Richard Brian / Special to the Sun
Thursday, May 31, 2012 | 2 a.m.
In hindsight, Republican congressional candidate Danny Tarkanian should have “put a microscope” on a 2007 land deal that went bad and has now left him and his family on the hook for a $17 million judgment, his lawyer said Wednesday.
A federal judge has ruled that Tarkanian, his parents and siblings must pay the Federal Deposit Insurance Corp. $17 million for a loan they took from a now-defunct bank that is under federal receivership. The loan was intended to help develop an “equestrian destination resort” in Anza, Calif.
Unfortunately for them, the Tarkanian family, and their partners Doug and Debra Johnson, appear to be the only ones left standing for the FDIC to go after.
“In 20-20 hindsight, yeah, he should have put a microscope on the deal,” Tarkanian’s lawyer, Gus Flangas, said. “It’s unfortunate he didn’t. He trusted Dyson, trusted the bank. That’s unfortunately a very, very expensive lesson learned.”
Tarkanian, the frontrunner in the Republican primary for the newly created 4th Congressional District, said he will appeal the judge’s decision, contending La Jolla Bank and Dyson bamboozled him into taking a risky loan.
The judgment, which was first reported by Sun columnist Jon Ralston, has the potential to financially decimate the family. Tarkanian and his wife, Amy, personally guaranteed the loan, as did his parents, Jerry and Lois Tarkanian; his brother, George Tarkanian; and his sister and brother-in-law, Josephine and Zafrir Diamant.
Danny and Amy Tarkanian have already lost to foreclosure a parcel of land in Las Vegas that they had used as collateral for the deal.
“The family has lost what amounted to be their nest egg,” Flangas said. “They’ll be chased down for money beyond that. And it’s not just Danny, it’s the whole Tarkanian family.”
While hindsight may dictate Danny Tarkanian should have scrutinized the deal more carefully, the bank and the developer should have been more forthcoming with the facts of the loan, Flangas said.
Danny Tarkanian filed the first lawsuit. He alleged that Dyson arranged for La Jolla Bank to loan his business partnership, Vegas Diamond Properties, $14.5 million.
Danny Tarkanian lent most of that money to Dyson to develop the resort in Anza, in rural Riverside County. At the same time, Dyson obtained his own $7.5 million loan from La Jolla Bank, using the Anza property as collateral, the lawsuit contends.
But the project never came to be, leaving Dyson without the proceeds to pay back either loan. When Dyson defaulted on both loans, the Anza property went to the bank and not the Tarkanians, who ended up as the subordinate lenders.
Flangas contends the bank should have disclosed its relationship with Dyson as well as the details of the primary loan and that the loan to the Tarkanians was subordinate to it.
He likened the bank’s actions in the deal to a homeowner painting over toxic mold and then failing to disclose the problem while selling the house.
At one point in the litigation, a federal regulator found the bank had engaged in unsafe and unsound banking practices and issued a cease and desist order.
Under the Financial Institution Reform, Recovery and Enforcement Act, the FDIC has broad authority to recover losses based on contracts signed with the defunct bank, Flangas said.
Still, Danny Tarkanian said he will appeal the ruling. He argued the land he and his wife lost to foreclosure was sold below market value and should be given more worth against his outstanding debt.
And he’s intent on convincing regulators that he is the victim of unsound lending practices because he wasn’t told that the Anza property was being leveraged twice for loans from La Jolla Bank.
“It’s an ugly case all the way around,” Flangas said. “It’s been very frustrating for me personally. I don’t like to ever lose a case, and we litigated this one very strongly. But you just can’t beat those statutes.”