The man who sold the BISCO warehouse to the city of Danville for $1.2 million says he is being pressured to pay thousands of dollars from the sale to a business associate who is the father of a city commissioner.
Former BISCO building owner Mitchell Barnes alleges that Mike Montgomery, father of Danville City Commissioner Ryan Montgomery, expects a hefty “finder’s fee” for the city’s purchase of the property from Barnes at an Aug. 10 auction.
To support his claim, Barnes refers to video and audio surveillance tapes that recorded a Sept. 5 meeting between him and Mike Montgomery in his Lexington office. Ongoing video and audio surveillance in and around the property is a long-standing part of Barnes' business operations, the proprietor explained during a recent tour of his office and adjacent warehouses.
On the tape, Mike Montgomery tells Barnes the two had a verbal understanding that he would get 50 percent of any amount over $1 million from the proceeds of the BISCO building sale. The final sale price was $1,237,550.
Barnes disagrees with that assessment and tells him several times that he has taxes to pay and does not think Mike Montgomery helped him find a buyer. Prior to buying the warehouse at auction, Danville had leased part of the building from Barnes for its public works department.
The discussions between Barnes and Mike Montgomery appear to contradict multiple public statements by Commissioner Ryan Montgomery that no one in his family stands to make money from the sale of the BISCO building.
When asked about Barnes’ allegations and the audio recording during a telephone interview Tuesday, Commissioner Montgomery said, “That’s news to me.” He once again reiterated his position that he and his family never financially benefited from the BISCO building.
During a telephone interview a few minutes later, Mike Montgomery said he never asked Barnes for money from the sale of the BISCO building and found that claim “laughable.”
“I love Mitch like a brother, but he is getting up in years and that may be impairing his judgment,” he said.
When a reporter informed him about the surveillance video and audios from the Sept. 5 meeting between him and Barnes in Lexington, Mike Montgomery abruptly said “no comment” and accused the reporter of trying to “wreck” his son’s chances for re-election to the City Commission.
Commissioner Montgomery has been criticized by residents during some recent meetings because he did not immediately disclose that his father and Barnes had a business relationship.
“That (lack of disclosure) has the appearance of questionable business dealings,” Danville resident Wilma Brown said during the Aug. 27 commission meeting.
Barnes alleges that Mike Montgomery called him as recently as Oct. 19, once again saying he is owed money for his role in the sale of the BISCO building. Barnes acknowledges that Mike Montgomery, owner of M&M Electric, acted as a property manager for him since at least 2005. Mike Montgomery paid no rent, Barnes said, and received 10 percent of the proceeds from the rent checks the city issued directly to his (Montgomery’s) corporation. Barnes said Mike Montgomery then forwarded the difference to him.
“I never really liked the way that was set up where he got the money first and then forwarded it to me later, but he pointed out that I was 40 miles away and it was a good idea for him to keep an eye on the place,” Barnes said.
However, the 10 percent agreement to which Mike Montgomery referred during their Sept. 5 meeting in Lexington is spelled out in a standard landlord-tenant lease and in no way applies to the sale of the BISCO property, Barnes said.
Until recently, Barnes and Mike Montgomery had a fairly amicable business relationship. However, Barnes disagrees with Ryan Montgomery’s assessment at the Aug. 27 City Commission meeting that his father, in managing the building, was “doing a favor for a friend (Barnes).”
“I met (Mike Montgomery) at an auction years ago and I outbid him,” Barnes said. “It was purely a financial relationship. He got his free rent, a little extra money for keeping an eye on things … .”
That contradicts another one of Commissioner Montgomery’s statements during the Aug. 27 meeting.
“… my father has no financial interest in this building,” the commissioner said. “I have no financial gain in that building selling. My father has no financial gain in that building selling. Actually, he’s going to be in the position where he’s got to move now and spend a lot of money to do so.
“So, therefore, I think there’s not any conflicts there … out of my duty of confidentiality as commissioner, I had to sit there and watch for a month from the time we had our executive session and some decisions were made. And not being able to tell your dad, or your brothers, or anybody like that, ‘Hey, you need to start moving.’
“But no, there’s no financial interest at all there for either of us. And when the sale closes, all relationships with that property and me and my family will be severed.”
Barnes, now in his 70s, said despite a number of interruptions to his business and personal life he has no intentions of giving Mike Montgomery money from the sale of the BISCO building.
Barnes actually hoped to directly sell the building to the city earlier this year without going through the auction process, but said that during a phone conversation in June city officials offered him $500,000 for the building while “snickering” over the telephone. Barnes said that’s when he selected an auctioneer.
“I would have gone for $1 million whether through auction or directly dealing with the city,” Barnes said. “But when the city officials I dealt with acted like smart-(expletive deleted), I knew I wasn’t being taken seriously.”
Barnes said when he went to close the BISCO deal last month, he met city officials, including Mayor Bernie Hunstad, and told them if he had been treated respectfully Danville’s taxpayers could have saved nearly $250,000 in the BISCO purchase.
Staff writer David Brock and contributing writer Frank Mojica contributed to this report.