Georgia GOP candidate Brian Kemp defaulted on $500K loan, owes big debt to bank he helped start

Gubernatorial nominee still owes $775,000 to a bank he co-founded, and faces lawsuit over a different loan default

By Igor Derysh

Managing Editor

Published October 25, 2018 8:00AM (EDT)

Georgia Secretary of State Brian Kemp  (AP/John Amis)
Georgia Secretary of State Brian Kemp (AP/John Amis)

Georgia Secretary of State Brian Kemp, who is also the Republican candidate to be the state's next governor, has racked up a lot of debt that could pose a conflict of interest, Fox 5 Atlanta reports.

Kemp, a real estate investor, saw companies linked to him receive more than $2 million in loans from the First Madison Bank and Trust, where he was a founding board member and shareholder.

Fox 5 notes that Kemp borrowed millions from numerous other banks during the 2007-08 financial crisis but the closely regulated “insider loans” from his own bank caught investigators' attention.

Emory University finance professor Rohan Ganduri explained that banks like to loan to insiders, who are regulated by Federal Reserve laws, because they tend to have less credit risk but added, “There are potential conflicts of interests. The insiders can treat these loans as a private piggy bank.”

Federal Reserve laws require that insiders get the same treatment as any other customer. Both Kemp and the bank refused to comment on whether he received the same treatment in getting the loans.

Sarah Henderson, who runs the government watchdog Common Cause, told Fox 5 that if Kemp is not hiding anything or operating in bad faith, he should discuss the issue publicly. “He's not a private citizen. He's the secretary of state. He has an obligation not only as a candidate but as a sitting constitutional officer to be transparent with voters of Georgia [and] the citizens of Georgia.”

According to the report, the first loan was for a company called Shelter Rock, what is co-owned by Kemp. The loan for $1.3 million was extended in 2007 and was to be repaid one year later. According to Kemp's financial disclosure filed last year, he still owed the bank $675,938 a decade later.

A second loan was given to Specialty Stone, another company co-owned by Kemp. The deed to secure the debt said the maximum loan amount was “unlimited.”

“That's not very typical,” Ganduri explained.

The company borrowed more than $200,000 in 2009 that was to be repaid by 2012. According to Kemp's 2017 disclosure, the company still owes the bank $97,724.

Kemp denied any wrongdoing.

“Those loans are backed, there are auditors who audit the bank," he told Fox 5, suggesting that his dealings were "just like other members of the board of directors with that bank. ... I have loans with many other banks. There is no insider deal. This is normal business practices.” 

This latest news comes as Kemp is embroiled in a contentious lawsuit over his failure to repay a $500,000 loan that he guaranteed in 2016.

The Atlanta Journal-Constitution reports that RLP Investments and its owner, Rick Phillips, filed a lawsuit against Kemp and Hart AgStrong LLC, a company in which Kemp is an investor.

Phillips alleged that Kemp personally guaranteed to pay back a $500,000 loan, but that his company then defaulted on the debt even after two three-month extensions.

“He’s the only person I ever dealt with,” Phillips told the outlet. “I loaned this money to Brian Kemp. I loaned it to Hart AgStrong at the request of Brian Kemp, and he personally guaranteed it.”

Kemp's campaign again denied any wrongdoing.

“We all know that conservative businessman Brian Kemp is one of many investors in Hart AgStrong,” spokesman Ryan Mahoney told the outlet. “He’s not in charge of operations, and the company is working to settle their debts. This isn’t a story. This is a failed publicity stunt to help a failing candidate for governor retain power.”

Despite his own debt burden, Kemp has repeatedly attacked his Democratic opponent, Stacey Abrams, over her own debt issues.

Abrams owes $227,000 in IRS, credit car, and student loan debt, WXIA reports. Kemp has said it “ought to be” illegal for Abrams to owe more than $50,000 to the IRS while helping her campaign financially.

Abrams said she is on a payment plan with the IRS after deferring paying taxes during a family emergency.

"I could not defer my family’s needs. I could defer paying my taxes and I am paying them. The IRS and I are in good standing," she told the outlet.

Abrams has a net worth of less than $109,000, according to her financial disclosure. Kemp listed his net worth at $5.2 million.

Every poll released in the race has the two candidates virtually dead even – although that may not account for all the voters purged by Kemp's office ahead of the election.

By Igor Derysh

Igor Derysh is Salon's managing editor. His work has also appeared in the Los Angeles Times, Chicago Tribune, Boston Herald and Baltimore Sun.

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