An unpaid $510,000 loan in East Grand Forks was not the result of employee malfeasance, willful neglect of duty or bad faith, a League of Minnesota Cities official said last week.
The organization's insurance trust issued that opinion in denying the city of East Grand Forks' insurance claims over the Boardwalk Enterprises loan. The City Council voted in March to take no action on the loan for now because of a lack of options in dealing with the debt, which was first brought to public light more than a year ago in a special city meeting.
The League of Minnesota Cities Insurance Trust stated that the loan has not been defaulted on "and therefore, (the city) has not realized this as a loss," according to a May 21 letter from the trust's Senior Claims Adjuster Carol Geiger to City Administrator David Murphy. Loan payments were to start in 2003 and conclude in 2019.
The letter added: "Based on all the information/facts that I obtained, it is my opinion that the actions of the city employees did not rise to the level of malfeasance, willful neglect of duty or bad faith." A near-identical letter was written in response to a claim filed on behalf of the city's Economic Development Authority.
Geiger referred questions to another League insurance trust official Tuesday, who a spokesman said was in training and unavailable until Wednesday.
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Geiger assigned attorney Shelley Ryan to render a legal opinion on the claim. Ryan interviewed city staff in East Grand Forks and reviewed relevant files, a City Council meeting agenda states.
The city filed the claims to see if any losses and legal fees associated with the unpaid loan would be covered under the league's insurance policy, according to the agenda item.
The former EDA director Jim Richter retired a few weeks after the Boardwalk Enterprises loan was first publicized in late April 2014. He has not commented publicly on the loan since and efforts to reach him have been unsuccessful.
City and Boardwalk officials have expressed surprise over the outstanding loan, and a closed meeting between the two sides in August did not result in a solution. The loan was made in 1999 to help construct the Boardwalk building.
City Council members discussed the insurance claim in a work session Tuesday night. City Council member Clarence Vetter pointed out the city has spent almost $25,000 in legal fees over the unpaid loan, which Mayor Lynn Stauss said "wasn't very smart." Stauss previously recused himself from discussions about the loan over family ties to Boardwalk officials.
