Three years, thousands of pages of court filings, and high emotions on both sides. That’s what characterizes a stalemate over the fate of Sequoia, the famed Presidential yacht built in 1925. Despite a court awarding ownership to a lender two years ago, that lender has yet to take possession of Sequoia. It’s due to an impasse over the total of outstanding debts. A Delaware Chancery Court judge is therefore giving the lender 60 days to exercise its purchase option.
Sequoia served Presidents Herbert Hoover through Jimmy Carter, with the latter never actually stepping aboard. He decided Sequoia should be sold to private interests in 1977. Gary Silversmith, a Washington, D.C. lawyer, purchased the all-wood, 104-foot (32-meter) Trumpy in 2000. In July 2012, he obtained a $5-million loan from FE Partners, a U.S. company formed in 2012 initially to negotiate and execute the loan. (The company has gone on to acquire another historically significant boat, a yawl built for Joseph P. Kennedy, father of the late President John F. Kennedy.) In court documents, Silversmith states the loan was necessary because his company, Sequoia LLC, “was suffering financial distress due to the poor economy coupled with the high cost of maintaining a wooden hulled 1925 yacht.” Both parties agreed that FE Partners could acquire Sequoia for $7.8 million if Silversmith failed to repay the funds by a set date. In a lawsuit filed in early 2013, Silversmith accused FE Partners of “a dastardly plan” to take Sequoia from him, including forcing him to default. FE Partners countered with claims that Silversmith had millions in unpaid debts relating to Sequoia that dated back before the loan agreement was signed. The company also claimed Silversmith attempted to hide these and related matters. Further accusations were filed by both parties in the ensuing months, until a motion for default judgment was filed by FE Partners in June 2013. Silversmith agreed to the default motion that August, and Vice Chancellor Sam Glasscock III, the Delaware Chancery Court judge who had been hearing the case, formally dismissed the suit. He then appointed an independent counsel in September 2013 to oversee the sale and transfer of Sequoia.
As part of his duties, the independent counsel investigated and outlined outstanding and potential debts. He submitted his initial findings to the court in May 2014, estimating liabilities of about $160,000. FE Partners disputed the sum. When the independent counsel submitted his final report, outlining $171,634 in liabilities, FE Partners disputed that as well. This in turn has been holding up the hand-over of Sequoia. Why? In part, because FE Partners is permitted to deduct the liabilities from the above-mentioned $7.8-million figure.
The disparity between what the independent counsel and FE Partners each state are the liabilities is significant. One example: taxes owed to the District of Columbia. The independent counsel reports the figure is $87,000, while Fe Partners claims it’s up to $10 million. FE Partners further argues that the independent counsel hasn’t considered potential liabilities, including tax debts in Virginia and Maryland. And, it states, it has until 2017 to exercise its purchase option. (Under the original 2012 loan agreement, the loan was payable within five years.) The independent counsel has countered that FE Partners may be trying reduce its final fiscal obligation by getting the liabilities added up to a higher sum.
Meanwhile, Sequoia has been sitting in a Virginia shipyard, out of the water, since December 2014. No work has been done due to the ongoing dispute.
On July 30, Glasscock ordered FE Partners to officially decide within 60 days whether it’s buying Sequoia. He noted that the company has regularly re-affirmed its desire to take possession of either the yacht or the company that Silversmith formed to manage her. “A tangible piece of American history sits deteriorating on a marine railway on the Western Shore, awaiting resolution of the legal issues that complicate its future,” Glasscock writes.
Even with this, the fighting continues. In a statement sent to the Associated Press, Richard Graf, a lawyer for FE Partners, wrote, “Additional liabilities have been incurred since the date of the independent counsel’s report, and the owner of the Sequoia has failed to maintain it in ‘good working order,’ as required by our loan documents. Thus, it is likely that all liabilities exceed the $7.8 million exercise price, and we are considering all possible options.” Silversmith tells the Associated Press that he has indeed maintained Sequoia, receiving a Coast Guard inspection certificate earlier this year and each of the past 10 years “without any substantial deficiencies.” Furthermore, he says, he will pay FE Partners if it chooses not to take over ownership of Sequoia and begin funding her repairs.
Sequoia, designated a National Historic Landmark in 1987, sits and waits.
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