Tuesday, Jan. 27, 2009 | 12:51 p.m.
In Business Las Vegas Archives
Legal settlements have been reached with more than 130 clients to recover $91.7 million of $97.5 million lost over the 2007 collapse of Southwest Exchange Inc.
Larry Bertsch, the court-appointed receiver for Southwest, described the deals getting most of the money back as “amazing.”
The settlements, in the process of being approved in federal and state district courts, will end two years of massive litigation with the Henderson-based financial company, which lawyers for the clients alleged in court documents was looted by its former owner, Don McGhan, to further his lavish lifestyle and business interests.
The FBI and the IRS have been investigating McGhan, who once had aspirations to make it big in the breast implant manufacturing industry.
Not all of the $91.7 million will go back to the investors. As much as 25 percent of the money in many cases will go to the lawyers who pushed the litigation and pursued the deals on behalf of the clients.
For former Las Vegas entertainer Wayne Albritton and his wife, Greta, who lost the $433,264 they deposited with Southwest Exchange after the sale of their Mount Charleston cabin, that’s a small price to pay.
“My wife and I have a lot of gratitude,” said the 66-year-old Albritton, who performed in several Strip production shows before moving to Palm Springs a decade ago. “All of what’s coming in makes you think that there is some justice out there.”
Las Vegas attorney Brandon Roos, one of the lawyers working on the deals, said the settlements are the “product of hard work by everybody,” including the judges who kept the cases moving.
Southwest Exchange was a firm that allowed people to make tax-deferred real estate transactions under the IRS tax code.
Investors could put off paying capital gains taxes on the profit earned from selling property as long as they kept the money deposited with the firm and, within a certain time period, withdrew it to buy a similar property. In court papers, plaintiff attorneys alleged that McGhan, the lead engineer involved in the creation of the first silicone implant, began looting the company with the help of others shortly after he bought the company in 2004.
A large portion of the money sitting on deposit with Southwest, $40 million, was used to buy a French implant manufacturer, documents allege.
The attorneys also accused McGhan of leading an “opulent lifestyle,” traveling the world on a 19-passenger luxury jet.
Last year the lawyers for the Southwest Exchange clients struck a deal for UBS Financial Services, a Switzerland-based financial institution, to pay the clients $23 million. Southwest had invested millions of dollars with UBS.
Among the latest settlements waiting to be approved is one for Citigroup Global Markets Inc., which runs the investment firm of Smith Barney, to pay $26.7 million. Southwest was once Smith Barney’s largest client in Las Vegas. Mark Dzarnoski, a defense lawyer representing McGhan, declined to discuss the criminal investigation, but said his client worked hard to help the parties reach the civil settlements. McGhan had previously turned over his assets to Southwest’s receiver.