with Mr. Deitrich Fansler, manager of Pin Oak Properties, LLC, by telephone,” the auditor’s report stated.
“According to the employee, Mr. Fansler contacted the employee by phone, and stated that the checks were to be sent to him and not to General Acquisitions. Based solely on the phone call from Mr. Fansler, the employee directed the check to be picked up and mailed to an address Mr. Fansler provided.”
The “special processing” change coincides with the bankruptcy filing by Pin Oak.
