Draft Lubert-Adler Memo Confirms Motives Behind $675M Ginn-LA Loan from Credit Suisse

The loan allowed Bobby Ginn and LA investors to remove guarantees and ‘harvest’ profits from five projects, leaving each liable for the entire loan amount.

Palm Coast, FL – September 20, 2010 –There are at least three lawsuits sniffing into multi-million dollar loans made by Credit Suisse to luxury resort developers. Two of them involve CS’s $675M loan to Ginn-LA (Bobby Ginn and financial partner Lubert-Adler). Recent court documents peel away more layers of the Ginn-LA/Credit Suisse $675M loan details. A Draft Memo from Lubert-Adler to investors reveals the motives behind the loan.
The memo explains that $333,125,000 of the $675,000,000 loan proceeds would be available for distribution. This distribution would result in:
  • "The immediate mitigation of 100% of the capital risk, through the repayment of all invested equity and bridge funding(s);"
  • "The removal of all guarantee exposure to Bobby Ginn, Lubert-Adler Fund III and Lubert-Adler Fund IV, because the facility is non-recourse, thereby allowing the JV (joint venture) to pursue the harvesting of profits with no risk of capital loss;"
  • "Accelerate profit distributions……"
The CS credit facility replaced existing financing that was recourse to Bobby Ginn and Lubert-Adler with a loan that was "no risk" to them but full recourse to the five communities cross collateralizing the loan.
The memo further discusses the added risk assumed by each community under the CS loan. Prior to the loan, each community was independent of the others and funded individually by LA and borrowings. Profits ultimately were derived from future lot or condo sales. By cross collateralizing, each community was jointly liable for the full amount of the loan, even though half the loan proceeds never went to the developments and each development received the benefit of only a fraction of the total loan. The subsequent loan default resulted in the forced sale of one community, the Chapter 7 bankruptcy of two others, and a foreclosure of a fourth.
The Bailey v. ERG Enterprises (Edward Robert Ginn) lawsuit alleges that Ginn and LA knew that the real estate market had considerably softened prior to closing the 2006 loan. GoToby.com’s analysis of the Palm Coast market shows clearly that sales began a precipitous fall in mid-2005, one year before the loan closed. Surely a large developer would have noticed.

residential home sales in palm cost and flagler county by GoToby.com

CS closed similar loans with a handful of other developers; Lake Las Vegas, Yellowstone Club, and more. Nearly all the loans featured similar "advanced profit distributions."
A recent lawsuit by Crescent Resources makes similar claims against former parent company Duke Energy. That lawsuit charges that Duke Energy took over $1.2B in fraudulent distributions while saddling Crescent and its subsidiaries with massive debt as the real estate market headed downward.
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11 replies
  1. Rich
    Rich says:


    What implications, if any, does this have on other suits against Ginn such as the class action one filed in Federal Court in Florida whose defandants include Ginn, Fifth Third, Luther Adler, Wachovia, and others? Is this finding admissable and relevant to that case and others?

  2. Frank
    Frank says:


    All of them……crooks and they can CTA’s just so long. Outright greed, entitlement and arrogance. By the time we "saw" it in them, it was too late and our neighborhood in SC remains struggling. Hopefully every one of the bums get what they deserve! Maybe Bernie has room in his cell.

  3. richard
    richard says:


    Why are you going after Bobby Ginn?
    It is pure capitalistic system,is it not?
    Ginn and his buddies cashed out like any other would, bank made loans knowing facts?
    Do you have any issues with Ginn or other real estate developers?
    Buyer should me more educated and understand market, it could been other than Ginn, any real estate developments are heading down after Boom, all over the world including Florida!
    I am not sue, why you always picking on Ginn, under same situation, I would done the samne, if I could, I just did not have same situation, power, infulence and/or etc.
    Ginn is in business to make money and other average Joe just did not understand real game?
    Without Ginn all over the world is in same situation today, Ginn or Bush did not creat real estate problems?

  4. Rich
    Rich says:

    Yellowstone Ruling

    If it is possible to provide a simple answer, what precedent does the Yellowstone case provide that would be relevant to the Ginn case alleging fraud, collusion with appraisers and banks, and even RICO charges? Does that case ruling give Ginn and the banks less "wiggle room"?


  5. Dan
    Dan says:

    Pure CapitalistSystem

    That description in the response from one of your readers is a perfect description of a pure fraud, deceit, and deception system. None of the practises he described have anything to do with a pure capitalist system, unless you want to go to jail.

  6. Toby
    Toby says:

    Reply to Rich

    There haven’t really been too many ”rulings.” But I do think the tide may be turning. In the early rulings, lawsuits against Ginn-LA were thrown out on technicalities like venue or class action status. But later suits have been better crafted to go to the heart of alleged misdeeds. Challenges have been granted arbitration, etc. Attorneys are taking advantage of facts (and rulings) submitted in other lawsuits to bolster their own case. The Yellowstone Club case is monumental. It found Credit Suisse ”equally at fault.” You WILL see this supportive ruling in future lawsuits.

  7. Toby
    Toby says:

    Reply to Rich

    I am not a lawyer, but I asked one. I was told that this is not a finding. It is a document filed as an exhibit in a case. It could be relevant to and used in other cases, depending on the facts and issues in those cases.

  8. Toby
    Toby says:

    Reply to Rich

    Again, I defer to my attorney friend who says – It was a ruling. And it’s not a simple answer as to what parts are applicable. Suffice it to say Ginn can’t be happy the ruling is out there. However, Ginn was not a party to that suit, so the ruling does not by itself establish liability on the part of Ginn.

  9. Toby
    Toby says:

    Reply to Rich #3

    My answer was regarding the Yellowstone Club rulings. My attorney source says that because Ginn was not a party to that lawsuit, the ruling does not by itself establish liability on the part of Ginn.

    Speaking for myself as a non-attorney – I can’t help but believe that the Yellowstone Club ruling will spawn additional lawsuits against Credit Suisse as well as against developers who ‘harvested’ profits. The type of information discovered in Yellowstone will be a beacon to followers as to where to look for any smoking guns.

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