Baltimore Racing Development LLC, which organized the first Baltimore Grand Prix and ended up millions of dollars in debt, plans to dissolve and has informed some investors by email that the company likely won't be able to pay them back, a lawyer for the company said Tuesday.
Steven D. Silverman said his law firm, Silverman Thompson Slutkin & White, has been hired to advise Baltimore Racing Development how to best end its existence. The company has no employees and — after the city tapped another company to organize this year's Grand Prix festival — no business prospects.
"We are helping to wind down the LLC in the most responsible way possible," Silverman said. He added that no decision has been made about whether Baltimore Racing Development will file for bankruptcy protection.
Del. Keiffer J. Mitchell Jr., a Baltimore Democrat who owned a 1 percent stake in the company, said he received an email from Silverman's firm last week that indicated that investors would not recoup their money.
"BRD will no longer exist, and there will be no proceeds forthcoming," Mitchell said, adding that he hadn't spoken with anyone connected with the company in months. "It was an experience that I definitely learned from as a business person. I guess I'll just move on."
Baltimore Racing Development still owns about $600,000 in assets used to run the race, such as tires and barriers. But the company reported $12 million in debts owed to investors, creditors and vendors, including more than $1.5 million in unpaid taxes and fees to the city of Baltimore, according to financial documents last year.
The state comptroller's office has placed liens against the property of former Baltimore Racing CEO Jay Davidson and his wife, Elizabeth, over nearly $600,000 in admissions and amusement taxes owed to the city.
Silverman said the company is trying to figure what to do with its assets.
"Whatever assets they have remaining will be liquidated and paid to any creditors in accordance with legal priorities," Silverman said.
Joseph Shapiro, a spokesman for Maryland Comptroller Peter Franchot, said the state is "typically at the front of the line" to be paid in such situations.
Mitchell said he was supposed to be paid by the company through a consulting agreement and was told that his money would be kept in escrow.
"I guess that didn't happen," he said.
The city canceled its contract with Baltimore Racing Development in December. Last week, the Board of Estimates approved a five-year contract to run the Grand Prix under new management, Downforce Racing, which is composed of Dale Dillon, an Indianapolis building contractor, and two former Constellation Energy Group executives, Felix J. Dawson and Daniel C. Reck. The men have said that they are the company's only investors.
Under the contract, Downforce Racing is obligated to pay less in taxes and fees to the city than under the previous agreement with Baltimore Racing Development. The contract with Downforce Racing also does not require the company to assume Baltimore Racing Development's debts.
Mitchell said investors in the first race are now left with no way to recoup their investment. City officials have encouraged Downforce Racing to work with vendors who worked on the inaugural race, but that is not a requirement.
"It was kind of off-putting," Mitchell said of the new deal. "We're kind of left standing here with nothing to do. There was a feeling that the city would push a little harder for the contractors and vendors."