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Demorest mayor accused of fraud in business deal
Rick Austin.jpg
Demorest Mayor Rick Austin during his time as a member of the Georgia General Assembly in 2009.

Rick Austin, the mayor of Demorest who recently accused the president of Piedmont College of sexual harassment, is now facing his own potential legal trouble.

Austin is denying allegations that he committed fraud in a business deal gone bad.

According to a lawsuit filed in Habersham County Superior Court, Austin entered a contract to purchase a local water and sewer business in August 2017.

The suit claims that, after taking over collection of bills for the business, Austin funneled profits from the company, which were meant to pay operating expenses, to his own personal use.

Austin was set to assume ownership of the business on Aug. 1, 2017, according to the lawsuit filed by Kingwood Water and Sewer LLC, with a stipulation that all income received from operations in July be used to pay that month’s bills.

“Despite the parties’ clear discussions and despite the language of the contract that (Austin) would not receive any assets or payments from the business earned prior to Aug. 1, 2017, (Austin) collected the payments from plaintiffs’ water customers for water and sewer service for July 2017,” the lawsuit states.

The lawsuit accuses Austin of opening a bank account with the plaintiff’s name and taxpayer ID number, where he allegedly deposited the July revenue, then subsequently acquired a debit card to withdraw money for auto parts for his personal vehicle and to purchase a computer from Best Buy.

A $10,000 cash withdrawal is also listed in the complaint.

In his affidavit, Austin said that he informed Bert Williams, the managing member of Kingwood, that he needed to open the account to deposit customer receipts and pay business expenses, including payment to Austin’s business, Pegasus Drone Services Inc., for running the water and sewer operation.

Austin said he paid the bills he was responsible for during the months of August and September.

Kingwood was unable to pay bills owed to Georgia Power, Windstream and the City of Clayton, the lawsuit contends, due to Austin’s actions.

Moreover, the lawsuit claims that Austin had no intention of making an initial payment of $125,000 for the purchase of the business.

Williams could not be reached for comment and his attorney did not return a call for comment.

In an affidavit provided by Austin to The Times, he outlines his attempts to secure financing from the bank. The loan, however, hinged on first obtaining a purchasing agreement, but that process was stalled.  

Kingwood purchases water from the City of Clayton to serve a residential subdivision. Austin said pending litigation between Kingwood and the city negatively impacted the terms of the loan he was offered and the bank would not allow the company’s assets or “receivables” to be used as collateral or security.

Austin secured an extension to mid-September to obtain the needed financing, and he was ultimately offered $50,000 and asked to put up his home as collateral.

But that was a risk Austin said he was not willing to take, so he asked that Kingwood settle its suit with Clayton so that he might obtain a more favorable loan agreement.

The lawsuit, however, alleges Austin “used false promises in order to keep the contract alive” and ultimately used those delays to siphon more money from the business.

The purchase agreement between Austin and Kingwood was ultimately terminated, and Williams resumed operations of the water and sewer provider.

But in November 2017, Austin received a letter from Kingwood’s attorneys accusing him of fraud and theft.

“Austin went about an intentional course of conduct, including lies and deceit so that he could obtain the income from plaintiff’s business and use it for his own purposes until such time as plaintiff became aware of defendants’ fraud,” the lawsuit states.

A $16,000 in payment demanded in this letter was an “effort to blackmail me,” Austin said in his affidavit.

In the Piedmont College lawsuit, Austin has filed an affidavit accusing the college president of repeated acts of sexual harassment. Austin is a biology professor at Piedmont College,

A wrongful termination lawsuit against the college was brought by former tenured professor Robert Wainberg in August. As part of that suit, Austin detailed in a deposition several incidents of “inappropriate conduct” by James Mellichamp.

“As a faculty member, I have personal knowledge that Dr. Mellichamp engaged in sexual harassment of a faculty member, specifically myself,” Austin states in the affidavit filed in Habersham County Superior Court and obtained by The Times.

Wainberg, who had worked at the college for about 30 years, was fired last year for alleged Title 9 violations, which cover sexual harassment complaints.

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