Ginn/Lubert-Adler Lawsuits: Updates and Interesting Revelations
Ginn sur Mer lawsuit: Plaintiffs settle with Bill McCraken, founder of Ginn Securities and former executive of Colonial Bank.
Palm Coast, FL – November 23, 2010 – Recently filed documents reveal more details likely to play a role in the final disposition of lawsuits against real estate developers Bobby Ginn and Lubert-Adler. Watching a lawsuit unfold is like watching a chess match. Early on, the untrained eye is mystified by the thrusts and parries. Lawsuits are dismissed, delayed, or allowed to go forward over technical issues (venue, or class status) rather than the merits of the underlying charges. Each side seeks more information from the other. The other side resists. Some of the Ginn/Lubert Adler lawsuits have recently been dismissed. Others are moving forward. Here’s an update on two of them.Webb v Ginn Financial Services et al. [Third Amended Complaint]
This complaint charges that defendants conspired through fraudulent appraisals to artificially raise the selling price of lots in Ginn sur Mer, a $4.8B marina/casino/condo-hotel project on Grand Bahama. In a recent breakthrough, the defendants settled with co-defendant William McCracken. In a judicial Order filed Monday, McCracken was dismissed from the case "with prejudice." In return McCracken will make himself available for a meeting with Plaintiffs followed by a deposition.
McCracken was once an executive with Colonial Bank who reportedly arranged numerous Colonial loans to the Ginn organization. He later joined the Ginn Companies and subsequently set up Ginn Financial Services where he served as Senior Vice President. In that role, he assisted in the creation GFS’s Mortgage Division, which he headed until 2009. He was instrumental in defining the appraisal and lending practices used to finance Ginn sur Mer lot sales.
McCracken’s Stipulation (part of the settlement agreement) provided Plaintiffs with a description of mortgage loans to Ginn sur Mer lot buyers. Lubert-Adler (Ginn’s financial partner and the LA in Ginn-LA) funded portions of several mortgages. It seems clear that Lubert-Adler was much more than a passive investor.
Needless to say, the remaining defendants are not pleased that McCracken settled independently. Ginn attorneys immediately filed Emergency Motions to suppress McCracken’s deposition and potential turnover of any documents. Emergency Motions were also filed in related foreclosure defense cases with the same Plaintiffs. Ginn claims McCracken unlawfully retained several boxes of company documents when departing the company. Ginn claims these "stolen" documents should not be turned over to Plaintiffs. Clearly, Ginn’s attorneys want to forestall or prevent the deposition and the documents.
Plaintiffs’ attorney in turn filed an Opposition to Ginn’s Motion to Stay which reveals more enlightening information. The third amended complaint charged Defendants with appraisal fraud, among other charges. It detailed how defendants first approached Pomeroy Appraisal to perform appraisals for lot sales within GSM. Pomeroy was allegedly asked to meet a target price equal to the selling price of the lot. When Pomeroy did not agree to bend the rules, Ginn Financial simply engaged another appraisal company (W. Carver Grant Appraisal) that would comply with their directives.
Plaintiffs recently engaged Pomeroy to appraise the subject lots retroactive to the dates of purchase. The Pomeroy appraisal excluded consideration of infrastructure and amenities which were non-existent at the time the lots were sold. The following table shows the W. Carver appraisals used to underwrite Plaintiffs’ mortgages and Pomeroy’s retroactive appraisals. These figures are revealed in the Opposition to Ginn’s Motion to Suppress. The differences are stunning.
|
Lot |
W. Carver Grant Appraisal |
Pomeroy Appraisal |
Difference |
|
Lot 272 |
$1,000,000 |
$405,000 |
$595,000 |
|
Lot 104 |
$1,020,000 |
$405,000 |
$615,000 |
|
Lot 493 |
$750,000 |
$130,000 |
$620,000 |
|
Lot 270 |
$1,356,000 |
$405,000 |
$951,000 |
|
Lot 179 |
$886,000 |
$300,000 |
$586,000 |
|
Lot 46 |
$1,000,000 |
$405,000 |
$595,000 |
|
Lot 203 |
None |
$100,000 |
N/A |
|
Lot 261 |
$1,400,000 |
$405,000 |
$995,000 |
Dillworth v Ginn [Second Amended Complaint]
This case evolved from the $328M cash distribution to Bobby Ginn and Lubert-Adler from the proceeds of a $675M loan from Credit Suisse. The distribution left four Ginn-developed communities unable to meet the loan payment schedule. The subsequent default led to the Chapter 7 (liquidation) of two of the communities; Tesoro, in Port St. Lucie and Quail West near Naples.
As Plaintiff, Bankruptcy Trustee Drew Dillworth alleges the transfer was fraudulent; that the money should be returned to satisfy creditors. Both sides gave oral arguments at a November 18 hearing. The main issue to this point was discovery. Defendants argued that a Joint Defense Agreement endowed the Defendant group with client privilege.
What happens in the upcoming months in the several lawsuits will test defendants’ ability to stick together. Events often strain prior relationships. Parties to the lawsuit may decide to back away from co-defendants and make their own deals with Plaintiffs, as McCracken did. Immediately after McCracken struck out on his own by settling with Plaintiffs, Ginn charged that McCraken possessed stolen documents.
In Dillworth v Ginn, the defendant list includes dozens of high-profile institutional and individual investors in the Lubert-Adler Funds tied to the Credit Suisse "fraudulent" distribution. Among them are Harvard, Yale, University of Michigan, and pension funds. Through discovery, Dillworth hopes to learn if the investors received fund distributions from the alleged fraudulent distribution. Ginn and Lubert-Adler are also co-defendants and were party to the contested Joint Defense Agreement. The veil of the JDA has been pierced. Now the defense alliances will be tested.
There are rumors that the Lubert-Adler relationship with Bobby Ginn is already becoming more strained. The word (rumor) from Grand Bahama is that Lubert-Adler and Credit Suisse are now working together on GSM. Ginn’s name will be removed from the project. Ginn sur Mer was the last of the Ginn-LA projects retaining the once ubiquitous Ginn brand. A recent visitor to Ginn sur Mer reports that the golf course is basically completed but not playable. Some roads planned to be four lanes have only two completed. Bridges over some canals are not yet built. There were not homes being built. There were no recent registered lot sales.
Down but not out?
A GoToby.com reader emailed recently suggesting that Bobby may have a new partner; Gridiron Capital, LLC, a private equity firm headquartered in New Canaan, Connecticut. Among Gridiron’s portfolio companies is Yellowstone Landscaping Group, the same Yellowstone that acquired Austin Outdoor in 2009. Bobby Ginn was said to have owned half of Austin Outdoor.
Brilliant Report
Toby, You have done another brilliant job piecing together the puzzle of fraud and decepetion among Ginn, et al.
This issue will not go away anytime soon. I look forward to receiving your email updates. Please keep up the good work. You are doing an excellent job.
Update
Toby,
W. Carver Grant is a Bahamian based Appraisal and Survey company situated on Grand Bahama. You may want to enlighten readers who may not know who he is. I know these people well and they have no scruples. His wife Veronica Grant, a Bahmian Attorney created a title insurance company to perpetuate the fraud of the appraised lots. You may want to investigate further. I believe her company worked in conjunction with Stuart Title to flim flam investors into believing the land was free of any title defects. You know the rest. Will keep you posted. Please don’t post these comments. Thanks!
Great Job!!
Toby,
As always you do not disappoint. As these parties all start to split things will really unravel. It will be more interesting than ever! Please keep up the great updates.
Can you perhaps explain what this means though RE: the Dillsworth case:
"The main issue at this point is discovery. Defendants are arguing that a Joint Defense Agreement endows the Defendant group with client privilege. A judicial Order is likely forthcoming soon."
What does a Joint Defense mean and why is that so important to the defendants?
bobby sinn
well done .you guys are doin a FANTASTIC job God bless you !!!!!!!!!!!!!1
GINN LUBERT ADLER
Toby
Charlie here ,to let you know Iam trying to get law suit in SCOTLAND under a JURISDICTION CAUSE wE SIGNED PAPERWORK IN Britain SO we come under our law.If successful we can extradite these cheats and seize there assets,If any ONE WISHES TO GET FURTHER INFO CALL OR E ME .british bankers being taken to USA and jailed why not should do same .they are crooks but never saw this coming ,
REGARDS
C