‘Armed with these bogus appraisals, Credit Suisse duped the lenders into investing hundreds of millions of dollars in under-collateralized loans that eventually imploded,’ according to the plaintiffs.
Palm Coast, FL – July 22, 2013 – Highland Capital is reportedly behind a $350 million lawsuit against Credit Suisse according to Bloomberg.com. The lawsuit alleges that Credit Suisse conspired with appraiser Cushman and Wakefield to develop inflated appraisals of several high-profile resorts. They used the alleged bogus appraisals to dupe developers into taking huge loans. Investors, including Highland Capital, lost out when all the loans defaulted.
Read more about this latest lawsuit at Bloomberg.com
This is not the first lawsuit against Credit Suisse claiming that the International bank duped developers into borrowing huge sums backed by inflated appraisals. Among those burned by the loans was Palm Coast developer Bobby Ginn, along with his financial partner, Lubert-Adler (Ginn-LA). Other alleged victim resorts included Yellowstone Club, Tamarack and Lake Las Vegas, but the total count may be as high as 20.
The lawsuits fall into two categories. The first category includes lawsuits filed by developers against Credit Suisse and appraiser Cushman & Wakefield alleging fraud. Within this group, the developers are characterized as victims. Among these is a suit seeking $24 billion. It was brought by a member of the Blixeth family, developers of Yellowstone Club. That lawsuit, seeking certification as a class action, is ongoing.
But were the developers the victims? In nearly all of the CS loans, resort developers, with Credit Suisse’s encouragement, took a significant percentage of the loan proceeds as a direct cash distribution, rather than use the entire amount to further development of the uncompleted resorts. The resorts were left insolvent and ultimately faced bankruptcy, liquidation or foreclosure. The second category of lawsuit claims that these distributions were a breach of fiduciary duty; that the developer is the bad guy.
In the Ginn example, Ginn-LA received approximately half of the $675 loan as a direct cash distribution. Four Ginn communities were directly affected; Ginn sur Mer, Tesoro, Quail West and Laurelmor. Tesoro and Quail West were forced into chapter 7 bankruptcy. Bankruptcy Trustee, Drew Dillworth, sued Ginn and Lubert-Adler, alleging breach of fiduciary duty. The lawsuit was settled last November for $25 million, shortly before key Ginn-LA executives were scheduled for depositions.