NORTH TONAWANDA – In April, the North Tonawanda History Museum celebrated its 11th anniversary as a chartered museum.
And now, another museum milestone is possible – foreclosure.
The museum, a former G.C. Murphy store at 54 Webster St., is a repository of memories for a port city situated on the Niagara River and Erie Canal, once home to a thriving lumber and dozens of other industries that thrived and faded over the past 150 years. Amid 10,000 square feet, the 1888 building is filled with displays on the Lumber City’s ethnic heritage, notable families, military, industry, schools and churches – much of it donated by families intent on preserving their memories in one place.
Executive Director Donna Zellner Neal said since 2011, the museum has averaged 20,000 visitors a year and since 2008, has seen 100,000 come through the door.
But a California property manager, Vadim Gorobets, said he sold them the building for $675,000 in 2009 and has never been paid what he was owed – more than $450,000, which includes a personal business loan, interest, 73 months of late fees and legal fees.
At issue are two loans.
One is a $352,386 mortgage between the museum and HSBC, which Gorobets said he would co-sign and guarantee to pay if the museum didn’t. The other is a second mortgage – a business loan of $289,252 which Gorobets said he agreed personally to loan the museum to help them “pay down” the full mortgage to HSBC.
“Basically they have been occupying the place rent free for the past six years,” said Gorobets. “They effectively threw me under the bus, leaving me to fend off a multinational bank while they were enjoying the property at 54 Webster St. without paying a single penny.”
Gorobets said Neal was the one who came to him in 2007, just one year after he bought the G.C. Murphy building, and said it would be a perfect site for their museum.
Neal herself would not confirm that she was the one who decided to purchase the property but said a negotiations team worked out the details, not her.
Gorobets said the museum gave him a $50,000 down payment to buy the building in 2009 and then six months later stopped paying – both him and the bank.
He said he also got sued by HSBC, which came after him after the mortgage payments stopped.
Neal said the museum had paid a total of $187,750, plus an undisclosed amount of interest, but felt the building was over assessed because of several problems and believes they “have paid what the building is worth.”
In July 2014, bank officials at HSBC toured the museum and agreed to forgive the remainder of the bank’s loan.
Gorobets said the bank forced him to settle a breach-of-contract lawsuit, since he had guaranteed the loan. He was unwilling to disclose the sum.
Both Neal and museum attorney Steven K. Long of Williamsville said they were unaware that Gorobets had been sued. Gorobets said he was never told that the loan had been forgiven by HSBC.
Neal also claimed that both the museum and Gorobets were victims of fraud in the purchase of the historic building.
But both sides confirm an agreement was made.
Gorobets said when he bought the old five-and-dime store for $575,000 he was receiving “a very healthy income” in rent payments of $10,000 a month from 2006 to 2009, from a tanning parlor and a secondhand store.
He said he agreed to sell it to the non-profit museum for $675,000.
So why sell if he was making money?
“Donna can be very persuasive. They were a nonprofit organization and they really liked that building. It was in a good location for them, right in downtown North Tonawanda and it had some historic value for them. I didn’t give it away. I figured I still would be making money, so I thought, why not?” said Gorobets.
He said museum officials were “well aware” and had plenty of time to determine what was involved in owning a building of this size – including PCBs and asbestos, which would require remediation.
“They could have pulled out very easily,” he said. “Normally when people buy a building they know what it entails.”
He said when museum officials were unable to get financing to buy the building from the bank, the deal was negotiated in which the museum would assume his mortgage with HSBC, but he also guaranteed the museum would pay the loan.
“They were putting $50,000 down so I thought if they had that much down payment, the payments were not that much; what could go wrong?” he said.
He said the museum took title to the building in March 2009 and stopped making payments in August of the same year.
After the payments stopped coming, he said, he started getting emails from Neal, complaining about the problems with the building and asking him to forgive the loan, which he said, he was not in a position to do.
He called himself a “small-time investor” and said this was the first commercial property he had bought.
Gorobets said he does not want to foreclose, but “just wants them to make good.”
Neal, 75, refers to herself as “a full-time, often double-time and even triple-time volunteer” since the museum was founded in 2003.
But in August, three board members – including board president Demelt F. Shaw and vice president Robert E. Pecoraro – resigned, saying they were being thwarted by Neal, who was blocking their efforts to make changes.
At the time, Shaw maintained that over the past 11½ years Neal controlled everything without consulting the board.
“I felt I was her boss. She wasn’t my boss and the executive board should make decisions,” Shaw said. “We are not an advisory board.”
But Shaw also had high praise for the volunteer work Neal did with the museum as an unpaid executive director.
“No one is going to come in and work the way she did,” Shaw said. “This is her life.”
Long, a business attorney in Williamsville who is representing the museum, said Gorobets is seeking money the museum does not have and accused him of trying to negotiate through the media.
According to the museum website, “Following six years of profitable operations, we have encountered serious setbacks in the last 18 months because of the economic downturn.”
Reduced grant income had forced the museum to draw on its reserves.
Shaw said after his resignation, the shortage of grants was one of the issues he and Pecoraro had been trying to change, claiming Neal was “alienating the people she needs to support the museum.”
He added, “You are not going to get above water without getting government or private foundation grants.”
Pecoraro agreed. He said he and Shaw had been trying to move beyond periodic book sales as the museum’s main source of income and seek out grant and foundation funding.
Long said a foreclosure would be devastating to a lot of people who had put their “heart and soul” into the museum.
“It’s a nonprofit organization that’s tried to be there for the citizens and for the people of North Tonawanda. They don’t have access to funds in large quantities and I think” Gorobets “was aware of that,” Long said. “What is moral and correct and business practical is sometimes different from straight legal issues.”