Orange County Choppers, a successful and well known custom production manufacturer of motorcycles based in Orange County, New York, was founded by Paul Teutul, Sr. and his son Paul Teutal, Jr, in 1999. With its sterling reputation, what is the reason for talks of OCC foreclosure ?
In September 2002, the Discovery Channel debuted a new reality show called American Chopper with OCC as the center piece, greatly conrtibuting to the company’s rapid rise to fame. OCC motorcycles featured on the show included those produced for celebrities and corporate customers around a specific theme, with the Fire Bike among its most popular, designed to commemorate the New York firefighters who lost their lives during 9/11. But beneath the success facade ran an undercurrent of turmoil between Paul Teutul, Sr. and Paul Teutul, Jr. In November, 2010, rumors started circulating about an OCC foreclosure and an episode of American Chopper with a bold headline about OCC’s money troubles only served to propel the rumors into the limelight. Financial problems seemed to follow the Teutul family, which was accused of bankrutcy fraud in 2007.
OCC Headquarters Forclosure
GE Commercial Finance Business Property Corp. was the lender that financed OCC’s new headquarters in the town of Newburgh, New York., holding two mortgages worth $11 Million and $1.5 Million. The OCC foreclosure action alleged that OCC missed payments of $96,400 and $14,000 respectively due in July. With the lawsuit brought by Paul Teutul, Sr. against his own son, Paul Teutul, Jr. in full swing by this time, it became apparent that the Teutul clan may be starting down the road to becoming another statistic of the mortgage crisis.
However, Richard Mahon, the attorney representing Choppers, has asserted that the missed mortgage payments were not due to the company’s cash flow or profits but alluded to a rather novel line of defense, namely the terms of the loans. Mahon stated that OCC intentionally missed its payments as a form of contract renegotiation. Stopping the payments was intended to put pressure on the lender to modify the terms of the loans. The headquarters built in 2007 was at the time valued at $12 Million, but due to adverse economic conditions was now only worth to between $7 Million to $8 Million, according to Mahon’s estimate. The Orange County Industrial Development Agency is also named in the OCC Foreclosure action, since it technically owns the property under a payment-in-lieu-of taxes agreement with OCC, even though ithe IDA is not liable for the back mortgage payments due to a clause in the lease-back arrangement that indemnifies the IDA against default by Choppers.
Orange County Choppers Foreclosure
Thereby, following the logic of OCC’s attorneys, if property values drop, the terms and conditions of the mortgage can and should be renegotiated to reflect the new economic reality. As stated earlier, this is a very novel argument that might not stand up in a court of law. Small wonder that GE Commercial Finance Business Property Corp. decided it was in its best interest to proceed with a OCC Foreclosure lawsuit. Then again, the OCC business itself is not at risk of being foreclosed upon, only the building presently housing the headquarters.
Given that Paul Teutul, Sr. reportedly owns the property surrouding the headquarters, could the OCC Foreclosure still have a somewhat happy ending ?