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A Caddo Parish bank sued the town of Sterlington earlier this year claiming the town owed some $1.8 million it borrowed to finance the launch of a water treatment system that never materialized.

Citizens Bank & Trust Company of Vivian, which operates four branches in Caddo Parish, also claimed former Sterlington Mayor Vern Breland misspent the town’s financing.

Breland served as mayor until late 2018, during years in which Sterlington accumulated some $20 million in debt while also recording audit findings that said town officials misspent up to $3 million in dedicated funds. He faces one count of malfeasance in office after a grand jury indicted him on the charge last year.

“Plaintiff would not have loaned the Town the funds if plaintiff had known that the Town did not have the ability to pay the debt owed,” stated Citizens Bank & Trust’s April 20 lawsuit.

Under Breland’s direction, Sterlington entered into a 14-year lease/purchase agreement with Government Capital Corp. to fund the town’s purchase of the water management system from Capstone Metering LLC, of Plano, Texas. Under the agreement, Sterlington received $2,064,000 to buy a water management system that Capstone would install in the town.

Other documents filed in Citizens Bank & Trust’s lawsuit shed additional light on Sterlington’s agreement with Capstone Metering. For example, Sterlington’s former fiscal administrator, Junior Shelton—who recently completed his tenure after ensuring the town was solvent and could make any future debt service payments—characterized Breland’s agreement with Capstone as “untrue and fraudulent.”

In an Aug. 25, 2020 letter to Citizens Bank & Trust, Sterlington’s legal counsel—Breazeale, Saschse & Wilson, a Baton Rouge law firm—argued the town’s agreement with Capstone Metering was “not entered into in accordance with Louisiana’s Public Bid Law” and was thus “null and void.”

Under state law, public works projects like the construction of a water system must be publicly bid if the contract is greater than $154,000. That did not occur in Sterlington, state investigators found.

Sterlington spent some of the loan proceeds from the water management system lease/purchase on items not authorized by the agreement’s price quote. Some of the unauthorized expenditures included spending some $400,000 to dig water wells to find a viable water source or paying the town’s financial advisor, Aaron Fletcher, according to a state audit report.

“In conjunction with seeking financing for the Town’s water management system, the Town, through Mayor Breland and his staff and representatives, provided financial documentation to plaintiff showing that its financial footing was sound and that it had the ability to pay the debt it sought to borrow,” stated Citizens Bank & Trust’s April 20 lawsuit.

Citizens Bank & Trust claimed Breland provided “inaccurate, misleading, and false information about its financial condition.”

According to Citizens Bank & Trust, Breland misspent the funds borrowed by using the money for other purposes.

“The Town hid the fact from plaintiff that it misspent funds from the loan,” stated Citizens Bank & Trust lawsuit.

Sterlington failed to make its first payment to Citizens Bank & Trust in January, the lawsuit stated.

“At the time of this filing, Defendant owes Plaintiff the total past due amount of $1,838,390.94, plus legal interest until paid in full, reasonable attorney’s fees and all costs of this proceeding, pursuant to the Agreement,” stated Citizens Bank & Trust’s lawsuit.

Citizens Bank & Trust argued that Sterlington’s former fiscal administrator, Shelton, publicly admitted Sterlington owed the debt.

Citizens Bank & Trust is represented by Blanchard, Walker, O’Quin & Roberts, a Shreveport law firm.

Shelton’s September 2019 letter to Capstone Metering indicated Sterlington had claimed the ability to produce water at the time of receiving its financing.

“Nothing could be further from the truth and in fact the ‘lease purchase agreement’ was grossly overfunded in attempt to use the excess monies to acquire everything needed to make water,” Shelton’s letter stated. “Capstone Metering LLC knew the Town of Sterlington was without any ability to make water at the time of the ‘lease purchase agreement’ because Capstone Metering LLC was acting as contractor to subcontract the drilling of ground wells and design, engineer, and fabricate system in order to produce water. With at least one well drilled on private property without a use agreement from the landowner. Additionally, of the meters installed, numerous installed meters began to leak resulting in removal.”

In response to Sterlington’s arguments that the agreement was null and void, Citizens Bank & Trust referred to a letter signed by West Monroe attorney Katy Balsamo, who served as Sterlington’s legal counsel at the time. In her letter, Balsamo said it was her opinion Sterlington’s agreement with Capstone Metering was a “legal, valid and binding obligation.”

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