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SBA Reviewing North Myrtle Beach, South Carolina
Hotelier's History of Problem Loans

Inquiry as to How Mike Mishra Received Stimulus Plan Funds After Defaulting on Prior Loans

By David Wren, The Sun News, Myrtle Beach, S.C.McClatchy-Tribune Regional News

Feb. 26, 2012--HARICHARAN "MIKE" MISHRA -- a North Myrtle Beach hotel owner who defaulted on two government-backed loans totaling nearly $900,000 -- paid off his mortgage with the proceeds from a third guaranteed small business loan. Federal officials are now examining how stimulus plan funds made their way into Mishra's hands.

"All I can say on this is we're looking into it," Michael Stamler, a spokesman for the U.S. Small Business Administration, told The Sun News last week.

Mishra also defaulted in 2008 on an $18.9 million construction loan for the Atlantic Palms condominium project in Myrtle Beach, in which purchasers lost $2 million in deposits.

The agency's review of the SBA loan started after The Sun News raised questions about discrepancies in documents associated with Mishra's 2010 sale of the La Quinta Inn at 1601-B Highway 17 North in North Myrtle Beach to a corporation named Shiram LLC.

Those documents appear to show that Mishra and his son are members of the corporation that was formed to obtain an SBA-backed loan that paid off Mishra's mortgage on the hotel just as Carolina First Bank, now TD Bank, was about to foreclose on the property.

Mishra told The Sun News that he is not affiliated with the corporation that bought the La Quinta, formerly a Best Western hotel.

However, Mishra signed a utility easement agreement in December stating that he is the managing member of Shiram, which is an anagram of Mishra.

Sanjay Mishra, Mike Mishra's son, has been listed as Shiram's registered agent since the corporation was formed in 2008, according to the S.C. Secretary of State's web site.

Mike Mishra, who was reached at the hotel last week, told The Sun News that he is managing the property for Shiram and that the corporation's owners live in Fayetteville, N.C.

"I'm not part of the LLC," he said. "When I sold the hotel I said I would manage it for them for one year, but I'm still here."

New loan pays off past debts

Mike Mishra sold the La Quinta to Shiram on March 11, 2010, for $2 million, according to Horry County property records. Shiram used the proceeds from an SBA-guaranteed loan to buy the hotel. That loan was part of President Obama's stimulus plan that temporarily relaxed lending rules and added more than $1 billion to the SBA's pool of funds to make money more accessible to small businesses.

Mike Mishra told The Sun News that he used proceeds from the hotel sale to pay off the Carolina First loan that was in danger of default. That bank filed a mortgage satisfaction document on May 5, 2010, showing Mike Mishra and his wife, Illa, had paid off the debt.

"It [the hotel] was about to go into foreclosure and I was trying to save it," Mike Mishra said.

Gita Jhala signed the SBA-backed loan papers as the sole member and manager of Shiram, according to property records. The Shiram corporate address listed on the deed is for property that belongs to Illa and Sanjay Mishra.

Neither Gita Jhala nor her husband, Mahesh "Mike" Jhala, could be reached for comment last week.

The Jhalas previously have conducted real estate and business transactions with the Mishra family. For example, Mike and Illa Mishra sold a condominium unit at 201 S. Ocean Blvd. in North Myrtle Beach to Mahesh Jhala in January 2002, property records show. Mahesh Jhala sold the same unit to Illa and Sanjay Mishra four years later.

Mike Mishra also was the registered agent for a corporation Gita Jhala formed in 1995 that operated a Days Inn hotel in Fayetteville, N.C. Illa Mishra was a director of that corporation, according to N.C. Secretary of State records.

Mike Mishra defaulted on two previous SBA-backed loans -- both of them taken on Jan. 16, 2000 -- before he sold the La Quinta Inn to Shiram LLC, according to court documents. The first loan was a promissory note for a $185,900 and the second loan was a $681,500 30-year mortgage. The collateral for the mortgage was the hotel at 1601-B Highway 17 North in North Myrtle Beach, according to the loan document.

The federal government obtained judgments against Mike Mishra and his company, Mishra Investments LLC, for both debts. Neither debt has been repaid, according to county property records.

When Mike Mishra sold the La Quinta to Shiram, the SBA subordinated the $681,500 judgment to the new loan. In other words, the Shiram loan would have priority over the older, defaulted debt in the case of a foreclosure or bankruptcy.

That means Mike Mishra benefited from two government-guaranteed loans collateralized by the same property even though he failed to repay the initial loan.

In addition, the S.C. Department of Revenue in December filed tax liens totaling $1,956.92 against Mike Mishra. The address listed on the tax liens is the same address as the La Quinta.

Atlantic Palms foreclosure

The tax liens are among the latest financial problems for Mike Mishra, whose plans to convert the Atlantic Palms hotel at 703 S. Ocean Blvd. in Myrtle Beach into a condominium tower were derailed when the company he and his wife formed -- SVI Hospitality LLC -- defaulted on a construction loan with National Bank of South Carolina in 2008.

Dozens of people who put deposits on condos at the project lost a total of $2 million because Mike Mishra did not segregate the deposits in an escrow account, according to court documents. Instead, Mike Mishra used the deposit money to pay construction costs and other expenses.

The project wound up in foreclosure and a receiver was appointed to operate the hotel. When the receiver took over the hotel on July 7, 2008, he learned that Mike and Sanjay Mishra had taken most of the money and all of the office equipment and the furniture from the premises, according to court documents.

A report filed by the receiver said the Mishras deleted all of Atlantic Palms' financial records and reservation information from a computer accounting system and tried to transfer $40,560 from the development's bank accounts to other accounts they owned. The receiver was able to stop the transfers before they were completed.

Sanjay Mishra also tried unsuccessfully to get Expedia to forward payments for Atlantic Palms hotel rooms to SVI Hospitality instead of the receiver, according to court documents.

Vimal Sodjhi of Fayetteville, N.C., lost $110,000 in deposits he placed on two units at Atlantic Palms which were never built. Sodjhi said Mike and Illa Mishra used to live in his neighborhood and convinced him to buy into the proposed condo tower. That friendship quickly soured after the project went bust.

"I contacted him [Mike Mishra] about the deposits and his response to me was, basically, that it had been my decision to get involved with it and I could take it up with his attorney," Sodjhi told The Sun News last week.

John Benso, a former Pawleys Island attorney who now is a Georgetown County magistrate serving the Murrells Inlet area, tried unsuccessfully to get eight condo depositors some money from the foreclosure lawsuit. However, a judge ruled that since the bank's mortgage pre-dated the condo contracts, NBSC was entitled to all of the money from the foreclosure sale.

Benso told The Sun News last week that he also tried unsuccessfully to get area legislators interested in passing a state law that would require developers to segregate property deposits in an escrow account. While state law requires real estate agencies to put condo deposits into an escrow account, there is no such requirement if the deposits are given directly to a project's developer. Some developers during the real estate boom, including Mike Mishra, fashioned contracts that allowed them to use the deposit money for ongoing building costs instead of holding onto it until buyers closed on their units.

Benso said he did not receive a response from the legislators he contacted.

Sodjhi said he has moved on with his life, but he still cannot understand Mike Mishra's financial dealings.

"It's complicated," he said. "It's beyond my imagination."

Contact DAVID WREN at 626-0281


(c)2012 The Sun News (Myrtle Beach, S.C.)

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