Diehl's home at the mouth of Big Cottonwood Canyon was scheduled for a 9:30 a.m. auction on May 15 on the steps of the 3rd District Courthouse in West Jordan to pay off the Merrill Lynch Credit Corp.
One day before the bankruptcy filing, Diehl's threat of legal action swayed the Cottonwood Heights City Council into giving into his demand that the city cede the property to Salt Lake County. The council had voted against zoning changes he wanted for his Tavaci project.
Diehl is seeking Chapter 11 protection for personal bankruptcy, claiming in court papers that he owes creditors more than $47.5 million, $43.7 of which he claims is unsecured debt, including $72,000 in alimony. The documents say that though he has assets totaling about $3.6 million, his income is nearly $11,000 in the red after monthly expenses.
In sworn testimony about his interlocking businesses complicated enough that Kuhn accepted a 2-page hand-drawn flow chart Diehl said his accountant had created Diehl outlined his ownership and positions in the concerns, which his filings show have little to negative value.
One of his debts, he explained, totaled $500,000 in loans conveyed by check by a man who lives in a separate dwelling on his Utah home's property. Diehl said the man loaned him the money in exchange for liens on personal property, including two cars and two motor scooters.
Diehl's primary business, Wasatch Pacific, has seen no income since the end of March. When Kuhn asked him whether he looked to that business for income, Diehl replied, "Hopefully." The income would come through real estate consulting, he said.
Bounced from his position on the Utah Transit Authority last May, Diehl was under investigation by the Utah Attorney General's Office after a legislative audit found he used insider information to make up to $24 million on a transit-oriented development. He has declared bankruptcy at least once previously, in 1992.
His list of creditors include First America Credit Union and two Las Vegas casinos Aria Resort & Casino and MGM Grand Hotel where he acknowledged during the hearing he lost a total $450,000 at one time in August 2011. He also owes $11 million to Bodell Construction Co. of Salt Lake City; $1.49 million to South Mountain LLC, one of his own companies; $800,000 to Kaysville Development; and $350,000 to Cache Valley Bank.
Among the unsecured creditors was an attorney representing South Mountain LC, a company that sued Diehl for $1.9 million alleging he siphoned money from their partnership to a retirement account.
The largest debt he listed as unsecured are three loans totaling nearly $26 million to America First Credit Union. But Rex Rollo, the credit union's executive vice president and chief financial officer, said that while the court papers say Diehl got the loans through personal guarantee, they are backed by real collateral, that is, real estate Diehl owns.
"These loans are all secured by real estate. We also get personal guarantees. We have them sign personally on their loans," Rollo said, adding the credit union is the first lien holder. "Which means not only can I go get the real estate, I can go after him for the deficiency."
Rollo could not be specific on which property secured the loans. As for the unsecured portion, he said, "obviously in question is whether his personal guarantee is anything."
Kuhn ordered Diehl and his attorneys to come back in two weeks with an amended filing that includes documentation of payments he has been making on extensions granted by the IRS and the Utah Tax Commission. Kuhn also met briefly with some of the unsecured creditors about a committee they will establish to consider whether Diehl's eventual reorganization plan will be adequate.
Terry Diehl's personal bankruptcy
The Salt Lake County developer and political donor on March 30 filed for a Chapter 11 personal bankruptcy. On Tuesday he met with creditors and a U.S. Trustee to go over his court filings.