Fraudulent Transfer Lawsuit against Bobby Ginn and Lubert-Adler Dismissed

Tesoro/Quail West Bankruptcy Trustee should probably have taken a different legal path, going after Credit Suisse rather than Bobby Ginn and Lubert-Adler.

Palm Coast, FL – April 20, 2011 – An Order filed Tuesday by Paul G. Hyman, Chief Judge of the U. S. Bankruptcy Court in the Southern District of Florida dismissed Fraudulent Transfer claims against Bobby Ginn and Lubert-Adler. The complaint had been filed by Tesoro/Quail West Bankruptcy Trustee Drew Dillworth on behalf of Tesoro and Quail West Debtors.  It sought to recover several million dollars disbursed to Ginn, Lubert-Adler, and LA’s fund investors from proceeds of a $675 million dollar Credit Suisse loan. Subsequent to the loan and transfer, Ginn’s Tesoro and Quail West developments were disposed of through a Chapter 7 (liquidation) Bankruptcy sale administered by Dillworth.
Judge Hyman dismissed the fraudulent transfer claim with prejudice (cannot be re-filed) because the Debtors in the bankruptcy case, whom Dillworth represented, "….did not have control over the Loan Proceeds, and consequently, the Loan Proceeds were not property of the Debtors." The Debtors were Guarantors, not Borrowers in the Credit Suisse Transaction.
Hyman left one small opening. He dismissed without prejudice a portion of the complaint addressing a Second Lien. This means the Plaintiff may re-file that issue within 20 days. However any recovery of assets is doubtful.
A question of strategy
Hyman’s questions Dillworth’s choice of choosing Ginn and Lubert-Adler as targets rather than Credit Suisse. A successful action against Credit Suisse might have resulted in the avoidance of the liens against the four Ginn-LA communities.  "….it is this Court’s view that the proper cause of action would have been avoidance of the Liens against Credit Suisse….and breach of fuduciary duty….Unfortunately, early in this bankruptcy, the Trustee elected to release Credit Suisse from any such claims in exchange for post-petition financing."
Case garners a lot of attention.
Bobby Ginn was a flamboyant developer who had previously gone through bankruptcy in Hilton Head, S.C. in the nineteen eighties. It seemed audacious for Ginn and Lubert-Adler to grab nearly half the loan proceeds, dooming to failure four luxury communities used as collateral. And by naming Lubert-Adler’s high-profile fund investors in the complaint, Dillworth exposed them. The list included several university endowments and scores of public employee retirement funds.
Credit Suisse made similar loans to as many as 22 developers of luxury communities; including Yellowstone Club, Tamarack, and Lake Las Vegas. All the loans were structured in a similar fashion. Discovery and depositions from other lawsuits against Credit Suisse have revealed a complex web of billions of dollars in loans, supported by allegedly fraudulent appraisals from Cushman & Wakefield, one of the world’s foremost real estate companies. A Cushman & Wakefield whistleblower has emerged in one $24 billion lawsuit [story] according to documents filed in the case.
Hyman’s order suggests that there are plenty of targets for lawsuits, but the outcome of these suits may depend more on whether or not plaintiff’s attorneys choose the correct targets than on the veracity of the underlying allegations. Like Dillworth’s lawsuit, some may fail as a result of tactical miscues. In some, one side might just "out lawyer" the other.

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