- 5 -
In February 1989, Scharlin, Katcher, and Mr. Friedland met
for lunch. The three spoke about refinancing Mark was seeking
from Chase Manhattan Bank. During the lunch, Mr. Friedland
reiterated that UNB would “not get hurt” on the Centrum loans.
During 1988 and 1989, CC and CHC consistently were unable to
service the Centrum loans. By late 1990, the Centrum loans were
nonperforming. At this time, CC and its subsidiaries were
experiencing significant financial difficulties. In addition to
the amounts owed to UNB, CC owed other creditors in excess of $60
million--the majority of which Mark had guaranteed. These loans
were in default, and, in many cases, the properties securing the
loans were deeded back to the creditors in lieu of foreclosure.
At this time, Mark’s personal guaranty was worthless.2
Around this time, Scharlin placed a call to Mr. Friedland to
inform him that the Centrum loans “were in trouble”. Scharlin
reminded Mr. Friedland that he had stated that UNB would not lose
any money on the Centrum loans and asked Mr. Friedland to “take
care of it”. At this time, Mr. Friedland sought advice from his
attorney, Aaron Podhurst,3 regarding whether his statements
created any legal obligation to UNB on the $2.6 million loan.
Mr. Podhurst advised Mr. Friedland that they did not.
2 Ultimately, in February 1995, Mark commenced a bankruptcy
proceeding.
3 Mr. Podhurst also was a member of UNB’s board of
directors.
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