Jackson developer David Watkins must pay more than $600,000 in restitution and penalties for diverting money from a bond issue for converting the Metrocenter Mall’s former Belk’s store into City of Jackson office space.
Chancery Judge Hollis McGehee ruled Thursday that Watkins had no authority to divert any of the $2.5 million in bond money intended for the Belk’s redevelopment to a law enforcement center his company, Watkins Development, was building in Meridian. Watkins created a development company, Retro Metro, for the Belk’s project.
McGehee’s ruling reversed portions of an order by Secretary of State Delbert Hoseman while upholding other parts.
The ruling reversed Hoseman’s finding that Watkins failed to disclose “significant and material liabilities” of Retro Metro in a development agreement and thus Watkins did not violated the Mississippi Securities Act.
However, McGehee upheld Hoseman’s finding that failing to disclose intentions to use a portion of the bond proceeds for the Retro Metro project to finance “activities” of the Mississippi Law Enforcement Center in Meridian is a material omission and a violation of the Mississippi Securities Act.
Further, McGehee upheld Hoseman’s finding that Watkins’ misuse of the Retro Metro bond proceeds was an act and course of business that “operated to mislead or deceive.” The Court found this since this was in connection with the offer and the sale of securities, it violated the Mississippi Securities Act.
According to court documents, Watkins recruited an investment banking firm, Duncan Williams, to buy the bond with a promise that the 20-year lease of the Belk property to the City would bring in $9.47 million while the construction costs for converting the Belk space was capped at $2.5 million.
Watkins, a principal of Retro Metro, was to oversee the total design and construction of the Belk conversion in exchange for a $500,000 development fee and “mobilization fee” equal to 25 percent of the project the project costs “otherwise expended.” McGehee found no evidence the fee would be out of line.
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