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Case #1: Crooked Security Firm
by Ray Hankamer.

rayhankamerHave you had a nightmare situation develop in your commercial real estate practice?  If so, please share with your fellow professionals so they can hear your problem, and the solution you found to it.

We had been hired by a major Houston bank to look after a closed hotel which the bank had foreclosed near Intercontinental Airport.  We were paid a monthly fee by the bank.  The hotel was closed and left ready to open again:  linens folded and stacked on shelves in the laundry room, kitchen clean and ready to re-open, guest rooms and commercial areas vacuumed and ready to go.

We paid to have a temporary cyclone fence erected around the hotel.  We hired a national name security firm to station round the clock officers on the premises, and the bank paid their invoices on time.  In addition to the on-site guards, the security contract called for a supervisor to stop in during each eight hour shift to verify their guards were in place.

We also had the listing for the hotel and were showing it to buyers at a $3.2 million asking price.

There was a two day torrential tropical storm which hit near IAH, and a couple of days after the storm, two men from our company stopped in at the closed hotel to check with security on how things were going.  As they drove it, an old jalopy pulled up next to them and a lady asked “Where they be sellin’ those TVs?”

Red flags went up.  Our people drove around back and saw doors open everywhere.  No guard was in sight.  We went inside the hotel and discovered that the ground floor had flooded with water marks a few inches up the wall. No one from the security company had advised us and we had no chance to react.

Across the lobby carpet were wheel tracks.  Investigating further, our people found that most of the valuable stainless steel equipment was no longer in the kitchen, and the tracks were from the dolly which someone had used to steal it.

Inspection of the laundry storage area indicated few remaining sheets, pillows, bedspreads, and blankets…and most of the TVs had been stripped from the rooms.  The locked case containing all room keys was standing open.

It was apparent that the “security company” had been conducting a garage sale of all our chattels, systematically looting the hotel.  Supervisors must have been in on the fraud.

We fired the company and replaced it with a new one.  The bank refused to pay the security company about $16,000 of outstanding invoices.

Then, we were stupefied when we were served with papers by the constable, suing us as the agent of the bank for not paying the security company for stealing from us!

We countersued for damages and went to court, claiming diminished value from the security company for the stolen goods AND for a $1 million loss in value of the hotel asset, since potential buyers began discounting their offers by that amount once they saw the damage from the flood and the lost furnishings of the hotel.

After a one week lawsuit, we won.  Then we were informed that the security company’s insurance company had filed for bankruptcy, and the security firm had no assets.  We won the trial but it was a hollow victory.

Then, when it seemed that nothing more could go wrong, the judge retired, and a new judge took the bench in the court.  The security firm’s attorneys went to the new judge and requested that the former judge’s ruling favoring us be overturned.  The new judge complied, and the security company geared up again to sue us for the unpaid $16,000.

The lawyers on both sides conferred and agreed that a new suit would not be worth $16,000, and after all this string of nightmares the matter was dropped.

The hotel eventually sold at auction for $1.6 million, half of the appraised asking price before this string of disasters began.

They can’t make this stuff up!


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