Bud Chiles finances worsen

When Lawton “Bud” Chiles, III, independent candidate for governor of Florida, filed his financial disclosure form last month, he listed his annual income as $143,000, his net worth as $1.3 million and an additional $1,763,546 in assets as of Dec. 31, 2009. But in the six months since that reporting date, his fortunes threaten to decrease sharply. The latest of several foreclosures on investment properties he owned has diminished his holdings by $150,000. And a development company he lists as a $550,000 asset is in default on an $11.5 million loan for which Chiles may be personally liable.

In all, if creditors in six pending lawsuits prevail, the man who wants to lead the state could end up owing more than $19 million. His aides say Chiles is not in danger of personal bankruptcy.

Many people, including those who consider themselves his friends, wonder why he chose to run for the state’s highest office at a time when he was so personally vulnerable.

“I admire anyone who goes into business on their own,” says Ron Sachs, who owns a Tallahassee media consultant firm and who served as communications director for  Bud’s father, Gov. Lawton Chiles Jr., in the mid-1990s. “And in this tough economy many businesses suffered. But the problem is his political campaign will be exposed to all kinds of ricochets from his business dealings. The simple logic many people will use, whether it’s fair or not, is that if you can’t handle your own finances why should we trust you with the state’s?”

Chiles has never held public office, so his record as a businessman and executive is the only criterion by which the public can judge him.

Chiles launched his campaign late and filed as an independent, even though his father was a prominent Democrat who also served as U.S. Senator. Chiles has vowed not to take donations of more than $250 because he asserts that big money has corrupted both parties. The result, according to Sachs, is a candidate who does not seem intent on winning.

“I have deep affection for Bud Chiles and his family,” Sachs says. “But this comes off seeming more like a lark, or politics as hobby.”

Katie Ottenweller, communications and policy director for the Chiles campaign, says that the Florida real estate crash hit many people hard. “These are investments for him that have gone south,” Ottenweller says. “They did not turn out the way he thought they would. But when you put these things in perspective, there are so many Floridians who are in a worse place. And he feels some of that pain, and understands the difficulties they are going through.”

“This is just a small part of the picture of his overall success in business throughout his life,” she adds. “Bud has acted ethically. He is not ashamed of anything he has done, and he has tried to do right by his investors.”

Bankruptcy is not a risk if the courts rule against him in all the lawsuits, Ottenweller and others say, even though his liabilities dwarf his assets.

“Bankruptcy is not an option,” asserts Jim McClellan, with the public relations firm Southern Solutions. “Nor would it be necessary.”

In the 1970s Chiles started his own public relations firm, Chiles Communications. He sold the company in the 1990s and took a job as an executive at an international charity in New York. Since then he has invested in real-estate development and in a company that builds modular homes.

Chiles, his wife Katherine and eight other people are all part of a company called the Moorings at Carrabelle, Inc.

On May 31, 2005, each of them signed contracts personally guaranteeing a $12 million loan the Moorings took out from Wachovia Bank, National Associates. The money was intended to develop a condominium and marina project on nearly 10 acres of land in Carrabelle, Franklin County. In 2006 the Moorings renewed the loan, paying it down by $500,000 in the process. But the project struggled as the economy plummeted. In 2008 several of the shareholders formed a company called the Moorings Second Lien Lender, LLC, specifically to loan $2.5 million to the company in an attempt to “move the development forward,” according to McClellan.

It didn’t work. Wachovia claims the company stopped payments and defaulted. In September 2009 Wachovia sued Chiles and his partners, as the personal guarantors of the loan, for the principal, as well as accrued interest and attorney’s fees. Because the loan was a personal “guaranty,” each individual is technically responsible for the full amount. The case is pending. Moorings Second Lien Lenders, meanwhile, foreclosed on their mortgage and now owns the development property.

On his financial disclosure form, Chiles listed his 16.3-percent ownership in The Moorings, LLC, as an asset worth $50,952, and his 5.6-percent ownership in The Moorings Second Lien Lender as an asset worth $500,000.

The Moorings decline followed the failure of another Carrabelle development that Chiles co-founded called Pirate’s Landing, a condominium/marina on the Carrabelle River.

In 2008 People’s First Community Bank foreclosed on the the marina and 22 condos there worth at least $2.9 million. Bud and his wife had bought a Pirate’s Landing unit to support the project but apparently did not keep up with payments. In 2009 their bank, SunTrust Mortrgage, foreclosed on that unit as well. The case is pending. Meanwhile, two of Chiles’ co-defendants, Donald and Deborah Mason, are suing Chiles for more than $1 million as a result of the of the failed deal.

On his financial disclosure form Chiles listed his Pirate’s Landing condo as an asset worth $150,000.

In 2007 Chiles was also a partner in GreenSteel, a factory in Carabelle that planned to build modular housing units. Carrabelle’s public officials gave several incentives to the company, including about $1.5 million in infrastructure to support the plant, in the belief it would create jobs. But Hexaport Building Systems of Florida, LLC, which owned GreenSteel, declared Chapter 11 bankruptcy in 2009. Hexaport’s owner bought out Chiles, and indemnified him against liability, according to McClellan. But he is still named in at least three pending lawsuits from creditors. On his financial disclosure form Chiles listed $2.5 million in contingent liabilities as a result of the bankruptcy.

In an attempt to connect with voters Chiles acknowledges his business troubles on his website: “My own business in real estate suffered when the economy turned down,” he writes. “I know the stress, the anxieties, the questions that plague so many of us still: When will I be able to resolve this? Will I be able to provide for my family?”

Ron Sachs does not think that message will resonate with voters. “This is an ill-fated political campaign,” he says.