KEMAH — A lawsuit filed in federal court accuses a former Kemah mayor of conspiring with other officials to purchase property damaged by Hurricane Ike “for pennies on the dollar.”
League City resident John Ray Melcher, the former owner of the now-closed Eagle Rider Motorcycle Rental USA at 310 Texas Ave., filed the lawsuit this week in Galveston’s U.S. District Court through his attorney Paul Houston LaValle.
The suit against former Mayor Matt Wiggins claims the city of Kemah was negligent in hiring, training and supervising employees, allowing Wiggins to work with other city officials to execute an alleged scheme to take property from disadvantaged business owners.
Wiggins denied any wrongdoing and said he had nothing to do with the foreclosure of Melcher’s business.
Melcher is seeking $5 million in actual damages and $15 million in exemplary damages from Wiggins and the city.
City Administrator Rick Beverlin said Wednesday the city has not yet been served with the lawsuit and had no comment.
The lawsuit accuses Wiggins of targeting desirable property in Kemah and using his power as mayor to direct Jack Fryday, who was a building inspector at the time, to either condemn structures or refuse to issue permits for repairs after Hurricane Ike. Wiggins would then cheaply acquire the property from distressed owners like Melcher, according to the lawsuit.
Wiggins became mayor in June 2009, the same month Melcher’s building was foreclosed. Wiggins said he was serving on the city council when foreclosure notices were first posted for the property.
The lawsuit states that Fryday and other officials repeatedly denied Melcher’s applications for permits to repair his business after Hurricane Ike.
“I have no recollection of (Melcher) ever coming before the city,” Wiggins said.
Fryday said he was never pressured or asked to deny permits for any property in Kemah, and he was just enforcing city code.
Wiggins, who owns several businesses in Kemah, said his own properties were inspected and reviewed just as stringently after Ike.
“I was getting the same letters as everyone,” he said.
LaValle, an attorney for Melcher, said Wiggins “duped” former business partner and then-Judge Mark Foster into buying the foreclosed property at 310 Texas Ave.
Larry Vick, an attorney representing Foster, said Wiggins set up the purchase of the property and asked Foster to close the deal.
The property was purchased in Foster’s name for more than $200,000 and was paid for by Wiggins, LaValle said.
Foster collected rent on the property and initially turned over the checks to Wiggins, who repeatedly promised to transfer the property out of Foster’s name, according to the lawsuit. Foster began keeping the rent after his partnership with Wiggins deteriorated, the lawsuit states.
The Galveston Central Appraisal District reports that the property, which is still owned by Foster and is now home to Crazy Alan’s Swamp Shack, is valued at $317,620.
LaValle said the former judge was unaware of Wiggins’ alleged “underhanded dealings,” but he is hopeful that Foster will deed the property and lease back to Melcher.
The lawsuit states that Foster has collected more than $100,000 in rent on the property during the last several years, and will collect more than $400,000 during the next seven years.
Foster is also involved in litigation against Wiggins, accusing the former mayor of fraud and deceptive business practices.
In September, FBI and IRS investigators descended on Kemah City Hall. Mayor Bob Cummins has said the investigation was related to property transactions conducted during Wiggins’ tenure.
Wiggins said he had not been contacted by either federal agency. He has filed several lawsuits accusing Kemah residents of defamation over news reports that he took advantage of property owners after Ike.