Local magnates squabble over ventures gone bad

• Bad blood in the old Gas & Electric Building

By Stuart R. Wahlin

Staff Writer

In addition to facing foreclosure proceedings by AMCORE Bank after defaulting on a $9,880,000 loan, Supplycore, Inc.’s first family, the Provenzanos, have also got their hands full with lawsuits evidencing a mounting feud between the Provenzanos and The Buckley Companies’ principals, Paul S. Nicolosi and Gino Galluzzo.

Joseph James Partners (JJP), LLC, formed by brothers Matthew and Peter Provenzano, secured the AMCORE loan in 2006, but by the time the note reached maturity June 30, 2009, $9,923,399.50 remained unpaid.

With JJP having defaulted on the loan, AMCORE is seeking payment from Supplycore, which backed JJP with a commercial guarantee.

The Provenzanos have also been among Rockford Mayor Larry Morrissey’s (I) most substantial supporters.

From 2001 through June 30 of this year, Supplycore has contributed $88,203.66 to Morrissey’s races for City Hall, plus $73,500 in loans, of which $28,700 remains outstanding, according to state election records.

Matthew Provenzano has personally contributed $2,598 to Morrissey’s mayoral campaign. Peter Provenzano contributed $5,473.

Morrissey could not be reached for comment prior to deadline.

Companies in which Nicolosi has interests have contributed $10,775.70 to Morrissey’s war chest.Although two of Nicolosi and Galluzzo’s companies—Desert Creek Capital, LLC, and Buckley Construction Services, LLC—have been joined as defendants in the Aug. 4 foreclosure filing, for their “interest in or lien on the mortgaged real estate” at 303 N. Main St., the two parties have little to say to one another these days.

The apparent friction began in August 2007, when Buckley Construction and Desert Creek filed suit against Provenzano LLCs JJP, 303 North Main Street and Main Street Partners of Rockford.

The ongoing litigation stems from an alleged partnership in 2006 to renovate and lease out office space in the former Gas & Electric/Camco building, which the Provenzanos had acquired in 2005 for use as Supplycore headquarters.

In early 2006, Nicolosi and Matthew Provenzano began discussing potential joint projects. Meantime, according to the complaint, Nicolosi had been negotiating with the Workforce Investment Board (WIB) for Boone and Winnebago counties to lease space to WIB in a downtown property owned by one of Nicolosi’s companies.

By June 2006, Provenzano allegedly agreed to the partnership terms proposed by Nicolosi’s staff. The intent of their agreement, the complaint alleges, was to renovate 303 N. Main St., with the understanding that joint ownership and development of Nicolosi’s downtown property—a site adjacent to the new federal courthouse—would come later.

Per the Main Street deal, JJP was allegedly to provide real estate, while Desert Creek would provide “certain services in the redevelopment of the building by creating the financial structure of the partnership, maintaining its records and negotiating the financing of the project, as well as providing a major tenant (WIB) to occupy approximately 25,000 to 30,000 square feet of the building.”

Buckley Construction Services, Buckley Architects and Buckley Real Estate Brokerage were contracted for project management, architectural services and lease brokerage, respectively.

In December 2006, the complaint states, articles of organization were filed for Main Street Partners, LLC, as “one of the manifestations of the partnership.”

In February 2007, a quit claim deed was recorded, transferring ownership of 303 N. Main St. to Main Street Partners, to take advantage of a $1.8 million historical tax credit.

At Provenzano’s request, it is alleged, Nicolosi withdrew as manager of Main Street Partners, the master tenant, allegedly so the tax credit could be secured.

The complaint alleges it was agreed Nicolosi would continue as an active participant in the partnership, despite having stepped aside as manager, and Desert Creek was to be readmitted later as a member of Main Street Partners.

Between June 2006 and March 2007, Nicolosi and Provenzano negotiated a redevelopment agreement and parking lot lease with the city, whereby the city provided $750,000 in tax increment finance (TIF) funding toward the project, and leased out spaces in the city-owned parking lot for use by the building’s tenants.

The complaint further notes that in June 2007, Main Street Partners entered into a contract to buy property at State and Wyman streets. Provenzano signed the deal on behalf of Main Street Partners, and Nicolosi was required to provide a $20,000 deposit as earnest money, which he paid.

According to the complaint, the partnership went smoothly until August 2007.

Desert Creek held up its end of the partnership, the complaint argues, “until such time that defendant JJP unilaterally froze out plaintiff Desert Creek from the partnership’s affairs by its denial that a partnership existed.”

Aug. 10, 2007, the complaint alleges, Peter Provenzano “abruptly and unexpectedly denied the existence of the partnership. However, later that afternoon, Matthew Provenzano informed Nicolosi that the partnership was still in place.”

Three days later, it is alleged, “Peter Provenzano confirmed his denial of the existence of the partnership by letter to Nicolosi and Galluzzo.”

The next day, Nicolosi was informed in a letter from attorney Robert Goldstein he should have no further contact with the Provenzanos.

The complaint also alleges JJP denied Desert Creek representatives access to the building at 303 N. Main St.

Count I of the lawsuit alleges breach of fiduciary duties to the partnership, and that Desert Creek was to have an equal share in the net profits.

“JJP’s actions terminating communications with plaintiff Desert Creek, and in freezing out plaintiff Desert Creek from the partnership property and the partnership’s daily business affairs, as well as in jeopardizing the consummation of pending leases between the partnership and certain tenants represent a breach of defendant JJP’s fiduciary duties to the partnership, and further deprives plaintiff Desert Creek’s rights as a matter of law,” Count I alleges, also arguing JJP has not honored outstanding debts and obligations.

Count I essentially seeks to have Desert Creek reinstated as a partner, and for outstanding bills to be paid. Count II, however, seeks dissolution of the alleged partnership.

Count II notes Desert Creek “seeks to compel a dissolution and winding-up of the partnership business, as well as an accounting and division of the partnership’s assets.”

Meantime, according to Count II, Nicolosi and Provenzano would continue the partnership.

Count III appears to be a contingency plan.

Should a judge determine no partnership existed, Desert Creek still wants to be compensated for the services its Buckley affiliates rendered.

Count III states, “Desert Creek is entitled to 3.5 percent of the total costs of the 303 North Main Street project for its services performed typical to that of a project manager, an amount equal to 1.5 percent of the total amount of financing obtained for its services performed typical to that of a financial consultant advisor, and an amount equal to 6 percent of gross rents for the terms of the leases executed by Mid-northern Management, Inc. and Watt Publishing Company.”

Litigation in this case is ongoing.

Perhaps contributing to the souring of the relationship was the backing of opposing candidates in the 2008 Republican primary for Winnebago County state’s attorney, but neither Nicolosi nor Provenzano would comment for this article.

Naturally, the Buckley camp supported the campaign of Nicolosi’s brother, Phil. Since July 1, 2007, Nicolosi contributed $20,294.38, either personally, or through Nicolosi & Associates, to his brother’s state’s attorney campaign. As of June 30, the campaign has an outstanding loan debt of $12,500 to Nicolosi & Associates.

The Supplycore camp, however, stood behind challenger Chuck Prorok, going as far as to hang a sizable Prorok banner on the east-facing side of the 303 N. Main St. building, catching the gaze of all who happened across the Jefferson Street bridge.

Supplycore President/CEO Peter Provenzano contributed $30,302 to Prorok’s campaign for state’s attorney.

Since Dec. 31, 2007, Supplycore contributed $21,601.72 to Prorok’s campaign, plus a $16,000 loan, which has been repaid in full.

Prorok won the primary, but lost in the general election to Democrat Joe Bruscato.

In next week’s issue, look for Part II: “No place near Showplace,” which details another crumbled development deal between the parties for a nearly 240-unit apartment complex on the 8700 block of East State Street.