Four prominent community members who signed loan guarantees backing Missoula's baseball stadium are refusing to pay an estimated $562,500, stalling transfer of the ballpark to the city of Missoula, officials say.

The four guarantors have hired a lawyer and argue they were misled when they signed the First Security Bank documents, said Wes Spiker, board chairman of Play Ball Missoula. Play Ball is a nonprofit that formed to build Ogren Park at Allegiance Field.

In 2007, First Security Bank loaned Play Ball $1.9 million to complete the ballpark, and 19 private individuals signed guarantees backing the loan, Spiker said. When Play Ball Missoula couldn't pay back the money, the bank called in the notes.

A banking official unaffiliated with First Security said guarantees are legal documents, and it's rare for guarantors to challenge payments. According to Spiker, 15 of the 19 guarantors have honored their commitments, paying roughly $1.1 million. Eleven paid cash, including one businessman who paid Friday morning after being contacted by the Missoulian earlier in the week.

But four individuals have not paid loan guarantees ranging from $50,000 to $250,000, according to Play Ball: Bob Gillette, Bruce Micklus, Joe Easton and Keith Lokengard. Gillette earlier forgave a separate $25,000 loan to Play Ball, Spiker said.

The late First Security Bank senior vice president Hal Fraser, who died a year ago, was one of the biggest advocates of community projects such as the ballpark. Spiker said the group of four claims Fraser told them the loan guarantees were only a formality and the bank would never call in the notes; thus, their refusal to pay.

"I just don't like the way it seems to me some of these so-called friends are stepping on the grave," Spiker said.

Mae Nan Ellingson, a lawyer representing Play Ball Missoula, said the decision to leave a bank guarantee unpaid borders on "indefensible," especially because those who signed the notes are savvy in finance.

"To me, it's a stretch for a businessperson to sign a guarantee and then say they never expected to pay on it," said Ellingson.

Through their lawyer, Richard Reep, the group of four declined to comment for this story. In an email, Reep also declined to answer questions about the guarantees and possible litigation.

"It (sic) our policy not to publicly comment on matters that may directly or indirectly involve our clients (sic) affairs. Therefore, I respectfully decline any comment on the story you intend to print," Reep wrote. "Likewise, my clients have been advised not to comment and I would request you cease pursuing comments directly from them."

Gillette directed the Missoulian to attorney Reep; Micklus declined to comment; Easton, a former Play Ball board member, did not return multiple voicemails requesting comment; and Lokengard could not be reached.


Play Ball Missoula raised some $6 million to build the ballpark, and it opened Ogren Park at Allegiance Field in 2004. But a prolonged lawsuit, skyrocketing building costs and an economic crash meant building the stadium cost more than expected, and the nonprofit found itself drowning in $7.3 million of principal and accrued interest.

When Play Ball couldn't pull in enough revenue or collect enough pledges to pay its loans, a finance team worked out a complicated set of transactions to clear the debt, prevent foreclosure on the stadium, and transfer the ballpark free and clear to the city of Missoula as planned.

The Missoula City Council approved the city's portion of the deal in August 2011, but the ballpark has yet to be turned over to the city. The project has been controversial in part because the city contributed land plus an estimated $4 million of urban renewal funds to the ballpark - money that could have been used for things like sidewalks and affordable housing.

City officials believe the deal eventually will go as planned, but a lawyer representing First Security Bank said the businessmen who are not paying the loan guarantees are jeopardizing the transaction with the city and its ability to collect future revenue from the ballpark.

"All of that has been brought to a screeching halt because we're not able to secure resolution with the (four) outstanding guarantors," said attorney Jon Beal.

Mayor John Engen said he hasn't tried to cajole the parties who aren't paying because that job is up to the bank and the lawyers. His focus is on securing the ballpark for the community.

"I told attorneys for both parties that I needed them to do their best to work together to ensure this didn't imperil the city's ability to acquire (the stadium), and I got the impression from attorneys they were on board with that," Engen said. "But really the fact of the matter is I think that First Security and Play Ball are where they need to be for us to proceed with closing."

The deal the finance team worked out puts a free and clear stadium in city ownership:

Play Ball agreed to collect any outstanding pledges and forward those payments to First Security. Secured lenders forgave some principal and interest, and the city paid $3.55 million of the debt, including $2 million of tax increment money. In exchange, the secured lenders agreed to release all claims against the civic stadium, the land and Play Ball.

Part of the city's contribution includes $1.55 million in revenue bonds issued to Missoula Federal Credit Union and the Montana Community Development Corp. To pay off those bonds, Mountain Baseball, which owns the Missoula Osprey Pioneer League baseball team, will lease the stadium from the city for $120,000 a year for 25 years.

First Security Bank was to collect its money from the outstanding Play Ball pledges and the loan guarantees, then release its claim against the stadium. But as it stands, First Security remains short some $562,500, so the deal is stalled.

Spiker said First Security Bank "has been more than generous with Play Ball and its guarantors." The bank wrote off 25 percent of the guaranteed amounts when 11 individuals paid cash, he said, and it also wrote off smaller portions for four parties making payments over time.

Since First Security still needs to collect the remaining loan guarantees, signing the settlement agreement as drafted wouldn't be prudent for the bank, Ellingson said. So she is crafting a revised agreement that aims to protect the city's ballpark without hampering the bank's ability to collect the rest of its money.

"It was and is absolutely essential to the proposed transaction that First Security acknowledge that it did not have any security interest in or claim against the Civic Stadium and the Land or a claim against any lease payments to be derived from the lease of the Stadium by the City to Mountain Baseball," Ellingson wrote in an email. "Without the transfer of the Civic Stadium to the City and without the City's ability to use the Lease Payments as the source of repayment for the City Revenue Bonds, the deal does not work for anyone."

Beal, the lawyer representing First Security, said he hasn't seen specific language, but agrees the goal is to preserve the ballpark for the city of Missoula: "I think it's an important community asset, and everybody is working hard to ensure that this gets transferred to the community."

Beal also said the bank has been willing to take "a substantial hit" on the money it's owed. First Security made an offer to all the guarantors to pay reduced amounts, but the last four individuals have so far refused to pay anything.

"I think in essence, they don't think it's an enforceable guarantee. Their signature on the document does not bind them to the contract," Beal surmised of their position.


Melanie Griggs, commissioner of the Montana Division of Banking and Financial Institutions, said loans are set up so that the guarantees are secondary to the original source of repayment - in this case, pledges, of which Play Ball collected some but not all. So guarantees aren't called on often.

If a guarantor doesn't pay, Griggs said the bank has an obvious recourse: "They go to court. It's a legal document. Most banks try to privately negotiate the situation first, but if they're forced to, they have an absolute right to seek court intervention."

Beal said the bank is still trying to resolve the matter with the guarantors' attorney and encourage them to willingly pay: "If that is unsuccessful, then they are going to have to revisit what options they have available. They can pursue legal action to ask the court to require these folks to honor the guarantees that they signed."

In the meantime, anyone owed money by Play Ball Missoula can still trigger foreclosure on the stadium, said Ellen Buchanan, director of the Missoula Redevelopment Agency. She said she doesn't believe that will take place because it's not in the lenders' best interest, and she expects a closing within the first quarter of 2012.

"From our perspective, nothing has been adversely impacted at all. We've got everything in place. We're waiting on one last piece, and we'll close it all simultaneously," Buchanan said.

At Play Ball, Spiker said he knows some people are going through patchy financial times and personal struggles. But he said there are also "obviously hard feelings."

Spiker said he was snubbed in public by one of the guarantors, while some contributors to the ballpark boycotted at least one business establishment because of the controversy.

"We rewarded these people with naming on our donor wall, and frankly, we're going to have to tear that thing down and make some revisions to it," Spiker said.

Reporter Keila Szpaller can be reached at @KeilaSzpaller, 523-5262, keila.szpaller@missoulian.com or on MissoulaRedTape.com.


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