Published Friday, July 16, 2010 | 6:38 p.m.
Updated Friday, July 16, 2010 | 7:22 p.m.
- Henderson files objection to Lake Las Vegas bankruptcy plan (5-26-2010)
- Lake Las Vegas proposes bankruptcy plan (9-5-2009)
- Judge approves bankruptcy for Lake Las Vegas golf course (6-29-2009)
- Another golf course to close at struggling Lake Las Vegas (6-25-2009)
- Lake Las Vegas can abandon golf course, judge says (1-15-2009)
- Judge: Lake Las Vegas golf course should be shuttered (12-22-2008)
Lake Las Vegas emerged from bankruptcy protection Friday and its creditor trust promptly filed scores of lawsuits to recover funds for creditors, including a $470 million claim against former insiders.
The emergence from bankruptcy was expected following the June 21 verbal approval of the community’s reorganization by Judge Linda Riegle.
The plan generally allowed the development’s lenders, led by Credit Suisse Group AG, to convert a portion of their loans to Lake Las Vegas into a controlling equity interest in the 3,600-acre, 1,600-home development and to recover some of the money lended to the resort by suing the former insiders.
“This is an extraordinary result,” Frederick Chin, CEO of Lake Las Vegas and founder of The Atalon Group LLC said in a statement. “The homebuilders, creditors, residents, homeowner groups, vendors, and the city of Henderson worked together to preserve the integrity of the community, resolve a multitude of complex issues that hindered its continuation and establish a platform for the future that enhances the objectives of property owners, homebuilders, lenders and local government.”
The complaint against the former insiders was also expected. Lake Las Vegas disclosed during the Chapter 11 bankruptcy case that it intended to sue scores of individuals and companies it claims drained the community of equity and caused the 2008 bankruptcy.
Friday’s main complaint named as defendants original Lake Las Vegas developers Transcontinental Corp. and Texas billionaires Lee Bass and Sid Bass, and others.
The defendants haven’t yet responded to the complaint, but Transcontinental has argued it was Credit Suisse that doomed the community to bankruptcy when it provided what critics call a predatory loan and made it possible for the insiders to withdraw the $470 million as an equity distribution.
Transcontinental has charged the entire bankruptcy case was a sham because it says Credit Suisse was both the main debtor and creditor.
It claims that after Credit Suisse provided a $670 million predatory loan to the property during the economic boom and encouraged the owners to withdraw much of their equity, Credit Suisse then effectively took over the development.
While not named as a defendant in Friday’s complaint, the lawsuit charges a third billionaire Bass brother, Robert Bass, received some of the equity distributions.
William Hallman, a longtime attorney for the Bass family, is named as a defendant and, according to the lawsuit, received distributions.
A spokeswoman for Robert Bass has said he never invested in Lake Las Vegas and was surprised to be named during the bankruptcy case as a potential litigation target.
Another Texas billionaire, Richard Rainwater, was named as a potential litigation target during the bankruptcy case. But he is not mentioned in Friday’s lawsuit, filed in U.S. Bankruptcy court in Las Vegas.
Besides alleging the insiders engaged in “fraudulent transfers” totaling $470 million, the lawsuit alleges further wrongdoing.
“Plaintiffs’ review of Lake Las Vegas’s affairs has uncovered accounting irregularities and improper practices in which Lake Las Vegas’s management materially misstated the company’s true financial condition,” the complaint says. “Certain of the insider defendants appear to have engaged in an orchestrated campaign to destroy documents and ‘sanitize’ the computer files as they were handing over the reins of the company at the end of 2007. As the controlling shareholders were also preparing to exit the company, they also caused Lake Las Vegas to make several million dollars in voidable preference payments to companies they owned or controlled.”
Also Friday, mostly routine “preference lawsuits” were filed by the Lake Las Vegas creditor trust against Textron Financial Corp., Sysco Corp., Stewart Title Guaranty Co., Sierra Health & Life Insurance Co., RSVP Party Rentals, Protivity, Par-3 Landscape & Maintenance, NV Energy, Nike, LasVegasGolf.com, Helena Chemical Co., Guaranty California Insurance Services, Gaal Contracting, ESD Waste 2 Water, Douglas Parking, D & K Foods, CBS Outdoor, Brennan & Associates Risk Management and Insurance, Ameron International Corp., AICCO Inc., General Electric Capital, Wood Rogers, Employers Insurance Company of Wasau, Vision Building Rentals, Verizon Communications, U.S. Foodservice, United Meat Co., Crop Production Services, Turf Equipment Supply, Southwest Gas Corp., Pacific Lighting, Outdoor Solutions, Haycock Petroleum, Gene’s Maintenance Services, Excell Janitorial, Callaway Golf, Burberry Ltd., Boulder Auto Parts, B2 Developer Services, Embarq and an entity called MIRANDA.
The preference suits, which are common in bankruptcy cases, seek to recover funds Lake Las Vegas paid to creditors during the 90 days before it filed for bankruptcy — the theory being that all creditors may have a claim against those funds.
“As a result of the transfers (payments), defendant received more than it would have received if: (I) the debtors’ cases were under chapter 7 of the Bankruptcy Code; (ii) the transfers had not been made; and (iii) defendant received payment of their debts under the provisions of the Bankruptcy Code,” these lawsuits say.