Ginn-LA Bankruptcy Trustee Sues Austin Outdoor and Quail West Foundation [Restored Copy]

Quail West Foundation and Austin Outdoor named as defendants as Dillworth uncovers more alleged financial hanky-panky by Ginn and Lubert-Adler over Tesoro and Quail West bankruptcies.

This story was originally posted January 2, 2010. A technical problem brought the server down late in the day. January 2 postings and reader comments could not be restored. I’m reposting this important news story for those who did not see the story yesterday prior to the problem. I apologize for the inconvenience.  Toby

Palm Coast, FL – January 2, 2011 – Tesoro and Quail West Bankruptcy Trustee Drew Dillworth continues to seek recovery of funds allegedly transferred from Ginn-LA’s Tesoro and Quail West golf course communities prior to their bankruptcy. New lawsuits name Quail West Foundation and Austin Outdoor as defendants. The third amended complaint in the primary recovery lawsuit reveals more details. Among other revelations, it contains the first mention of disappearing club membership deposit fees.
Tesoro and Quail West were luxury golf communities in southern Florida developed by Ginn-LA entities. Their bankruptcy was the result of a $675 million Credit Suisse loan default. As Trustee, Dillworth is attempting to locate and recover funds fraudulently transferred from the bankrupted entities. Here’s a summary of ongoing litigation launched by Dillworth against Bobby Ginn, Lubert-Adler and related entities.
The term Debtor(s) refers to the bankrupted Tesoro and Quail West entities.
Dillworth v. Ginn – Third Amended Complaint – Fraudulent Transfer of $148,828,198.14 [filed 5/10/10]
The original lawsuit seeks the return of $148,828,198.14 from Ginn, Lubert-Adler Funds III and IV as well as several high-profile Lubert-Adler investors. The six-page list of defendants includes:
The funds were part of a $328 million distribution directly to Ginn and LA from the proceeds of a $675 million Credit Suisse loan. Dillworth alleges that the distribution rendered Tesoro and Quail West insolvent, ultimately leading to their bankruptcies.
The defendants claim that shared documents sought by Dillworth were protected by lawyer client privilege as a result of a Joint Defense Agreement was denied. The Third Amended Complaint filed December 30 reveals new information apparently gleaned from documents provided as a result of that ruling or through discovery.
Excerpted from the Third Amended Complaint:
Four US-based projects were "fodder" for the Bahamas Project
As Dean Adler himself explained, however, the opportunity was even more appealing insofar as it enabled them to use the 4 U.S.-based Projects “as fodder” for the Bahamas Project, which was viewed internally as the Project with the greatest potential for profit:
I would also point out that the 4 [U.S.] properties are giving the necessary credit to get a loan for [Ginn sur Mer] – there are no stand-alone lenders for the Bahamas. The reality is[] that we are taking the risk by taking 4 financeable properties and using them as fodder in order to get financing for the Bahamas. . .
Email, D. Adler to R. Rosenberg, 06/06/06, Forwarded to J. Brannon, 06/06/06, LA048225 – 048226 (emphasis added).
Ginn and Lubert-Adler allegedly used club membership deposit funds they were supposed to hold in an escrow account pending completion of amenities facilities.
Ginn and Lubert-Adler records reveal that, during the third quarter of 2006, total net revenues at Tesoro and Quail West – the most “mature” of the five Projects – were approximately 3% of previously forecasted amounts, due to “the lack of real estate sales.”
Shortly thereafter, Ginn and Lubert-Adler initiated discussions with Credit Suisse aimed at a restructuring of the loans, so as to enable compliance with certain financial covenants.
In addition, during the same period, Ginn and Lubert-Adler also consummated the first of a series of related party transactions in which the Debtors and Other Project Entities would sell undeveloped condominium parcels in bulk to affiliates in order to generate needed cash to “feed” the loans and fund development expenses.
Throughout that period and beyond, Ginn and Lubert-Adler also periodically invaded Tesoro Membership Deposits which they were obligated to hold in escrow pending completion of all “Club Facilities” – again, to “feed” the loans and fund development expenses.
Dillworth V.Ginn – Mitigation Credits valued at $408,000 [filed 9/17/10]
Quail West paid $408,000 for wetland mitigation credits related to development within the Quail West project. However, the agreement named mitigation agreement was executed in the name of Ginn Co., not Quail West. Ginn Co. has refused to turn over whatever interest it claims in the Mitigation Credits to Trustee Dillworth.
In June of 2005, contemplating that the Mitigation Credits would be required for the future development of the Quail West Property, Debtor paid $408,000.00 to purchase the Mitigation Credits from PIMB under a contract entitled Agreement for Sale of Mitigation Bank Credits (“Agreement”). A copy of the Agreement is attached as Exhibit A and fully incorporated into this Complaint.
When the Mitigation Credits were purchased, Debtor owned the Quail West Property.
The Mitigation Credits were needed to satisfy potential obligations imposed by the United States Army Corp of Engineers (“ACOE”) and the South Florida Water Management District (“SFWMD”) associated with development of the Quail West Property. The nature of the obligations imposed by the ACOE and SFWMD and the purpose of the Mitigation Credits are more fully described in the Agreement.
For reasons unknown to Trustee Dillworth, the Agreement was made in the name of Ginn Co., and not Debtor, notwithstanding the fact that Debtor paid all the consideration used to purchase the Mitigation Credits purchased pursuant to the terms of the Agreement.
Robert F. Masters executed the Agreement on behalf of Ginn Co.
At the time Mr. Masters executed the Agreement on behalf of Ginn Co., Mr. Masters also was the Manager of Ginn-Quail West GP, LLC, which was the General Partner of Debtor.
Based upon information and belief, the principals of Ginn Co. dominated and had control over the assets of Debtor, and caused Debtor to pay for the Mitigation Credits.
NEW – Dillworth v. Ginn – Fraudulent Transfer of $49,456,705. [filed 12/21/10]
Dillworth seeks recovery of roughly $49 million consisting of $31,947.006.46 transferred from Ginn-LA St. Lucie Ltd., LLLP (a Tesoro entity) to Ginn-LA Conduit Lender and $17,509.699.21 transferred from Ginn-La Quail West Ltd., LLLP to Ginn-LA Conduit Lender. The transactions occurred in May 2008, less than one year prior to the bankruptcy filing.
The purported “creditor,” Ginn-LA Conduit Lender, Inc., a Delaware corporation, was a shell entity created to facilitate the referenced “Credit Suisse lead secured loan” transaction, a transaction consummated approximately two years earlier in which the Debtors’ equity sponsors “recapitalized” and took hypothetical future “profits” out of the Tesoro and Quail West Projects, and three other luxury residential communities, on a cross-collateralized basis.
Ginn-LA Conduit Lender was formed shortly prior to the closing of that transaction, and became part of the corporate structure holding the assets of one of the three other communities, namely, the Ginn Sur Mer Project (a.k.a. the Ginn sur Mer Development), in The Bahamas.
 Notably, the Lead Debtors’ payments to Ginn-LA Conduit Lender in May of 2008 were not made – or used – to satisfy the Credit Suisse secured loan obligations themselves. They were made to satisfy phantom intercompany debts created for internal accounting purposes…
NEW – Dillworth v. Austin Outdoor – Fraudulent Transfer – Non-Arms Length Transaction Totaling $1,763,374.05 [filed 12/21/10]
Dillworth seeks recovery of funds received by Austin Outdoor related to a lease termination agreement in excess of what Austin would have received under provisions of the bankruptcy code. The lawsuit alleged that Austin Outdoor was beneficially owned by Ginn Companies.
In or around 2005, The Ginn Companies, LLC, acquired a 55% interest in Austin Outdoor. The Ginn Companies, LLC marketed this acquisition as a means of strictly managing its cost center with respect to its real estate projects.
Therefore, as of 2005 and through the Petition Date, the same people who owned, operated and controlled the Debtors – Ginn, Lubert and Adler – owned, operated and controlled Austin Outdoor. Thus, the Debtors and Austin Outdoor not only shared the same ownership and control, but also an identity of economic interests.
As a direct result of their close relationship, the Debtors and Austin Outdoor entered into a number of landscape management agreements and other transactions. However, and also as a direct result of their close relationship, these agreements were not made upon an arm’s-length basis.
Moreover, according to the Debtors’ principal’s sworn testimony in the Statement of Financial Affairs, Main Case D.E. 11, Austin Outdoor was an “insider” of the Debtors within the meaning of 11 U.S.C. § 101(31).
NEW – Dillworth v. Quail West Foundation – Fraudulent Transfer – Avoidance of Wire Transfers Totaling $458,255.00 [filed 12/21/10]
The Quail West Foundation is a not-for profit residential community property owner’s foundation established to operate and maintain a club at a high-end luxury golf and country club residential community located in Naples, Florida, commonly known as “Quail West.” The Tesoro Club LLC transferred a total of $458,255.00 to Quail West Foundation in three separate wire transfers. The transfers occurred within two years of the bankruptcy petition.
On or about December 10, 2008, the Debtor, The Tesoro Club, LLC, transferred the sum of $203,000.00 to the Foundation, via wire transfer.
On or about December 11, 2008, the Debtor, The Tesoro Club, LLC, transferred the sum of $203,000.00 to the Foundation, via wire transfer.
On or about December 12, 2008, the Debtor, The Tesoro Club, LLC, transferred the sum of $52,255.00 to the Foundation, via wire transfer.
The wire transfers described above are in the aggregate amount of $458,255.00 (collectively, “Transfers”).
With respect to the Transfers for which avoidance and recovery is sought in this adversary proceeding, the Foundation was an initial transferee or entity for whose benefit the Transfers were made within the meaning of 11 U.S.C. § 550(a)(1).
Motion for Order [filed 12/21/10]
In addition to the filing of the amended complaint and the new lawsuits, Dillworth filed a motion for entry of an order expanding the scope of employment of the law firm of Stearns Weaver as Special Litigation Counsel representing Trustee Dillworth to encompass the pursuit of the additional alleged fraudulent of $49 million. Harold Moorefield leads Stearns Weaver’s efforts in the above actions.

5 replies
  1. John Ell
    John Ell says:

    Ginn-La Bankruptcy

    Apropo of Mr.Ginn’s problems, there are probably many cliche’s that could apply, but one of the best might be: "though the mills of the gods grind slowly they grind exceeding fine".

    Several prior situations come to mind namely, the Hilton Head Is., bank problem; and equally serious, the attempted Flagler Beach annexation ploy.
    Many do no realize, and look upon the CCFB (Concerned Citizens of Flagler Beach) organization with disdain. The uninformed do not realize that it was through CCFB efforts that Ginn’s attempts to hoodwink the Commission in place, at the time, were foiled.

    The final cliche’ might be: "beware of business interests bearing gifts, or perhaps gifts bearing business interests.

    Imagine what would have happened to our little community if that annexation had been allowed to go forward.

  2. Ken
    Ken says:

    I think you should read the ruling

    The judge eviscerated the bankruptcy court opinion. His opinions on subsidiary guarantees and "value" are extremely germane to Trustee Dillworth’s assertions in his complaint.

  3. Toby
    Toby says:

    Reply to Ken

    The TOUSA ruling was based mostly on the issue of ”reasonably equivalent value.” I think that in the main case, Dillworth has shown that neither Tesoro nor Quail West received reasonable equivalent value.

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