Kemp's Insider Loans: $800,000 Owed?

Brian Kemp, a real estate investor and property manager, owes more than $800,000 in insider loans to First Madison Bank and Trust, a bank in Athens, Georgia, that he helped start and now sits on the board of directors for. These insider loans are legal but heavily regulated, and Kemp's staff has refused to disclose the terms of the loans. Kemp is also involved in a lawsuit over a separate $500,000 debt that he guaranteed in 2016 but never repaid.

Brian Kemp's companies borrowed millions from over half a dozen banks

In 2018, it was revealed that companies linked to Brian Kemp borrowed millions from more than half a dozen banks, including a community bank in Athens, Georgia, where he was a founding board member and stockholder. These loans, known as "insider loans," totaled more than $2 million and were taken out during the 2008 financial crisis.

The two biggest loans were made to companies linked to Kemp as the economy was collapsing in 2007 and 2008. The first loan was for over $1.3 million from First Madison Bank for lake land near the South Carolina border. The second loan, made in 2008 to Specialty Stone, a company co-owned by Kemp, had no borrowing limit.

While insider loans are legal, they are heavily regulated. Emory University finance professor Rohan Ganduri explains that some bankers view these loans as an opportunity to have a strong loan on their books, while others worry about potential conflicts of interests.

Kemp's staff did not answer detailed questions about the loans, and critics have called for more transparency, especially given his position as secretary of state and later governor of Georgia.

Kemp's companies borrowed from a bank he helped start

During the 2018 Georgia gubernatorial race, it was revealed that Brian Kemp owed more than $800,000 in insider loans to First Madison Bank, a bank he helped start and of which he was a board member and stockholder.

Kemp is a real estate investor and property manager. According to his financial disclosures, companies linked to him borrowed millions from more than half a dozen banks. However, the focus was on the loans with his own bank. These so-called "insider loans", while legal, are heavily regulated. Emory University finance professor Rohan Ganduri says that some bankers like making these loans to wealthy board members and shareholders as they are good credit risks and unlikely to harm the bank. However, he also points out the potential conflict of interest, where insiders can treat these loans as a "private piggy bank".

The two biggest loans made to companies linked to Kemp were:

• A loan of over $1.3 million borrowed by Shelter Rock, a company of which Kemp is a part owner, in September 2007. The loan was supposed to be repaid in 2008, but when Kemp filed his 2017 financial disclosure, Shelter Rock still owed the bank $675,938.
• A loan of $202,662 borrowed by Specialty Stone, a company co-owned by Kemp, in August 2009. The plan was to pay it back by 2012, but Kemp’s latest disclosure shows that Specialty Stone still owes First Madison Bank a total of $97,724.

Kemp's campaign staff refused to disclose the terms of his insider loans, leading to calls for transparency from good government groups.

Kemp's companies borrowed from First Madison Bank and Trust

During the Great Recession in 2008, companies linked to Georgia businessman Brian Kemp took out car, property, and real estate development loans totaling more than $2 million from First Madison Bank and Trust in Athens, Georgia. Kemp, a founding board member and stockholder of the bank, was also a co-owner of Specialty Stone, a company that borrowed $202,662 from First Madison Bank in 2009.

According to Kemp's financial disclosures, the plan was to pay back the loan by 2012. However, his latest disclosure shows that Specialty Stone still owes First Madison Bank a total of $97,724. While "insider loans" like these are perfectly legal, they are heavily regulated to ensure that insiders like Kemp get the same treatment as any other borrower. Emory University finance professor Rohan Ganduri notes that there are potential conflicts of interest with insider loans, as insiders may treat these loans as a "private piggy bank."

Kemp's campaign staff refused to disclose the terms of his insider loans, leading to calls for transparency from groups like Common Cause. Despite the concerns, Kemp denied any special treatment, stating that his loans were backed and audited just like those of other board members. He also mentioned having loans with many other banks.

In summary, Kemp's companies, including Specialty Stone, borrowed millions of dollars from First Madison Bank and Trust during the Great Recession. While these insider loans are legal, the lack of transparency around their terms and the potential for conflicts of interest have raised questions about their appropriateness.

Kemp's staff did not answer detailed questions about the loans

In 2018, Brian Kemp, a real estate investor and property manager, owed more than $800,000 in insider loans to First Madison Bank and Trust, a bank in Athens, Georgia that he helped start and of which he was a board member and stockholder.

Kemp's financial disclosures revealed that companies linked to him had borrowed millions from more than half a dozen banks. However, it was the loans from his own bank that sparked curiosity and scrutiny. These so-called "insider loans" are legal but heavily regulated. While some bankers view them as opportunities for strong loans to reliable borrowers, others worry about potential conflicts of interest, where insiders may treat these loans as a "private piggy bank".

Despite the controversy, Kemp's staff did not answer detailed questions about the loans. When FOX 5 anchorman Russ Spencer interviewed Kemp about the campaign, he was met with vague responses and a reluctance to delve further into the matter. Kemp asserted that the loans were backed, audited, and no different from normal business practices. He also emphasised that he had loans with many other banks and saw no insider deal. However, when pressed for more information, Kemp's campaign staff abruptly ended the interview, leaving many questions unanswered.

The lack of transparency from Kemp and his staff fuelled concerns about the nature of these insider loans. Emory University finance professor Rohan Ganduri highlighted the importance of loan terms being consistent with those offered to any other borrower, without special advantages. Sarah Henderson, executive director of the good government group Common Cause, echoed similar sentiments, urging Kemp to disclose the terms of his loans. She emphasised his obligation as a sitting constitutional officer to be transparent with the voters of Georgia.

Kemp is a defendant in a lawsuit over a $500,000 loan

Brian Kemp, a real estate investor and property manager, was involved in a lawsuit over a $500,000 loan. The lawsuit was filed by RLP Investments and its owner, Rick Phillips, against Kemp and an agricultural business he invested in, Hart AgStrong LLC. According to Phillips, Kemp requested a $500,000 loan for his company to purchase raw canola seeds, and he produced documents showing a personal guarantee agreement between them. However, Kemp and Hart AgStrong defaulted on the loan even after two 90-day extensions.

Kemp responded to the lawsuit by stating that he tried to "invest early in a company that was creating jobs and economic opportunity," and he was confident that the company would recover and repay the loans. Financial records show that Kemp guaranteed $10 million in loans to Hart AgStrong, a seed processing company that he backed. The company began to struggle financially after expanding into Kentucky. As a result, Kemp distanced himself by resigning from the board in 2017 and selling off much of his stake in the company.

While the lawsuit specifically focused on the $500,000 loan, it brought attention to the larger issue of Kemp's "insider loans." These loans, totaling more than $800,000, were borrowed by companies linked to Kemp from a bank he helped start and sat on the board of directors, First Madison Bank and Trust. The "insider loans" term refers to loans made to insiders or members of an organization, which, while legal, are heavily regulated due to potential conflicts of interest.

Kemp's financial disclosures reflect that his companies borrowed millions from multiple banks, with one company co-owned by Kemp, Specialty Stone, borrowing a total of $202,662 in 2009, with plans to repay it by 2012. However, recent disclosures show that Specialty Stone still owes First Madison Bank $97,724. When questioned about these loans, Kemp asserted that they were properly backed and audited, and that he had loans with many other banks, denying any special insider deals.

In the end, Kemp quietly settled the lawsuit regarding the $500,000 loan just before taking office as Georgia's Republican Governor. The terms of the settlement were not disclosed to the public.

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