The highly influential Public Works Commissioner Gustav A. James is heavily in debt, including to local and federal tax collectors. The local tax liens are nine and 10 years old.
James acknowledged he has financial problems but said they are strictly personal and do not impact his ability to lead one of the territory’s largest departments. He said he has payment plans for the tax liens and other debts are being addressed.
The problems have come to light because the Bank of Nova Scotia filed an action in Superior Court for foreclosure against him in December, saying he had defaulted on a mortgage he took from the bank in 2005 for property on St. Croix. According to the bank, at the time of the filing he still owed $131,798.41 on the property.
As is customary in such actions, the bank cited other entities that hold recorded debts from James. Those entities routinely become “co-defendants” in debt actions since their financial claims against the defendant compete for payment with the plaintiff’s claims against him.
Listed in the suit are:
– A tax lien from the federal Internal Revenue Service for $48,539. 79 which was dated Oct. 1, 2015, and actually filed Oct. 13, 2015;
– Two tax liens from the V.I. Bureau of Internal Revenue, one filed in May 2006 for the principal sum of $111,102.57 and one filed in February 2007 in the principal sum of $25,235.86;
– Choice Hotels International Inc., which recorded a final order of judgment against James for $183,375 plus costs of $350 on Oct. 21, 2013. The fact that it is still in court records indicates that Choice Hotels had not yet collected on the judgment.
– A mortgage from Banco Popular de Puerto Rico of $300,000 from June 14, 2006. There is no information in the filing as to the status of that loan and presumably it is not in default.
Between the foreclosure and the other sums listed, the total amount owing is more than $700,000, but James said the situation is not as serious as it may look.
“My assets are far in excess of my liabilities,” he said. “Everything is under control.”
Rather than indicating a pattern of mismanagement, he said the debts represent the fallout from an investment that went sour. “This is the remnants of that.”
As the head of Public Works, James has responsibility for the design, construction and maintenance of government buildings and public roads and highways; the maintenance of public burial sites; providing transportation services including mass transit systems; parking lots and other parking areas.
The budget for the department is close to $40 million annually, with about half those funds coming from the federal government. The commissioner’s salary is $105,000.
Additionally, as a member of the governor’s cabinet, James sits on several boards, including the V.I. Port Authority, the V.I. Water and Power Authority, and V.I. Waste Management.
James also referred questions about his finances to his attorney, former Sen. Ronald Russell. Russell said he is preparing a full response to the Scotiabank suit, but provided the Source with a draft preliminary written statement.
“Initially we assert that the property for which he is being sued for foreclosure was acquired as part of a site for a hotel development in Frederiksted. Mr. James signed an agreement with Choice Hotels to build a hotel on the property and paid them $30,000 for the franchise along with making substantial investments in plan development and plan acquisition,” Russell wrote.
“Ultimately he was unable to secure financing for the construction of the hotel and Choice Hotel sued him in absentia in a court in Maryland for failure to build the hotel. We are currently contesting the enforcement of that judgment and the liquated damages,” Russell wrote. “We note that during the severe depression here and in the United States, several business and companies suffered huge losses. Gustav James, as the owner and chief engineer for Systems Engineering, also experienced financial setbacks during that time.”
Concerning tax liens, Russell said the ones from the V.I. Internal Revenue Bureau are for income taxes, penalties and interest, and that from the U.S. Internal Revenue Service is for self-employment (social security) taxes plus penalty and interest. “James is currently making planned periodic payments on the outstanding tax balances.”
James said Friday his payment plan to the IRS started about two months ago. “I’m making payments to the IRS every two weeks.”
As for the IRB payment plan, “It’s not 100 percent up to date, but we have a plan and I’m working on it,” James said.
The tax lien apparently did not bother senators who voted overwhelmingly to confirm James several months ago. Nominees are required to fill out a lengthy form which includes questions about whether the nominee has any outstanding monetary obligations, including taxes, to the V.I. government or any of its entities.
James checked the box indicating he had a tax lien. He did not provide any details about it such as the type of tax involved or the period it covered, but said he had a payment plan in place.
In response to another question on the form, he said a judgment had been entered against him in favor of Choice Hotels but “that matter is still in dispute.”
The form does not ask about federal tax liens. And in James’ case, the IRS lien wasn’t placed until after his confirmation.
In his letter, Russell described the amount owned to Banco Popular as “a corporate debt that Mr. James assumed personally after the corporation ceased doing business.”
Russell added, “While the amounts owed are substantial, Mr. James owns real assets worth several million dollars and is in no way daunted by the size of the debt.
“Mr. James is highly disappointed that his personal finances are being publicly aired at this time; however, as a Virgin Islander who has seen the best and worst of times, he will continue to advocate for what is best for the residents and generations to come,” Russell said.
According to his nomination paperwork, James has a bachelor of science degree in mechanical engineering from Michigan State University and has worked more than 40 years “in management of engineering, construction and maintenance, in the territory and abroad.”
He served as general manager of C&C Construction at the Hovensa Oil Refinery in the 1990s and later as manager of Special Spaces International until December 2014, when he was tapped for Public Works.