Bigger and richer than nearly any developer in town, the Kroh brothers were surrounded by well-heeled banks, smart business people and good lawyers. Robert Jackson Jr., the new president of the company that wants to redevelop St. Petersburg's downtown, was the Kroh Brothers Development Co.'s lead lawyer. He helped them structure deals. They helped him and his firm make money.
But George Kroh and his brother, John Kroh Jr., were convicted of lying to get loans, and they are bankrupt and can't pay the millions of dollars they owe. So one of their old lenders, Mercantile Bank of St. Louis, has gone to court to try to collect from some of the Krohs' old partners, including Jackson.
If the bank wins, then Jackson, who last week replaced a financially troubled Neil Elsey as head of the Bay Plaza project in St. Petersburg, could be personally liable for $8.4-million. That doesn't include another $3.4-million the bank wants from a Jackson family trust, or $8.4-million more that the bank says Jackson's old law firm should pay.
The bank's lawyers say Jackson breached a financial promise and committed "negligent misrepresentation" as a lawyer. Jackson has denied in court documents any wrongdoing.
A trial is tentatively scheduled for later this year, and Jackson, who has refused repeated requests for an interview, said through a Bay Plaza spokesman Monday that he did not want to comment on pending litigation.
Lee Fowler, a vice president of Bay Plaza and its Kansas City-based parent, the J.C. Nichols Co., said any verdict affecting Jackson would not affect Bay Plaza. Unlike his predecessor, Jackson has no personal financial stake in Bay Plaza.
The Kansas City native, who intends to stay in Missouri and fly to Florida when needed, apparently also has substantial personal means; a family trust once pledged to put up $6.3-million in a real estate deal, public records show. When he divorced his first wife in 1989, he was ordered to pay $75,000 a year in alimony.
Elsey, who also faced lawsuits seeking millions, was less well-heeled. Elsey resigned last week with personal debts of more than $2-million. The Nichols Co. installed Jackson, 48, as Bay Plaza president, and announced that it had acquired Elsey's 50 percent share.
Bay Plaza, the name of the company created by Nichols and Elsey, also is the name associated with the St. Petersburg project.
The $200-million plan calls for Bay Plaza to spend $160-million and the city $40-million to remake the downtown into an outdoor plaza with shops, theaters and pleasing streetscapes.
Nichols successfully developed a leading prototype, Country Club Plaza, 70 years ago in Kansas City. While such ritzy tenants as Bonwit-Teller and Tiffany's have given way to stores like The Gap and The Limited, the plaza still has a Saks Fifth Avenue and dozens of boutiques that appear to draw shoppers and strollers like a magnet.
Jackson, the new head of Bay Plaza, grew up familiar with this kind of success. The son of a Kansas City lawyer, he eventually began representing some of the region's leading builders, including Nichols, which he joined full-time last year.
He also became a partner in some of the developers' ventures, including Shawnee Mission Bancshares, a bank holding company controlled in part by Jackson and Nichols.
In 1989, Jackson and Nichols Chairman Lynn L. McCarthy were fined $12,500 each by the federal government after banking regulators said their bank improperly made loans that benefitted their personal business interests. McCarthy said then that they paid the fines to avoid costly litigation. They neither admitted nor denied guilt.
Besides the bank, Jackson holds interest or control in 14 other companies or partnerships, according to records at the Federal Reserve Bank in Kansas City. They include real estate ventures such as Jackson's wholly owned Parker Development Corp. and a 50 percent interest in Captiva Island Associates. He is no stranger to Florida, his father helped found the Turtle Creek Country Club in Tequesta, according to the elder Jackson's obituary in the Kansas City Star.
Then there were the Kroh brothers. As outside counsel, "he was doing all of the real estate partnerships and everything," George Kroh said.
But by 1987, the Kroh Brothers Development Co., with property interests worth $1-billion just a year earler, was in deep financial trouble and filed for bankruptcy. Soon thereafter, the brothers were convicted of lying to banks to get loans. George cooperated with the prosecution and was jailed only briefly. John was sentenced to 12 years in prison.
Amid the brothers' troubles, but before the conviction, Mercantile Bank sued Jackson and a partnership he had with Kroh family members.
The bank said it loaned the partnership $4-million and that $3.4-million hadn't been paid back. Jackson said in legal papers that his financial involvement in the partnership, through a Jackson family trust, was brief and that the Kroh brothers had moved the money into other accounts and projects with consent of the bank. Ultimately, the money became part of a larger pot that banks were hoping to get back from the Krohs.
The bank said it loaned the money partly because of a letter of assurance that Jackson wrote. The letter stated that the partnership was properly registered with the state of Missouri.
That was not true, the bank said, and if the partnership was not registered, that could make it tough to collect under terms of the note.
Thus, the bank wants $3.4-million from Jackson, plus $5-million more in punitive damages because of Jackson's letter of assurance.
Jackson recently tried to have the suit dismissed. A Kansas City judge refused.