Sun West Acquisition Corp. president John G. "Gary'' Grubbs — Pasco County's partner in a proposed channel dredge near Aripeka — used the company as "his own personal piggy bank'' and improperly spent more than $1.6 million of corporate money supporting his lifestyle and covering unrelated business expenses, a minority partner charges in a lawsuit.
Denise Taglia of Palm Harbor sued Grubbs and Sun West Acquisition on June 7 in Pasco Circuit Court, accusing Grubbs of breaching his fiduciary duties and unjust enrichment. She is asking the court to appoint a receiver to oversee the company. Otherwise, the lawsuit said, Sun West's "assets will be subject to continued loss, waste and destruction by Grubbs' ongoing wrongful actions.''
Denise Taglia is the wife of R. Victor Taglia, who served as Grubbs' chief financial officer. She is part of her husband's trust, which owns 12.5 percent of Sun West Acquisition, a company Grubbs formed in 1998. Grubbs owns three-quarters of the company stock, with Brooksville lawyer Thomas S. Hogan Jr. controlling the remainder, according to the lawsuit. State records show Taglia and Hogan resigned their positions as company directors last summer.
Grubbs answered Taglia's lawsuit with his own litigation. He filed suit in Pinellas Circuit Court on June 23, alleging that Victor Taglia and Hogan siphoned millions of dollars from Grubbs in undocumented fees and expenses and conspired in 2016 to take control of Sun West Acquisition's property and "shut Grubbs out of the entire operation.''
"It's retaliatory,'' Thomas Wert, the Orlando attorney representing the Taglias, said about Grubbs' suit. "The allegations in that complaint — there are many outright falsehoods in it.''
Sun West Acquisition and affiliates own land west of U.S. 19 near Aripeka that is targeted for development as the 1,076-acre SunWest Harbourtowne, a residential community and resort. Much of the land is currently being mined for limestone, but has county approval to be turned into a high-end, mixed-use development surrounding freshwater lakes.
The lawsuits are the manifestation of a dispute among the owners over how to deal with the property, Wert said. Grubbs set a "ridiculously inflated price of $125 million'' for the land that resulted in "no real offers to purchase the property in over 10 years,'' according to the Taglia lawsuit, and "it is clear Grubbs has no intention of selling.''
Undermining a sale violates agreements with his partners and the business plan established as part of Grubbs' 2004 U.S. Bankruptcy Court proceedings, Wert said.
Grubbs' attorney, Brian Deeb of St. Petersburg, declined comment.
Sun West Acquisition also is the applicant, along with Pasco County, for a federal permit to dredge a deepwater channel through Fillman's Bayou, which separates the mine from the county-owned and privately operated SunWest Park. A dredged channel providing access to the Gulf of Mexico would increase the value of the Sun West Acquisition land, while opening up additional public boating opportunities at the county park.
Grubbs is supposed to finance the quest for the permit, but the Army Corps of Engineers suspended its review of the application eight months ago until a potentially costly and time-consuming environmental impact statement is submitted. That has not happened, and the county has disputed the federal mandate.
At one point, Grubbs himself wondered how the permit costs would be covered.
"How will you pay for the channel permit application?'' Grubbs asked Victor Taglia in a May 11, 2016, company shareholders meeting, according to minutes attached to Denise Taglia's lawsuit.
Pasco County officials have said previously that Grubbs is responsible for the permit costs. But in a recent letter to the Army Corps, Commissioner Jack Mariano said the requirement for the environmental impact statement "seems a punitive burden on public resources.''
No hearing has been scheduled on Grubbs' lawsuit. The request by Denise Taglia to appoint a receiver is scheduled to be heard in Pasco Circuit Court in October.
Among the allegations contained in the Taglia suit:
Grubbs' unauthorized expenditures included using $400,000 to pay off his home mortgage and spending nearly $48,000 at a Chevrolet dealership, almost $19,000 at an RV lot and $7,152 at a boat manufacturer, Yellowfin Yachts. He traveled to resorts, repaired his airboat, dropped more than $8,000 at three liquor stores and $4,828 at Karl Reef, a New Port Richey bar, and spent a combined $50,122 at Walmart, Publix, Target, Sam's Club and Best Buy.
Grubbs also used Sun West Acquisition money to pay more than $305,000 in business expenses for nine of his other companies, including Grubbs Emergency Services. He transferred $209,000 to family members and paid his personal tax attorney $39,000 and himself $250,000 to cover the cost of another tax attorney because of ongoing tax issues with the Internal Revenue Service.
Meanwhile, Grubbs' lawsuit accuses Victor Taglia; Hogan; Hogan's wife, Deborah Hogan, and the Hogan Law Firm of breach of fiduciary duty, negligence, fraud and civil conspiracy. The Hogans and their firm also face allegations of legal malpractice.
Hogan and Taglia created a myriad of notes, mortgages, assignments and corporate actions without Grubbs' authorization, the lawsuit states, "in a pattern of self-dealing for the benefit of Taglia and Hogan and their respective trusts and to the detriment of Grubbs whose money had been entrusted to them and who converted and diverted the same for their own pecuniary gain.''
''Mr. Grubbs' lawsuit is without merit,'' said attorney Matt Foreman, who is representing the Hogans and their law firm.
Grubbs' finances have been reported on previously by the Tampa Bay Times. The IRS recorded liens totaling more than $2.3 million against him, contending he didn't pay personal incomes taxes for 2008 through 2010. Another of Victor Taglia's companies, Dial One-One LLC, filed a foreclosure suit against Sun West Acquisition last year, alleging the company defaulted on a $23.5 million loan used a decade earlier to secure the mine land. That lawsuit is pending.
During the May 2016, shareholders meeting, Hogan and Grubbs suggested the foreclosure suit be dismissed, but Victor Taglia disagreed, saying the suit "was the next step in the process of protecting the real estate and that it was consistent with prior board meetings.''
In his suit, Grubbs called the loan "a manufactured debt,'' part of an arrangement to funnel money through a Nevada corporation and the Virgin Islands for tax purposes. "In other words, Dial One had booked a loan and claimed a debt because it wrote a check to (Sun West Acquisition) to return Grubbs his own money.''
A promissory note, dated Nov. 25, 2015, prepared and signed by Hogan that obligates Sun West Acquisition to the $23 million debt to Dial One-One "is nothing short of a fraud,'' Grubbs' lawsuit states.
Denise Taglia's lawsuit links Grubbs' spending with the IRS troubles.
As a result of Grubbs' personal tax problems, Grubbs has used and continues to use (Sun West Acquisition) as his own personal piggy bank by paying his personal expenses with (Sun West Acquisition) funds without the approval'' of Denise Taglia or the company's board of directors (Victor Taglia and Hogan), despite a November 2015 admonishment to stop, the lawsuit states.
The lawsuit also includes new revelations about Grubbs' finances.
• The IRS levied Sun West Acquisition's corporate cash accounts on Nov. 3, 2015, seizing more than $206,000 in cash. On Nov. 30, the IRS also levied the company's customer accounts receivable, "leading many customers to cease dong business'' with Sun West Acquisition. As a result, the limestone mine's revenue dropped from more than $2.4 million in 2015 to less than $1.1 million in 2016.
The IRS action came after Grubbs transferred $1.4 million to the company from Bowtie Properties, another entity that lists Grubbs, Thomas Hogan and Victor Taglia as officers. The purpose of which "was apparently to avoid paying the Internal Revenue Services Grubbs' personal income taxes from the proceeds from the sale of property owned by Bowtie.''
• The IRS recorded another lien against Grubbs in September 2016 for nearly $383,000, saying he failed to pay personal income taxes in 2005 and 2007.
• Without notifying his partners, Grubbs negotiated and signed a $110 million sales contract for the Sun West and adjoining properties with an Atlanta company called Stearn Enterprises. The transaction never closed after the buyer did not deliver a required $10 million deposit. However, the lawsuit contends Grubbs "cut a deal for himself with the proposed buyer'' that would have given him 10 percent ownership of the company that would develop the land.
During the May 2016 meeting, Denise Taglia asked who wrote the sales contract to include that provision, retaining Grubbs as an owner. "Grubbs said that most potential buyers wanted the same deal: to keep Gary Grubbs,'' according to the meeting minutes.
In that same meeting, Hogan asked Grubbs and the Taglias to sign a conflict-of-interest waiver and documents that would allow further actions without a full board meeting. Denise Taglia refused to sign.
Hogan asked her if she trusted him.
"No,'' she answered.
Grubbs' wealth came from the work of Grubbs Emergency Services, a company he formed in 2000 to do disaster relief services nationally. It generated nearly $350 million in income and a $55 million profit in a three-year period ending in 2005.
Grubbs' lawsuit contends Hogan and Victor Taglia convinced him to form a separate entity, GES-Nevada, and to put the ownership in a trust for asset protection and tax purposes. Grubbs said he understood he would own full beneficial interest of the trust.
The lawsuit says Hogan and Taglia purchased, with approval of the bankruptcy court, shares of another Grubbs company, Grubbs Construction Co., and they also bought membership interests in the Nevada corporation directly from the trustee and claimed ownership of Grubbs Emergency Services.
Grubbs said he learned in December 2016 that the transactions meant Hogan and Taglia were claiming ownership of the $350 million generated from 2003 to 2005.
In 2002, Grubbs said, Hogan and Taglia told him about the tax-saving benefits of funneling money to the Virgin Islands. Through all the maneuvering, Taglia and the Hogans "exacted and siphoned off signification portions of the monies sent to the Virgin Island as claimed earned fees and expenses, with little or no benefit to Grubbs who had earned the money through an entity which he believed he fully controlled. None of these fees and expenses were disclosed to Grubbs, which fees and expenses ran into the million of dollars,'' his lawsuit states.
By 2005, the Virgin Islands program shut down, and the money was returned to a company called Dial One LLC, owned by the Taglias. Grubbs said he questioned the ownership structure but "was assured by Thomas Hogan that this structure was for asset and tax protection purposes and that Grubbs owned 75 percent of everything.'' A portion of the repatriated funds was used to pay off the remaining mortgage on the Sun West property, the lawsuit says.
Grubbs said he received no cash from the payout at the insistence of Taglia and Hogan because "it would cause a tax problem. Instead, they would provide mortgages to Grubbs on the additional parcels being purchased. This resulted in an income tax liability to Grubbs based on income he never received and mortgages that were ultimately taken from him by Taglia and Hogan,'' the suit says.
Grubbs said he sought independent counsel in fall 2016 after learning that the Hogans and Taglia had additional claims on the proceeds to the Sun West Acquisition property "that were different from what was represented to Grubbs.''
The suit says company documents turned over to Grubbs' attorney "detailed a chilling series of deceptions of Grubbs by the people he trusted most.''