The owner of Sequoia, the former Presidential yacht, has agreed to default judgment and attorneys’ fees for the company that loaned him money a year ago. Yesterday, a Delaware Chancery Court judge signed the formal dismissal of the case, meaning Sequoia can be purchased by the loaning company for a previously agreed-upon $7.8 million, minus the loan amount and other fees. However, the same judge is weighing whether to impose sanctions on the attorneys for Sequoia’s owner for alleged misconduct, or to request Delaware’s Office of Disciplinary Counsel, a court agency, impose them.
First, some brief background on the yacht. The 104-foot Sequoia, a Trumpy with a wood hull, was built in 1925 and initially used by President Herbert Hoover. Presidents Franklin Delano Roosevelt, John F. Kennedy, and Richard Nixon also enjoyed time onboard. Even though she wasn’t the only Presidential yacht during the 20th century, Sequoia served more American Presidents than any other vessel, straight through to 1977. That’s when President Jimmy Carter decided it wouldn’t be wise to continue using her, given the economic crisis of the time. He ordered Sequoia to be sold, and a variety of private buyers called her their own at different times over subsequent years. Sequoia was declared a National Historic Landmark in the 1980s.
The settlement in the Sequoia lawsuit this week follows a long and often ugly battle between the plaintiffs and defendants.
Sequoia was acquired at auction in 2000 by Gary Silversmith, a Washington, D.C.-based lawyer and developer, who formed the Sequoia Presidential Yacht Group to oversee her. Last year, due to the recession, Silversmith sought a loan to continue maintaining Sequoia. He formally arranged one in July 2012 with FE Partners, a U.S. company formed in March 2012 and principally doing business in Washington, D.C. On its website, FE Partners states that it is “currently interested in historically significant antique vessels and is a unique source of debt and equity capital to fund the maintenance, operations and restoration of yachts as well as certain commercial and decommissioned Naval vessels that might otherwise fall into disrepair, be dismantled and/or removed from U.S. waters.” FE Partners agreed to lend Silversmtih $5 million. Both parties further agreed that FE Partners could acquire Sequoia for $13 million if Silversmith wished to sell, or for $7.8 million if Silversmith failed to repay the funds.
Silversmith sued FE Partners in New York in early January, claiming “a dastardly plan to wrest control of the Sequoia” and “overwhelming avarice.” He alleged that the company purposely provided only part of the loan to him, to ensure that he’d default and that FE Partners could then enforce the acquisition option. A New York judge dismissed the lawsuit in late January, since the contract stipulated that disputes could only be filed in Delaware, where both FE Partners and Silversmith’s Sequoia Presidential Yacht Group were registered.
When Silversmith re-filed the complaint in Delaware in early February, the lawsuit made the same claims as before, though also claiming that FE Partners sent several wrongful notices of default, alleging they were based on false claims. On February 10, FE Partners filed a reply to the complaint, stating that it uncovered nearly $10.5 million in debts that Silversmith’s company owed to various parties, all dating back before its loan agreement. “The plaintiffs’ concealment of their significant debts and their potential contingent liabilities constitute material breaches of the express warranties in the loan documents,” FE Partners’ filing stated.
After a hearing before a judge in Delaware that same month, both parties agreed to a 60-day truce. This meant that neither would take any action against the other, though lawyers for both would be permitted to continue gathering evidence. A court date for the lawsuit to proceed was set for May, upon the expiration of the maintaining of the status quo. That date was subsequently postponed for this week.
However, in June FE Partners filed a motion for default judgment plus sanctions for fabrication, alteration, and destruction of evidence as well as witness intimidation. In that request, court records show, FE Partners called into question the actions of Silversmith and his lawyers. Among the claimed actions: Silversmith discarded the primary computer used at the Sequoia offices, and a letter from Gazprom, a Russian company, to Silversmith was fabricated to make it appear that the company offered $20 million to purchase Sequoia. Silversmith and his attorneys redacted the request for default motion, meaning that many sections of information were blacked out; they claimed these details were confidential. In July, a judge rejected their request for continued confidential treatment of the default motion, suggesting the motivation was more related to avoiding embarrassment over their alleged behavior. Unredacted documents were subsequently filed with the court, though they remain under seal.
The Sequoia Presidential Yacht Group agreed to the default motion, though not the sanctions, in early August. Vice Chancellor Sam Glasscock III, the judge who has been overseeing the case, formally ordered the case dismissed on Tuesday of this week. In the court documents, he writes, “This Order and Judgment shall be separate from and in addition to FE Partners’ request for sanctions against the Sequoia Parties’ counsel, which has been heard by this Court and will be addressed separately.” He also writes, “The Sequoia Parties fraudulently induced FE Partners to enter into the Loan Documents as alleged in the Counterclaims, including, but not limited to, through the use of fraudulent misrepresentations, including the fabricated $20 million Gazprom offer letter.” Glasscock adds that the case “reeks of fraud and malfeasance.”
In the meantime, the judge is appointing an independent attorney to oversee the sale and transfer of Sequoia to FE Partners. In a statement released to Megayacht News last evening, FE Partners says, “For months, the owner of the Sequoia has tried to use the courts and media to defame and pressure us. During the litigation, he fabricated crucial documents, engaged in witness intimidation, and destroyed computers on which critical evidence was stored. Today, we are pleased that the Vice Chancellor has dismissed this complaint and we have been vindicated. Assuming we can establish all existing liabilities, it would be our intent to exercise our option, purchase the Sequoia, and keep it in the United States. Should that happen, we hope to do our part to preserve and restore the USS Sequoia so that future generations of Americans will be able to enjoy the storied past of this magnificent vessel.” As of press time, our request for commentary from Silversmith’s attorneys has gone unanswered.