A former Charlotte city councilman hoping to be re-elected this year failed to repay a $375,000 loan he received in late 2020 from a construction company he served as president of after leaving office, according to documents obtained of the City of Charlotte with a request for public records.
In December, James “Smuggie” Mitchell first received a letter asking him to repay the loan in five business days, plus about $7,000 in interest, records show. The investment firm, Bright Hope Capital, which bought the construction company considered it to have failed to repay the loan in the following weeks until it said it had taken control of the stake of Mitchell in the construction business, according to the records.
News of the default was first reported by the Charlotte Business Journal, which obtained city records. The records include several pages of emails and letters from Robinson Bradshaw, a law firm representing Bright Hope Capital. It also included letters from Malcomb Coley, one of the leaders of the investment companies.
Mitchell told the Charlotte Business Journal and WFAE he still owns a 25% stake in the construction company.
He is one of six Democrats vying for a General Council seat. He previously served on the board, representing District 2 from 1999 to 2013, then as a member at large from 2015 to 2021.
Mitchell abruptly resigned as an advisor in January 2021 after accepting a position as co-owner and president of RJ Leeper. The construction company had been purchased by Bright Hope Capital LLC, which had been set up by local business leaders. Its main investors included Hugh McColl, former CEO of Bank of America, and Coley and Lloyd Yates, a former Duke Energy executive, the Observer previously reported.
When he resigned from the city council, Mitchell owned 25% of RJ Leeper. State law prevents public officials from directly benefiting from a contract with the public agency they serve. The law considers a participation greater than 10% as a direct benefit.
Mitchell said the law would have barred RJ Leeper from doing business with the city had he remained on the board, the Observer reported when he resigned.
“The opportunity was too great to take a 30-year minority-owned business and continue the legacy,” Mitchell said in January 2021. “I think I can impact Charlotte in a different way.”
Mitchell then left his management position at the top of RJ Leeper, while saying he would continue to own 25%, the Observer reported in July.
Attempts to contact him on Friday were unsuccessful. A lawyer representing him, Bobby Robinson, wrote in an email to the Charlotte Observer on Friday afternoon that he was unable to comment at this time “due to ongoing litigation”.
Mitchell’s ownership in RJ Leeper is significant because, if elected, the ties could affect the company’s ability to do business with the city.
In interviews with the Charlotte Business Journal, Mitchell said he would be prepared to cut his interest below 10% if elected. He also told the news agency that he did not want to interfere with RJ Leeper’s ability to receive and work on bids for municipal contracts.
RJ Leeper has been involved in work on public projects such as extensions to the Charlotte Convention Center and Charlotte Douglas International Airport, the Observer reported.
The construction company was founded in 1993 by former City Council member Ron Leeper and has become one of the leading minority-owned contractors in the Southeast.
Non-payment of the loan
In early 2020, Bright Hope loaned Mitchell $375,000, according to documents obtained through a public records request. We don’t know what the loan was for. The loan was secured, among other things, by Mitchell’s 25% stake in the construction company.
A year later, Robinson Bradshaw, the company representing Bright Hope, wrote an email to Mitchell demanding payment of the loan. At that time, according to documents, Mitchell’s loan was approximately $382,000, including interest. Payment was due within five business days, the documents show.
Failure to pay would mean Bright Hope would seek ways to recoup the loan, including taking legal action against Mitchell and “seizuring your members’ equity in Bright Hope Construction, LLC,” the documents say.
On January 24 of this year, Robinson Bradshaw wrote a letter to Mitchell stating that he had not made payment or even responded to the letter. He had until the end of the month to make a payment or Bright Hope could continue with the lawsuit and seizure of Mitchell’s equity in Bright Hope, the documents say.
On March 1, Bright Hope wrote another letter to Mitchell stating that the loan was still ongoing. The letter states Bright Hope’s right to accept Mitchell’s 25% stake under the terms of the loan agreement.
Later that month, Bright Hope wrote to Mitchell that he had accepted — or, essentially, taken control of — his 25% stake in the company, under the terms of the loan agreement. The effective date was March 22.
The loan agreement includes a paragraph on loan repayment. Mitchell agreed to pay the $375,000 loan “upon demand, but in any event no later than 12/31/2024,” documents show.