One recent evening on the cusp of spring, the engines thrummed below decks, and the Sequoia, one of the most famous yachts in America, made a stately turn from her home at the Gangplank Marina in Southwest D.C. and into the Washington Channel.
Now in her dowager years, the 88-year-old boat was setting out on a private cruise lights ablaze, as if turning back time, Gatsby-like, to that half-century when it was at the beck and call of U.S. presidents.
It’s a lovely image, and the Sequoia, at 104 feet long and 19 feet wide, is a modestly beautiful boat. Built in 1925 by famed naval architect John Trumpy for Philadelphia socialites, the Sequoia is the longest-serving presidential yacht and a National Historic Landmark. It was the scene of much presidential history: the site of JFK’s last birthday party; where Richard Nixon decided to resign, with a bottle of scotch at the piano.
The boat is owned by Gary Silversmith, a 56-year-old lawyer and real estate entrepreneur. A presidential history buff, he bought it in 2000, when it was a poorly maintained albatross — mothballed in dire need of repair — and he has since spent millions restoring it to Washington glamour.
Bill Clinton came aboard while president, and former Soviet leader Mikhail Gorbachev famously crooned during a cruise. Dick Cheney and Donald Rumsfeld have socialized on it, as have Supreme Court justices Samuel Alito, Antonin Scalia and Ruth Bader Ginsburg, Silversmith says. Baseball’s Cal Ripken Jr., country music’s Emmylou Harris, actor Gary Sinise — the A-list.
Today, if you can swing the $10,000 or so rental fee, you, too, can play the piano, sit in JFK’s chair and stand along the top rail just like Nixon and Soviet leader Leonid Brezhnev. It’s the ultimate Washington-insider tourist attraction, the power bauble of baubles in a town built on access to power.
“We went on it once on the opening day of baseball season” to go to Nationals Park, says Robert Tanenbaum, a principal owner of the Nationals and a principal at Lerner Enterprises, the real estate giant. “What more classic way to go to the national pastime in the national capital than on a timeless Trumpy?”
Dirk Kempthorne, the former Idaho senator and U.S. secretary of the interior, thinks the cruises Silversmith gives wounded veterans — for which he has been awarded the Navy’s highest civilian honor — represent the nation at its best.
“It demonstrates what this ship means to America,” Kempthorne says.
So we can all agree that The Sequoia Presidential Yacht Group LLC and Gary Silversmith v. FE Partners LLC— in which Silversmith is attempting to stave off a financier who is trying to force a sale at a deeply discounted price — is another kind of Washington story, the two-legal-sharks-in-a-cage thing. The trial is scheduled to start May 13 in Chancery Court in Delaware, the state in which both companies are registered, and, sweetheart, it’s not going to be pretty.
Isn’t it terrible that Silversmith once stiffed a family who booked a cruise for a dying husband and father, didn’t refund the $7,500 deposit and forced the family to sue? And that a similar thing has happened more than once?
Isn’t it awful that FE Partners, the Washington-based firm that is now trying to claim the boat, said it was making Silversmith a “friendly” loan of $5 million — then gave him about half and sent more than 30 default notices before a single payment was due?
Yeah. Washington. Yacht. Money. Power. History. Lawyers.
Blood in the water, and the fins are getting closer.
***
On that recent spring evening, with the boat pulling out under a darkening sky, Silversmith was hosting a benefit for the U.S. Vietnam War Commemoration. With about 40 people gathered on the upper deck, retired Army Lt. Gen. Mick Kicklighter, director of the Department of Defense’s Office of Commemorations, hoisted the flag. Silversmith told a lighthearted anecdote about Lyndon Baines Johnson and his son-in-law aboard the boat, people chuckled and there was light applause.
“It’s an honor and a pleasure to have you all here,” Silversmith told the crowd. “When we’re all gone, the Sequoia will still be here.”
It was chilly outside and warm inside, and guests sipped complimentary glasses of wine and noshed on hors d’oeuvres. They walked through the bedrooms below decks, milled about the large dining salon on the first deck, or took in the view on the upper deck. Here on this table, you could admire an informal snapshot from JFK’s final birthday: cramped and crowded, actor David Niven sitting on the floor, Jackie right there. Back here, in the bedroom, this tiny shower? See how the floor is lowered? LBJ did that, to keep from bumping his head.
It’s the kind of thing you’d expect to see behind a velvet rope at the Smithsonian, except you can flop out on the presidential bed (so small! not that fancy!), then sit in the wicker chair on which JFK opened gifts.
Every bit of this is Silversmith’s property, for the boat has a curious provenance.
The Commerce Department bought it from private owners in 1931, primarily using it as a booze-busting ship during Prohibition. Herbert Hoover liked to requisition it from time to time — to tool down to Palm Beach with the missus — and it was soon the president’s official yacht.
Franklin Roosevelt’s first guest was the prime minister of Great Britain, and so began four decades of presidential entertaining. The Sequoia was not always the presidential yacht — FDR eventually used the Potomac; Truman preferred the Williamsburg; and Eisenhower, the Barbara Anne and the Susie E. — but the Sequoia was always available for “unofficial cruises,” on which names didn’t have to be logged, writes Giles M. Kelly, a former skipper and boat historian, in “Sequoia: Presidential Yacht.”
But the recession of the late 1970s hit hard, and Jimmy Carter ordered it sold at auction as a symbolic cost-cutting move. It fetched $286,000 ($1.1 million today).
The boat spent most of the next two decades bouncing from owner to owner — Kelly writes that it once was moored at a bar in West Palm Beach a few feet from sport fishing boats called The Hooker and Bum Bum — before winding up in a Norfolk shipyard for much of the 1990s. The shipyard finally unloaded it for $1.9 million to Silversmith.
“I thought it was the ultimate piece of Americana, and I was just enthralled by getting that,” he says. “I also thought it would be a good capital investment.”
“She’s back!” gushed the Washingtonian in December 2000, soon after Silversmith returned it to the capital. To the public eye, the Sequoia has been a five-star beauty ever since.
***
Silversmith cuts an unlikely nautical figure.
Born in Colorado, raised in Missouri, he’s an Eagle Scout, and his father owned and managed drugstores and his mother was a
homemaker. He became entranced with presidential history when, as a child, he wrote Harry Truman (a fellow Missourian) and Truman wrote him back.
He came to town to attend Georgetown University Law Center and never left. His primary business is P&L Investments, a company that reworks ecologically damaged sites, such as gas stations or old apartment buildings. He also runs several other financial entities.
Downtown, his K Street office is small and casual. The window that overlooks Farragut Square is smudged, and on a recent day, it’s open, street noises drifting up from lunch-hour traffic below.
He does pretty well, but there’s no trust-fund bespoke wealth here, no three yachts and a mansion. Silversmith lives in a comfortable house on a tree-lined street on the western side of Bethesda. His wife manages a nursery school. His two children — who went to Walt Whitman, the nearby public high school — are grown.
He’s an avid marathon and triathlon competitor. On a tabletop in the television room of his home is a small, framed picture of Silversmith and his brother in last year’s Alcatraz Sharkfest, a 1.5-mile swim from the island to Fisherman’s Wharf in San Francisco.
He pleads guilty to being a little disorganized, but make no mistake, the Sequoia is his entree to power Washington.
“He’s very sentimental about the boat,” says Kelly, the former skipper. “I think it’s given him a lot of prestige and good connections, and he’s handled that part of it pretty well.”
***
Removed from the glamorous nights aboard the yacht was the reality that Silversmith apparently was often struggling to pay for and maintain the antique wood-hulled boat.
He didn’t write a check to buy it but formed a company, the Sequoia Presidential Yacht Group, took out a loan, then went about finding ways to keep the boat solvent, including chartered tours.
It worked for several years, but the Sequoia is a toy for the extremely wealthy — maintenance averages well over $150,000 annually, Silversmith says. Creditors began suing some of his companies for bad debts, particularly after the 2008 recession.
Court records show that the Sequoia sometimes failed to honor bookings. Vinton Cerf, the man who more or less created the Internet, sued the Sequoia for breach of contract in November 2010 and won back his deposit of $10,400. Linda Eisenstadt, another customer whose tour was canceled, was awarded $41,000 — more than triple her deposit, though Silversmith says they have negotiated a lower settlement.
In early 2011, Iris Clarke and her family paid $7,500 for a four-hour tour as a birthday party for her elderly father, a lifelong sailor in a seafaring family. He was dying of prostate cancer, she wrote in an e-mail, and “the Sequoia is an icon in the boating community, embodying the essence of grandeur, history, style. ... It seemed a fitting end to a spectacular life.”
The Sequoia canceled four days beforehand, citing difficulties with maintenance at the shipyard, and the family’s deposit wasn’t returned, either. The Clarkes sued and won.
“He did not pay interest on the amount due, which he had offered time and time again,” Clarke writes of Silversmith, “nor did he send us any apology gifts he had offered repeatedly.”
In an e-mail, Silversmith says in response to the cancellations: “Since 2000, we have had over 700 charters and an aberration. ... It’s not our ordinary and customary course of business.” (He adds that the Sequoia does not contest cases in court “when we have full intention to pay.”)
In the Clarke matter, he says a family member told him the family wanted to apply the deposit to a later tour, confusing the issue of a refund. Clarke replies, again via e-mail, that this is untrue: “He conjured that convenient explanation up out of thin air. ... I hope you expose him for what he is.”
***
Meanwhile, things dockside were turning unpleasant.
Crew members say paychecks were sometimes late, and the manager of the city-owned Gangplank Marina said the Sequoia was such a deadbeat client it should be barred.
“In the nine years that Sequoia has been in the marina has been in continuous of the Payment of Dockage Fees and Other Charges Clause ... with the exception of 2012, when was required to prepay all slip fees in advance with certified funds,” wrote J. Nickerson to city officials earlier this year.
The city let the Sequoia stay in a “transient” slip, and Silversmith says Nickerson is overinflating small issues, motivated by a beef he had with the boat’s prior captain.
It was in this season of unhappiness and mounting bills that Silversmith approached Mike Cantor, managing partner of the Equator Capital Group, a D.C.-based investment firm. Cantor had been on the boat a few times as a guest, and he and Silversmith had a cordial, though not close, relationship.
In February 2012, Silversmith relayed to Cantor that he had an offer from Gazprom, the Russian energy giant, to buy the Sequoia for $20 million. It was tempting, he said in e-mails between the two, but he didn’t want to sell a historic American vessel to the Russians and “be a scoundrel.”
Would Cantor, who had once managed a fleet of oil tankers, consider making a $5 million loan to right the yacht’s finances?
Cantor, in court affidavits, says he was intrigued and approached one of his partners, the Timblo family of India. This branch of the Timblos owns a vast mining-based empire, principally overseen by Auduth Timblo. One of his sons, Anuj, went to college in Texas and lives in Montana.
Cantor and the Timblos inspected the boat, liked what they saw and formed a new entity, FE Partners, to handle the transaction.
It was a $5 million loan, at 3 percent interest (a far lower rate than Silversmith was then paying) and full repayment in five years. Cantor and the Timblos would get about a dozen free charters a year, and they had the right to charter the boat for an entire year, which, according to the terms, “will include the possibility of repositioning the Sequoia to India or other non-U.S. locations.”
Important: They could buy the boat, at any time, for $17.5 million.
Before the loan could be finalized, things went south. Cantor says in court affidavits that his due-diligence work showed that the Sequoia had serious financial and legal problems, including that the boat had no liquor license and had not paid sales tax in the District, and that the registration looked to be under slightly different names in two jurisdictions. The payments and penalties, Cantor said experts told him, could be as much as $10 million.
Silversmith says this is wildly overblown. The liquor license was not an issue; the Sequoia hired caterers that the city’s liquor licensing board had advised it to use, he says. To mollify his lenders, he says, the yacht is now obtaining a license — with zero penalties. The ship was also audited in the wake of Cantor’s allegations, and Silversmith offers city documentation that the yacht’s tax burden is no more than $177,000 — a fraction of Cantor’s allegations.
What happened next is the key to the case: Cantor did not walk away from the loan, as might have seemed prudent for a firm that had discovered that a would-be borrower had, in its opinion, been less than honest.
Instead, he renegotiated a far tougher package, the final details dropping in place shortly before closing: higher interest rates, complicated insurance and boat maintenance plans, and a purchase price reduced to $13 million.
If Silversmith defaulted on the loan, the purchase price fell to $7.8 million — about $10 million less than the original deal.
Silversmith, in an e-mail, writes that he was floored: “Until I got to the closing the next day, I didn’t know there was a $7.8 default purchase price.”
His plan of financial salvation had turned into a trap, he says. A preexisting promissory note on the boat was due, and his creditor was out of patience. “Cantor knew that loan was maturing and they seized on that.”
He signed the deal.
***
Okay. Here’s where it gets ugly.
The contract called for FE Partners to immediately wire three payments. They made two but never made the third.
Cantor says in court filings that he discovered, in a dramatic meeting with the crew just after the documents were signed, that the Sequoia had even more hidden debts and that Silversmith had told the crew to keep them secret — including that Silversmith owed the crew $28,000 in wages.
Further, Silversmith had failed to obtain required insurance coverage and file adequate restoration plans that were mandated in the agreement in order for the third part of the loan to be made, Cantor wrote in court filings.
Silversmith counters that Cantor is wrong on the facts.
Cantor wrote in his affidavit that at the crew meeting, Silversmith was out of the country on a family vacation. But Silversmith has provided documents showing he was in town and exchanging e-mails with the boat’s captain that day and making plans to come by the yacht in the late afternoon.
FE Partners’ “predatory” plan, Silversmith wrote in court papers, became obvious: “By strategically failing to meet its contractual obligations, placed itself in a first-lender position ... whereby it could take advantage of Sequoia LLC’s continuing financial distress and loot .”
Within weeks, Cantor was hammering the Sequoia with default notices — for allegedly not paying the crew on time, for misclassifying the boat’s handful of employees on federal tax forms, and more.
Silversmith’s court responses say FE Partners, motivated by “overwhelming avarice,” began issuing “concocted default notices ... all based on lies, misstatements, or technical matters that were immediately corrected.”
Says FE, in its filing: “While such colorful language may satisfy Plaintiffs’ desire to smear Defendant’s good name, it does not change the law or the facts.”
No issue was more contentious than an unusual $40,000 loan the Sequoia obtained in February 2011 through Sergio Cespedes, then the boat’s captain.
The loan was from Gina Sanjines, whom Cespedes has characterized as a relative (Sanjines could not be reached for this story) and who reportedly works on the support staff at the White House. The money was an emergency loan to cover yacht maintenance and crew salaries, and was at 10 percent interest. A year later, it had not been repaid.
In his court filings, Cantor says he was upset when he learned of the loan, because he felt it might give Sanjines’s priority over his. On July 25, 2012, he e-mailed Silversmith: “In recent communications, you falsely characterized the note as a personal obligation of yours instead of an obligation of . ... It is our understanding that you instructed members of the crew of the vessel to intentionally withhold” information about the loan.
He slapped the yacht with a default and told Silversmith to repay the debt, or FE Partners would and charge him the balance. Silversmith, who says he never had the promissory note from Sanjines, said Cespedes told him the repayment was $80,000 — and suddenly, with no explanation, it jumped to $104,000.
Silversmith sent Cespedes a blunt e-mail on Aug. 1, saying all he could afford was $80,000.
“If she does not accept my 80000 today then I will have the Inspector General of the White House review the debt and her hard money lending business that she is conducting. ... I understand the Inspector General at the White House would not view it favorably.”
Further, he wrote, without using Sanjines’s name, he had described the situation to “my friend, Russell George, the Inspector General at the IRS who was on the boat with me, and he confirmed this would be reviewed with concern. ... I am desperate and do not have a choice.”
She didn’t take the $80,000. Silversmith, fuming, paid the $104,000 to avoid yet another default notice.
Today, Silversmith says he was angry because he was never given any accounting on the loan.
“It was all haphazard and regrettable,” he says. “Obviously I should have had a copy of the promissory note ... but I felt like I was getting hustled.”
Cespedes, the boat captain, quit shortly after the incident.
Now living in Bolivia and speaking on a call set up and monitored by Cantor’s public relations firm, he sums up his four-year history with Silversmith this way: “Gary as a friend is a great person, but when you get involved with financials, he’s just different.”
Silversmith: “Sergio didn’t have any complaints about my financial dealings until Cantor and FE Partners got involved and befriended him.”
***
Of course, the case is hardly one-sided.
It’s not clear how much was disclosed to FE Partners about the boat’s condition. Cespedes has said Silversmith told the crew to cover things up. Matt Vilbas, a crew member since 2010 and the boat’s captain since last fall, disputes that.
“ had full run of the boat” from the beginning, Vilbas says. “Those conversations were open. I don’t think things were held back at all.”
Also unclear is the claim by FE Partners that its intentions are to keep the Sequoia in the United States. The company’s one-page Web site says the company’s focus is to preserve “Naval vessels that might ... be dismantled and/or removed from U.S. waters.” In a statement, the company says it “is committed to keeping the Sequoia at its home port of Washington, D.C.”
However, in its short history, FE Partners has purchased no boat of any kind, making its patriotic intent impossible to verify. In the loan agreement, it made no legally binding statement about keeping the yacht in Washington, but instead asserted the right to take the Sequoia out of the United States for one year.
While Cantor, who forms half of the company, has lived in Washington for more than two decades, the Timblos have little or no ties to the city. Anuj Timblo is the only family member living in the United States.
“My father and I and many of my family members were educated in the United States, and we feel a great debt of gratitude to this country,” Anuj Timblo said in a statement. “We are thrilled to have the opportunity to help preserve this unique piece of America’s heritage.”
Still, not everyone was impressed with the way the company dealt with Silversmith.
Michael Kulik, a freelancer who has served as the Sequoia’s photographer for years, got a call from Cantor in September. Kulik was bitterly feuding with Silversmith at the time about a payment. He says Cantor urged him to sue the Sequoia, offering legal advice on the steps to take. He says Cantor also offered him $1,000 for pictures of code violations aboard the yacht.
“He was wanting pictures of too many people being on board. ... He was looking for dirt,” Kulik said. He says he rejected the offer, and Cantor was “indignant” that he did so.
FE Partners says in a statement: “Mr. Kulik’s claims are wildly inaccurate.”
***
It’s all sort of migraine-inducing, isn’t it?
So you won’t be surprised to learn that by November, just five months after the loan was signed, it blew up.
Silversmith notified Cantor that he had a loan commitment for new funding and wanted to repay FE Partners in full, within 30 days.
Cantor responded by sending notice that the Sequoia was in default and FE Partners was exercising its right to purchase the boat for $7.8 million.
Silversmith sued to force FE Partners to take repayment — setting up the trial that, as of press time, was scheduled to start next week in Delaware.
The outcome is anybody’s guess. FE Partners might win and claim the boat at $7.8 million, or lose partially and be able to buy it at $13 million. Silversmith might win everything, including the right to nullify the sale agreement.
Whom to root for? In a milieu this unpleasant, who knows?
For perspective, let’s ask Kelly, the Sequoia historian. He sailed the boat on a 6,000-mile trip in 1984. He was a member of two trusts that tried to buy and endow the boat.
The best solution for the Sequoia, he thinks, is for the boat to be held by a trust, perhaps managed by the government, with Silversmith on the board. Kelly says it’s only fair to note that Silversmith alone brought the boat back to Washington, spent millions on its upkeep and has a “psychic attachment to it that isn’t about dollars and cents. ... He has an almost spiritual connection to the boat.”
Two men, one bauble.
Somebody’s got to lose.
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