Napa Valley Resort Locked in $50M Lawsuit Between Owners

J. Roger Kent, founder of the Rug Doctor enterprise, holds 30.76 percent of the company that owns the Silverado Resort and Spa and has filed a suit that claims PGA Hall of Famer Johnny Miller and two other partners committed fraud, breach of contract, negligence and misconduct with “oppression and malice.” Bill Schmidt, an attorney speaking for Wall, Miller and Leister, said the complaint “is merely part of Mr. Kent’s opportunistic and prolonged campaign to intimidate, threaten and bully his partners out of the business.”

One Silverado Resort and Spa owner is suing another group of owners—including PGA Hall of Famer Johnny Miller—for at least $50 million, the Napa Valley Register reported. The executive, J. Roger Kent, alleges his Napa Valley, Calif. resort partners committed fraud, breach of contract, negligence and misconduct with “oppression and malice.”

Kent, the founder of the Rug Doctor enterprise, claims that Silverado Resort and Spa is in a dire financial situation, has been mismanaged and would soon be “insolvent,” the Register reported. The resort has “substantial negative working capital,” said the complaint.

Silverado’s pre-pandemic business model relied heavily on income from large group events like weddings, business meetings, and conventions, the Register reported from the complaint. There’s no assurance these types of events will be resuming in the near future, it read.

Kent blames his partners for the problems at the resort, the Register reported. According to the lawsuit, which was filed on July 13 in Napa Superior Court, Kent owns 30.76 percent of the company that owns the resort.

His complaint names golfer John L. Miller, Tim Wall and Ken Leister, described as both friends and partners, as defendants, the Register reported. Companies formed by Miller and Wall each own 30.76% and Leister 4.66%. An LLC formed by resort General Manager John Evans owns 3.04% of the company that owns the property.

Bill Schmidt, an attorney speaking for Wall, Miller and Leister, disagreed with the allegations in the suit, the Register reported.

This complaint “is merely part of Mr. Kent’s opportunistic and prolonged campaign to intimidate, threaten and bully his partners out of the business,” said Schmidt. “Kent’s wild accusations are unfounded and harmful.”

Miller, Wall and Leister “look forward to exposing Mr. Kent’s behavior and wrongdoing while vindicating themselves in court,” said the statement from Schmidt.

In 2010, the partners bought the resort from former owners—the Okawa Family—for $21.8 million, the Register reported. Around that time, Kent loaned the project $23.5 million to buy and renovate the resort, said the court documents. Miller and Wall each contributed $1 million towards the purchase price.

Kent claims that Wall’s responsibility was to oversee the business and make the resort profitable, the Register reported. Over time, Kent has financed more than $30 million in debt to the company that owns the resort, the suit contends.

According to Kent, by July 2019, he had hoped that the company would be able to pay off a $20 million loan he’d made, the Register reported, but instead he found from an audit the resort was in a “dire financial situation.” One bank called in to possibly refinance the company placed “little value” on the resort “as a going concern,” said the complaint.

Kent claims that Miller and Wall then held “secret” discussions to sell or develop parts of the resort, the Register reported.

In September 2019 Wall and Evans had been in talks with a group called Trinity Real Estate Investments, LLC about buying the resort, the Register reported. Kent said he was improperly shut out of such negotiations.

That led to Kent’s “grave concerns” about Miller’s and Wall’s actions at the resort and property, the Register reported. Kent also claimed that additional mismanagement was discovered, as well as “outright willful and wanton misconduct and gross negligence,” by Miller and Wall.

“The sheer magnitude of the wrongful conduct is stunning,” said Kent’s complaint.

Those findings reportedly include a “disguised” political contribution made by Wall and his wife to Bill Dodd’s campaign, improperly paying more than $103,000 towards Wall’s health insurance premiums, hiring Wall’s stepson without authorization for a total of $495,577, giving away too many free resort stays, treating the company as a “personal piggy bank,” unauthorized legal payments, transferring a resort condo for below fair market value and unauthorized payments of $274,404 to Miller’s son, the Register reported.

In 2018, Wall allegedly took out leases for golf carts and other equipment, including “souped-up, custom golf carts” for personal use by Wall, Miller, Leister and Evans, but not Kent, the Register reported.

The complaint also alleges that Miller and Wall charged nearly $200,000 in personal expenses from 2017-2018, that company debt was misallocated, incorrect tax returns were not amended, and the resort’s liquor license was improperly transferred to resort manager Dolce Hotels and Resorts, the Register reported.

Miller and Wall’s compensation of “millions” was “wildly excessive” under IRS guidelines, the Register reported from the complaint. Kent claims that Wall only averaged about one hour of resort work a day when in Napa.

“Wall just wanted to play golf” at the resort, not maintain an active role in management, said the complaint.

Miller’s role, “when he is even there,” is limited to providing name recognition and appearances, the Register reported.

In addition, according to the complaint Miller and Wall “hatched a scheme” during the COVID-19 pandemic to get a federal Paycheck Protect Plan (PPP) loan of $4.7 million, the Register reported. However, this was a knowing misrepresentation to the government, because an audit had shown that the resort was insolvent, or would be, whether or not it got the PPP funds, said the complaint.

Kent said that by early 2020, he suspected that Miller and Wall were planning to partner with Napa developer George Altamura, restaurateur Thomas Keller, the Doctors Company and others to push out Kent in a “hostile attempt” to take over the resort, the Register reported, while purposefully mismanaging the company to depress the value of the resort “so they could eventually purchase it on the cheap.”

Not so, said attorney Schmidt, speaking for Wall, Miller and Leister, the Register reported. Until the onset of the COVID-19 pandemic, Kent and his partners in ownership of the Silverado Resort experienced years of “tremendous success” and profitability, said the statement from Schmidt.

“Over the past year, Mr. Kent has made many attempts to force his partners out of the business,” the Register reported from the statement. Miller, Wall and Leister “are completely aligned and working in harmony for Silverado’s best interest,” said the attorney.

According to the statement, the Register reported, Kent “refused to vote for PPP and the cash flow it has provided directly to the Resort’s employees.”

The attorney said that since COVID-19 hit, Kent has already received payments of over $1.2 million from Silverado owners, the Register reported. Meanwhile, “the other owners have deferred over half a million dollars to help the Resort.

“Instead [Kent] seeks to use this COVID-19 crisis to cause the Resort to fail so he can take it away from his partners for nothing.”

Evans declined to comment for this story, the Register reported.

“The Doctors Company is not pursuing an investment in Silverado Resort,” said a company spokesperson, the Register reported. A spokesperson for George Altamura said the businessman “has nothing to do” with a possible purchase of Silverado Resort and Spa. A spokesperson for Thomas Keller could not be immediately reached this week.

Silverado Resort and Spa includes 1,200 acres of oak groves and vineyards, hotel rooms, business facilities, dining, a spa and other amenities, the Register reported. Silverado also offers two PGA championship golf courses, along with tennis, pools, bocce, hiking and biking.

The next step in the complaint is a case management conference on December 22, according to the court, the Register reported.