Text From EPM CEO Blames ‘Margin Call’

The text begins with an apology.

“Yes my apologies for the sock (sic) and awe and the margin call wasn’t expected nor justified to be honest. However in business, it is what it is at times when someone can hurt you.”

That text was sent by Equity Prime Mortgage (EPM) CEO Eddy Perez to an executive at Jesse Iwuji Motorsports LLC. (JIM) in late September, and is cited in a civil breach of contract lawsuit filed by JIM last week in the U.S. District Court for the Southern District of Florida.

Judge Beth Bloom signed an order Thursday dismissing the case without prejudice over a question of jurisdiction, but because it was dismissed without prejudice, the case could be refiled in the proper venue. 

That happened later Thursday, when Attorney Darren A. Heitner, of the Fort Lauderdale, Fla.-based law firm Heitner Legal, refiled the lawsuit and it was accepted by Bloom. Friday, the judge signed an order for both sides to file schedules for discovery.

The original dismissed complaint was filed last Monday. Thursday’s amended complaint once again accuses EPM of breaching a $6 million, two-year sponsorship agreement the Atlanta-based mortgage lender had signed on Nov. 30, 2021, with Florida-based JIM, a stock car racing team that competes in the NASCAR Xfinity Series and was co-founded by Iwuji and NFL Hall of Fame running back Emmitt Smith.

Under the deal, in the first year, EPM agreed to pay $2.25 million in monthly installments of $187,500. In the contract's second year, EPM agreed to pay $3.75 million in monthly installments of $312,500.

The complaint states that on or about Sept. 27, 2022, or less than a week before EPM was required to pay another monthly installment, “an executive at EPM told an executive at JIM that EPM got ‘margin called’ and was suffering due to mortgage rate hikes, and thus EPM could not make any additional compensation payments to JIM” under the agreement.

JIM subsequently received a text message “on or about” Sept. 29 from an EPM executive confirming that neither the Oct.1 payment nor any subsequent payments would be made, the complaint states.

'There Was No Margin Call'

The text message cited in the complaint was recently shared with NMP by someone with knowledge of the case who requested anonymity. The text, written by Perez, was sent in response to a message telling him the race car team hoped EPM would complete its installment payments at least through the end of the year.

Last week, Phil Mancuso, a partner in EPM and the company’s chief investment officer, strongly denied the lawsuit’s claim that EPM terminated the sponsorship due to a margin call, stating unequivocally that “There was no margin call.” At the time, Mancuso did not provide a reason for EPM’s decision to terminate the sponsorship agreement, stating he could not comment on the lawsuit.

Presented with the contents of the text from EPM’s CEO that specifically refers to “the margin call,” Mancuso provided a written statement. 

“I can’t comment on communication that I wasn’t a party to or even confirm the veracity of,” his statement begins. “That said, I will reiterate there were absolutely no margin calls with our broker-dealers. Full stop.”

Mancuso’s statement added, “As to the pending matter, JIM was put on notice of a material breach of our agreement. I can’t comment further on ongoing litigation.”

'My Client Was Lied To'

Heitner, the attorney for JIM, issued a blunt reply to Mancuso’s statement.

“Then my client was lied to,” Heitner said, referring to Mancuso’s denial of a margin call, “which is a bigger issue because that would be fraud.”

He added that EPM “only sent us a bare bones letter after we sent our notice. This will all get fleshed out. They have no case.”

The notice Heitner refers to is cited in the complaint. After EPM failed to make its $187,500 installment payments on both Oct. 1 and Nov. 1 this year, JIM sent a Notice of Intent to Terminate the sponsorship agreement to EPM, as required by the agreement. According to the complaint, “EPM confirmed its receipt of the JIM Notice to Terminate but took no actions to cure or otherwise remedy the stated material breaches.”

The complaint states that, as of Thursday, EPM had failed to make “the required additional payment to JIM in the amount of $312,500” (the first installment for the contract's second year), and adds that JIM expects EPM will fail to pay the remaining $3.75 million due for the second year of the agreement.

Despite the unpaid installments, the claim states EPM “continued to fully exploit and receive the benefits it sought” in the sponsorship agreement, including making promotional posts on social media with photos featuring JIM’s race car with EPM’s logo on its hood, and EPM requesting special access for guests at a NASCAR race at Talladega Superspeedway in Alabama on Oct. 2, 2022.

The lawsuit seeks to “recover damages in an amount no less than $4.125 million,” which includes the unpaid installments and the full-year amount for the contract’s second year, as well as attorney’s fees and court costs.