The company that bought the former Farrel Corp. properties in downtown Ansonia three years ago has sought bankruptcy protection in federal court.
The bankruptcy filing by Washington Management came as the company was about to lose two of the properties to a mortgage lender who had foreclosed on them.
Background
Moustapha Diakhate’s Washington Management bought roughly 10 acres of former Farrel Corp. properties on both sides of Main Street in January 2013, amid much fanfare and promises of redevelopment.
But no redevelopment plans were ever submitted.
Parts of the properties were occupied with tenants when Washington Management took ownership. But one — 501 E. Main St., the Farrel Corp.’s former “process lab” — has been vacant for years.
In late 2014, the city issued a blight citations against the building because of graffiti, overgrowth, more than 200 broken windows, and other problems.
Those liens, which total millions of dollars, remain pending.
Foreclosure, Bankruptcy
Last year, Shaw Growth Ventures, a Jericho, NY-based mortgage lender, sued Washington Management, saying Diakhate has defaulted on a $2 million loan he signed when he bought 501 E. Main St. and 65 Main St., an office building with a 108-space parking garage underneath.
While that case was pending, Washington Management sold the other two former Farrel properties it had bought — 1 W. Main St. and 35 Main St. — to “Ansonia Developers,” a limited liability company of which Diakhate is the president.
The purchase price for that sale was $2, according to property records in City Hall.
In February, Milford Superior Court Judge John Moran ruled that 501 E. Main St. and 65 Main St. would be turned over to Shaw in March unless Diakhate paid them $2 million.
In that case, the judge found the fair market value of 501 E. Main St. to be $210,000. For 65 Main St. the figure was $820,000.
Days before the properties were to be turned over, Washington Management sought bankruptcy protection in federal court. That filing automatically stayed the foreclosure.
Article continues after the document.
Businesses use bankruptcy to continue operating while trying to clear their books of debt — but in general, creditors and a judge must approve a bankrupt business’ plan to repay at least some of what it owes.
Two days after the initial bankruptcy filing, Holley Claiborn, a federal trustee assigned to the case, filed a motion to throw it out of federal court because Washington Management was not represented by a lawyer, as required by law.
Three weeks later, a lawyer representing Washington Management filed an appearance in the case and asked a judge to deny the trustee’s motion to dismiss.
The case was set for a hearing at U.S. District Court in Bridgeport April 12.
But neither Diakhate nor his lawyer showed up.
During the two-minute proceeding that followed Claiborn asked U.S. Bankruptcy Court Judge Carla E. Craig to continue the matter to April 26.
Click the play button below to listen to what happened in court.
Claiborn went over the background with the case, and said that while a lawyer had filed an application to represent Washington Management, there were procedural issues with the filing.
She also said the filing failed to disclose that the lawyer has a connection to one of the debtors listed in the case.
And, Claiborn noted, Washington Management hadn’t filed any details about how it plans to get out of bankruptcy.
She asked the judge to continue the case to see if anything happens.
If not, she said she may ask the judge to dismiss it.
Judge Craig, after saying she was surprised nobody from Washington Management had shown up, then continued the matter to April 26.
Reaction
The Valley Indy emailed Diakhate March 15 and again Wednesday (April 20) seeking comment.
Meanwhile, the city is waiting to see what happens when the bankruptcy case goes back to court, Mayor David Cassetti and Economic Development Director Sheila O’Malley said Wednesday.
Aldermen have discussed the city’s blight liens against the company in closed-door meetings for months. The discussions are kosher under the Freedom of Information Act because they involve pending litigation.
Last month, the Aldermen voted to have John Marini, the city’s corporation counsel, foreclose on the blight liens at 501 E. Main St. He was drawing up the papers to do so when the bankruptcy petition was filed.
The city sees the old process lab as an important property in the near term because it sits next to two city-owned former industrial properties — the “ATP” and “Palmer” buildings at 497 E. Main St. and 153 Main St., respectively.
City officials have for months been negotiating the sale of those buildings to Woodbridge developer Jerry Nocerino, who also owns several other Main Street properties.
“We have a vested interest in that building (501 E. Main St.) because it’s directly adjacent to our city-owned properties,” O’Malley said. “And whatever happens to that building will negatively or positively affect those two buildings.”
“We’re watching closely,” she said.
