The Cove Hotel’s financial woes continue

By Bob Peryea

Correspondent

The saga of the receivership and the whereabouts of over $1 million at the Cove in Lake Geneva continue as the parties are headed back to court on Nov. 14.

Last month, PNC Bank sued in court to have a receiver assigned to the hotel to recover the remaining balance of a $1.65 million loan given to the Cove Condominium Association in 2007. The balance remains over $1.2 million despite alleged significant payments by condo owners toward the debt.

According to a request for Wednesday’s hearing by the receiving attorney, Michael Polsky of Beck, Chaet, Bamberger & Polsky in Milwaukee, contends the situation at the Cove is dire enough to warrant the immediately removal of the current management company, Geneva Hospitality, LLC. Polsky is requesting the court’s authorization to bring in another management company immediately.

Polsky alleges that Geneva Hospitality “failed to properly oversee the operation of the Cove Condominium.” He said that Geneva Hospitality allowed the hotel’s property and liability insurance to lapse completely in September. At its October board meeting the owners were assured by board President Cathy Hurlbut and Geneva Hospitality owner Sal Sardina that the facility was completely insured.

Polsky said that no complete accounting has been provided of the funds paid by owners to cover the costs of a loan taken out in 2007 to build

Polsky detailed many of the Cove’s ongoing financial problems in the hearing request.

Tax issues

Geneva Hospitality has several ongoing and unresolved tax debts to the state, according to records. In June of 2006, the Department of Revenue filed a lien in the amount of $174,622.

According to court records this debt was paid in full in May of 2009. Another lien in the amount of $14,275 was filled in November of 2007, which was paid in full in August of 2009.

To complicate the issue of missing tax payments, Chandra Webster, another principal of Geneva Hospitality, is listed by the state as owing $304,026 in sales taxes. She is listed as the agent of Geneva Enterprises of Wisconsin, LLC. The organization was dissolved in 2009 by the state for lack of activity. The seller’s license listed under Chandra Webster was revoked due to lack of payment.

The records further indicate that on March 29, 2009, Geneva Hospitality borrowed $250,000, with the total due in six months. An extension was granted to the loan, but the company apparently failed to pay. A lien was ordered in October of 2010 that is still outstanding.

Records show several unpaid bills from Geneva Hospitality including a bill from Abraham’s On-Site Shredding Service of Twin Lakes for shredding services. According to the bill, approximately 4,000 pounds of documents were shredded in August.

Had they invested in tax resolution services at the earliest, most of these hassles could have been avoided. With their expertise and extensive experience in IRS-related matters, tax agents might have been assistance to their hefty tax bills, years of unfiled tax returns, and other tax-related issues.

Owners have questions

Some owners have called into question the relationship between Sardina and Hurlbut.

“As board president Cathy (Hurlbut) is supposed to be protecting the interested of the owners but the amount of time and effort she spends protecting Geneva Hospitality raises red flags with some owners. There’s a lot of questions about the relationship,” said Kaye Lowman, a condo owner at the Cove.

Hurlbut ran for Kane County (Ill.) Circuit Court Clerk. In February of this year, her campaign accepted a $5,000 donation from Sardina, approximately one month after the contract for his company was renewed by the Board of Trustees.

Some parties are also calling into question the company’s reporting to the condominium owners, who are contractually entitled to a percentage of all room rentals.

In a letter dated Oct. 26, Attorney Robert Procter of Axley Brynelson, LLP, the firm representing a group of owners in the receivership action, states “we have been provided with anecdotal evidence by numerous unit owners and have spoken to at least one witness that questions whether unit owners are being paid the revenues that their units generate.” He said, “We think it is essential that you take actions to determine whether the Association’s finances and the revenues generated by the room rentals are being handled properly.”

The letter is addressed to James Patrician, Patrick McCarthy, Ronda Thompson McCarthy and Lino Menconi, a concerned group of condo owners.

Procter attached a police report dated Sept. 25, 2003, accusing both Sardina and Webster of “theft by fraud.” In the report, a condo owner at a property in Wisconsin Dells accused Geneva Hospitality of misreporting and withholding room revenue funds from the owners at that resort. Geneva Hospitality was the management company of Caribbean Cove Resort in the Dells.

When asked if the owners knew about the financial concerns of Geneva Hospitality, Lowman said, “Were we aware? No. Questions arose about the PNC Bank loan. Then everything else started coming out.

“The first thing we were looking for was we were hoping (from the receiver) for an accounting of the loan balance because as we understand it (the balance) is the same as five years ago,” Lowman said. “They (Geneva Hospitality) have been collecting $10,000 a month from owners. And about 100 owners paid $10,000 each in a lump sum.

“Of course, we haven’t seen the accounting.”