$130M Showdown: Bondholders File Federal Lawsuit to Force Wyatt Detention Into Receivership

$130M Showdown: Bondholders File Federal Lawsuit to Force Wyatt Detention Into Receivership

For the past few weeks, there has been a battle of words between Central Falls Mayor James Diossa and lawyers representing the bondholders of the Wyatt Detention Center over the management of the prison.

The backdrop has been Diossa shifting gears from a supporter of the Central Falls prison taking Immigration and Customs Enforcement (ICE) prisoners to now being an opponent.

The war of words took a dramatic turn on Wednesday as the bondholders for Wyatt filed a federal lawsuit seeking to shift the prison’s management from the board, who is appointed by Diossa, to a federally appointed receiver. In addition, the suit seeks to place a temporary restraining order against Diossa’s board from interfering in the management of the facility.

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

$130 Million Showdown

The eleven-count lawsuit seeks $130 million in damages. "As to Counts VI (Tortious Interference with Indenture), VII (Tortious Interference with Mortgage), and VIII (Tortious Interference with USMS Contract), award the Trustee damages in any amount to be determined at trial, but no less than $130 million dollars and, consistent with the temporary restraining order request, enjoin the City, the Mayor, and the City Council from further interference with the Indenture, USMS Contract, and Mortgage," the lawsuit seeks.

“UMB Bank, N.A., as successor indenture trustee for those certain Detention Facility Revenue Refunding Bonds described more fully below (the “Trustee”), files this petition for the immediate appointment of a receiver and the grant of a temporary restraining order to protect against the immediate and irreparable harm to the assets of the Central Falls Detention Facility Corporation  and complaint against the Corporation, City of Central Falls, Mayor James A. Diossa, City Councilors Jonathan Acosta, Hugo Figueroa, Jessica Vega and Franklin Solano, Corporation Directors Wilder Arborelda, Gary Berdugo, Joseph Molina Flynn, and Herman Yip," states the lawsuit.

Flynn, who is the recently appointed chairman of the board, heads the RI Latino PAC, and is a contributor to GoLocalProv.

The lawyers for the bondholders claim that Diossa's actions have been reckless financially and have put both prisoners and Wyatt staff in danger.

"... the protests led by the Mayor in front of the Wyatt on March 28th and again on March 30th, including protestors shouting 'We see you!' and 'We are here for you!' -- inciting hundreds of detainees to react (the overwhelming majority of which are not ICE detainees) -- negligently put the staff and detainees at the Wyatt at risk of danger and immediate harm,” wrote Adrienne Walker, the bondholders' attorney.

According to the suit filed on Wednesday, “The Trustee represents the holders of the Bonds owed well over $130 million.  The bond debt represents approximately 99% in dollar amount of the Corporation’s liabilities (based on the Corporation’s financial statements).  As the senior secured creditor to the Corporation, the Trustee holds first priority liens against all of the Corporation’s assets, including its revenue, accounts, and real property,” the lawsuit states.

In a letter from Diossa's attorney which was sent to the bondholder's lawyers before the lawsuit, the city asserted that city would not be deterred and that the bondholder's threats were intended, "to silence the City from speaking out against the unjust treatment of people within the municipal detention facility.

"...any suit brought against the Mayor, Council, or any other City official or resident in connection with protesting these recent actions of the Wyatt will be met with the appropriate counterclaims and motions under the Anti­SLAPP laws in which the City will seek damages, including attorneys' fees and punitive damages to the fullest extent of the law," stated Diossa's letter on Monday.

Central Falls officials refused to comment on Wednesday's lawsuit.

Controversy Over ICE Detainees

“On March 10, 2019, ICE transferred approximately 133 detainees to the Wyatt. Since their arrival, the Corporation has met or exceeded all requirements established by ICE for the housing of detainees,” and Diossa has protested against the arrival of the ICE detainees. 

In 2015, Diossa lobbied the Rhode Island congressional delegation to work to bring ICE prisoners to Wyatt. At the time, it was critical to the financial viability of the facility — and necessary for the city to keep its $50,000 a month impact fee paid by the prison.

Diossa refused to comment for this article, but a spokesman says, “There is a big difference between immigration detainees who were at Wyatt previously and this new [President Donald] Trump initiative. The 'Southwest Border Zero Tolerance Initiative' was announced in May 2018 by then-Attorney General Jeff Sessions to detain and prosecute anyone caught crossing the border. This set into motion the systematic – and as we have since learned, chaotic - separation of children from their parents."

Revolving Door of Board Members Under Diossa

The lawsuit says that “Since 2013, the Mayor has continually appointed new members to the Corporation’s five-person board, appointing approximately twelve members to the Board of Directors to the Corporation, many of whom have attempted to exercise pressure on the Corporation to pay impact fee payments to the City in violation of the Corporation’s legal commitments."