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April 23, 2014

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Nevada Supreme Court lets lawsuit continue over failed Fontainebleau

CARSON CITY — The Nevada Supreme Court has allowed 47 offshore hedge funds to continue a lawsuit in Clark County seeking an estimated $375 million lost investing in the failed Fontainebleau Resort and Casino in Las Vegas.

The court ruled today that District Court Judge Mark Denton was wrong to dismiss the lawsuit against Union Labor Life Insurance Co.

The case was returned to District Court. The hedge funds filed their lawsuit in 2011 and appealed to the Supreme Court in January 2012.

The proposed Fontainebleau obtained more than $2.5 billion in loans from various sources, including the hedge funds. But there were hundreds of millions of dollars of cost overruns that doomed the project to failure.

The proposed casino was to be built on the north end of the Las Vegas Strip to include a 63-story glass skyscraper and more than 3,800 guest rooms, suites and condominium units.

The hedge funds, headed by Brigade Leveraged Capital Structure Fund Ltd., allege that Union Labor Life Insurance Co. conspired with the Fontainebleau to conceal that the project was in financial trouble and could not be completed.

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