Fire Department presses fraud claim over truck loan

A volunteer fire department in Scott County has lost a pumper truck and a brush truck to repossession after defaulting on a 2011 loan and is fighting the lender in court to get them back.

The Northwest Scott County Volunteer Fire Department is pursuing claims in U.S. District Court in Fort Smith against First Government Leasing Co. of Illinois and its president, Paul Graver.

The Fire Department claims that First Government Leasing and Graver deceived Fire Chief Donnie Atkins when he signed a lease-purchase agreement in July 2011 to borrow $90,000 to help the department buy a 2011 Kenworth pumper truck. The department did not purchase the firetruck from First Government Leasing but borrowed money for the purchase.

Atkins said he could not comment on the repossession Wednesday because the matter was in litigation.

The department also used money from an $85,405 Federal Emergency Management Agency grant it was awarded in 2009, according to FEMA records for the firetruck's purchase. The department paid a total of $174,000 for the pumper truck.

The agreement with First Government Leasing, filed among other documents in federal court, showed that the department had pledged all seven of its vehicles -- including a 2011 Ford brush truck -- as collateral for the loan.

The pumper truck and the brush truck were the two vehicles repossessed by First Government Leasing.

With $76,500 interest over the 10-year loan term, the agreement showed the department obligated itself to pay First Government Leasing $166,500.

The department's attorney, Derick Allison of Greenwood, said Tuesday that the department stopped making the $1,387.50-a-month payments because it ran out of funds.

He said the department gets its money from membership dues and whatever it can generate from fundraisers and grants. The department also gets some money from the Arkansas Department of Emergency Management.

In its claims against First Government Leasing and Graver, the department accused the parties of fraud, violation of the Arkansas Deceptive Trade Practices Act, usury and wrongly taking and selling the department's property.

The department claimed First Government Leasing took advantage of Atkins' "inability to understand the language of the agreement."

"In fact, the individuals operating [the department] are rural Scott County volunteers who lack the formal education which would have allowed them to understand the ramifications of the agreement," Allison wrote.

First Government Leasing attorney Matt Campbell of North Little Rock said Wednesday that a lack of understanding was no excuse for the department to default on the loan.

"It seems disingenuous to try to blame it on a lack of education," he said, "when my client made the loan in good faith."

In December 2012, First Government Leasing filed a complaint against the department in Scott County Circuit Court, arguing that the department had defaulted on the loan and petitioned to take possession of the loan collateral to satisfy the debt.

In addition to the pumper and brush truck, the department had pledged a 1990 brush truck, a 1994 ambulance, a 1970 tanker truck, a 1984 Chevrolet Blazer and a 1985 Chevrolet pickup, a copy of the agreement among court documents showed.

The department's lawsuit said that after First Government Leasing filed its default action in circuit court, it took possession of the pumper truck and later sold it for $180,000. The date of the repossession was not listed.

First Government Leasing also took the 2011 Ford brush truck last July. Atkins told reporters at the time that it appeared someone broke into one of the department's locked buildings through an air-conditioning vent to gain access to the vehicle.

Allison said department equipment, including its Jaws of Life, was on the brush truck and was taken with it.

The department's lawsuit said First Government Leasing sold the brush truck for $89,000.

The department is arguing that First Government Leasing has recovered more than $100,000 over the principal and total interest that was due from the department's loan.

Once First Government Leasing and Graver took possession of the vehicles, it dropped its default suit in circuit court, leaving only the Fire Department's lawsuit, which was filed as a counterclaim to First Government Leasing's suit.

Campbell said he requested that the department's case be transferred from circuit to federal court because his client would have a better chance at prevailing. He said Graver would have the choice of relying on Illinois law rather than Arkansas law in the legal battle over the lease-purchase agreement.

In a motion to dismiss he filed in federal court Wednesday, Campbell wrote, for example, that the deceptive trade practices claim made by the department would not stand up under Illinois law.

"In none of the claims has NW Scott [the Fire Department] sufficiently pleaded facts that would support the relief it seeks," Campbell wrote.

Metro on 03/26/2015

Upcoming Events