DOVER, Del. (AP) — An investment group with ties to a wealthy industrialist family in India can take ownership of the former U.S. presidential yacht Sequoia with no payment to its current owner, a Delaware judge ruled Monday.
Vice Chancellor Sam Glasscock ruled that FE Partners, an investment entity formed by Washington, D.C.-based Equator Capital Group and members of the Timblo family, can exercise an option to acquire the Sequoia at an adjusted option price of zero.
After years of legal wrangling that at times tried his patience, the judge noted in his 21-page opinion how far the Sequoia has fallen since its glory days. Presidents from Herbert Hoover to Jimmy Carter once entertained dignitaries and diplomats aboard the yacht or simply sought refuge there from the Oval Office.
In more recent years, the 104-foot wooden vessel, which has changed hands several times since Carter had it sold at auction in 1977 for $286,000, has been used for entertaining and sightseeing tours of the Potomac River, offering four-hour charters for $10,000 (plus food and drink) from its dock at a Washington, D.C., marina.
Currently, the National Historic Landmark lies rotting at a shipyard in Deltaville, Virginia.
"The Sequoia, an elderly and vulnerable wooden yacht, is sitting on an inadequate cradle on an undersized marine railway in a moribund boatyard on the western shore of the Chesapeake, deteriorating and, lately, home to raccoons," Glasscock noted.
Monday's ruling stems from a lawsuit filed in 2013 by Sequoia Presidential Yacht Group LLC, led by Washington lawyer and businessman Gary Silversmith.
A year earlier, the Sequoia group entered into a $7.5 million loan agreement with FE Partners to help pay off certain obligations and provide operating and capital funds. The agreement gave FE Partners the right to exercise an option to purchase the yacht for $7.8 million in the event of a default.
Sequoia sued to prevent FE Partners from exercising its purchase option, but after the judge found that the loan was fraudulently induced, Sequoia agreed to a default judgment in favor of FE. That set off a new round of litigation as attorneys argued over how much the option price should be reduced because of needed repairs, liens and other outstanding liabilities.
After accounting for undisputed deductions, Glasscock wrote that the maximum exercise price amounted to a little more than $2.4 million, which is less than the $2.75 million that an expert for FE Partners testified it would cost to rebuild the yacht's wooden hull.
"Today, the court ruled that the lender can buy the Sequoia with a credit bid that essentially allows them to not pay any additional money at closing," Silversmith said in an email. "Of course we are disappointed. We remain ready, willing and able to pay off the lender in full, but unfortunately it appears that we will be denied that opportunity."
Silversmith had argued that FE Partners was grossly overestimating the cost of needed repairs as part of a trial strategy to drive up the purported liabilities and acquire the Sequoia for little or nothing out of pocket. But the judge rejected Silversmith's contention that it would cost only about $310,000 to address problems outlined in Coast Guard inspections and to get the Sequoia floating again.
"FE Partners is committed to restoring and preserving the Sequoia in cooperation with the U.S. Coast Guard so that future generations of Americans will be able to enjoy the storied past of this magnificent yacht," FE Partners general counsel Richard Graf said in an email. "We are pleased that Vice Chancellor Glasscock found in our favor, rejected Mr. Silversmith's false claims and again determined that Mr. Silversmith committed fraud in obtaining the loan from FE Partners."