Seven months after Harbor of Hamblen was formed in an effort to again provide temporary housing to domestic-violence victims, a once-unknown $150,000 debt is threatening to swamp the nonprofit agency and prevent it from offering services in the future, officials say.
Commercial Bank has filed a foreclosure petition against Harbor of Hamblen as well as Harbor’s predecessor, CEASE and Donna J. Kelly, former CEASE executive director.
The bank is seeking permission to sell the shelter and an adjacent office building to satisfy the unpaid debt.
“(S)aid principal amount of $150,000 being outstanding and past due and payable in full, along with late charges and accrued interest through Aug. 20 … (Commercial Bank) is entitled to request … the trustee enter and take possession of real property and to sell all or part … at (a) public foreclosure auction …” the foreclosure petition states.
Morristown attorney Ethel Rhodes, secretary of the Harbor board, says that until recently, the Harbor board knew nothing about the $150,000 line of credit, which was extended in 2019. The debt represents about 80 percent of the value of the shelter and office, and there’s no way Harbor County could continue if had to repay the debt, according to Rhodes.
“The trust deed is based on a loan made without proper due diligence to certify the authority of an applicant to obtain a loan against the real estate,” Rhodes wrote in a letter to Commercial Bank, correspondence that was filed in an exhibit in the foreclosure case.
“In other words, Ms. Donna Kelly acted without any authority whatsoever to borrow against the property owned solely by CEASE …” the letter further states. She did not have authorization to sign a trust deed.”
Kelly has not been charged with any crime. District Attorney General Dan Armstrong confirmed the state comptroller’s office is conducting an investigative audit of CEASE’s finances.
Rhodes hand-delivered the letter to the Commercial Bank loan department on July 11. Commercial Bank officials apparently were not swayed by Harbor’s legal argument.
The bank filed the foreclosure petition on Aug. 26.
Commercial Bank asserts in the petition the agreement that encumbered the shelter was entirely legitimate and signed by its board chair, according to the petition.
The $150,000 debt was not the only problematic financial development before Harbor of Hamblen was formed on March 19.
Rhodes says the shelter computer and copy machine were scrubbed, as were critical entries in the accounting software. The attorney also alleges CEASE incurred approximately $70,000 in unexplained credit card debt.
CEASE relied – and in the future Harbor must rely – on grants. Rhodes says CEASE’s finances were in such disorder that a grant agency said the shelter would never receive another dime as long as it was associated with CEASE.