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Amended Filing of $24 Billion Lawsuit against Credit Suisse Reveals More

Amended complaint adds plaintiffs and provides more details of the Loan to Own scheme Credit Suisse employed to allegedly gain control of four luxury ski and golf resorts.

By Toby Tobin
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Palm Coast, FL – February 1, 2010 – Plaintiff's attorneys in a $24 Billion lawsuit against Credit Suisse Bank filed an amended complaint January 25, 2010. The amended complaint provides more details of the "Loan to Own" scheme Credit Suisse allegedly used to gain control of four luxury ski and golf resorts; Yellowstone Club, Tamarack, Lake Las Vegas, and Ginn sur Mer. The plaintiffs purchased properties at the four resorts. The developers are portrayed as victims also. What irony.
In a nutshell here is how the alleged scheme worked
  • In an unusual twist, Credit Suisse approached the developers; not the other way around. CS represented themselves as specialists in resort property lending. CS's co-defendant is Cushman & Wakefield, Inc. one of the world's most respected property management and appraisal firms.
  • Defendants represented that Cushman & Wakefield's appraisals and CS's loans complied with both federal and state laws and guidelines. In fact, CS set up a Cayman Island branch through which the loans were originated for the sole purpose of avoiding lending and appraisal standards enacted under federal and state law pursuant to the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). The Cayman Island Branch consisted only of a post office box address and letterhead stationary.
  • C&W then used a "Net Value" appraisal method rather than the standard "Fair Market Value" method, thus inflating the value of the appraised properties by hundreds of thousands of dollars.
  • After convincing the developers that their properties were worth much more than previously thought, CS encouraged the developers to borrow large sums of money. CS further encouraged developers' equity holders to siphon off a significant portion of each loan to themselves as a profit or equity distribution. CS called this an "Equity Recapitalization Loan Program."
  • The loans were syndicated to private investor groups, laying off the risk on them rather than on CS. For placing these loans CS collected tens of millions in fees. As "Loan Administrator" and "Lending Advisor" In these capacities, CS not only collected additional fees but also gained significant control over the financial dealings of the developers, a position from which they could influence the planned loan default.
  • CS did this knowing that the amounts borrowed (justified by illegal appraisals) were too much for the developments to repay and would eventually result in defaults. That is precisely what happened.
  • Once the loans came under default, CS arranged to have puppet or sham entities enter the picture as debtors in possession or administrators to take over functional operation of the resorts. It was an important part of the scheme that CS not becomes a successor developer. As successor developer, it would be obligated to all the promises made to those who bought property; the plaintiff class. Those promises included infrastructure and operating amenities.
  • Once the thinly capitalized "sham agents" default, SC would force bankruptcy. It could then sweep in and buy the assets for pennies on the dollar while, at the same time, severing contractual obligations of the original developer.
  • The scheme used the tag team approach with the "Capital Markets" team originating the loan, then turning it over to the "Risk Management" team which orchestrated the takeover of the resorts. One CS internal email referred to the scheme as "our gravy train."
When I wrote about this lawsuit after the initial complaint was filed, several GoToby.com readers expressed skepticism. They felt it was absurd to think the developers could be hoodwinked by a bank in such a massive scheme. The amended complaint provides additional details which suggest otherwise.
Lawsuits are generally not too exciting, but you really should read some of this one. The section on Lake Las Vegas starts on page 36 of the amended complaint. Tamarack begins on page 55. The Ginn sur Mer section starts on page 62 and Yellowstone Club on page 70.

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reader comments
Reply to John
Posted by Toby
Nov 16, 2013, 3:23 pm
I've heard only rumors. Also rumors about the balloon mortgages that Ginn Financial wrote for Ginn sur Mer being transferred to an institution possibly controlled by CS. If true, CS would be in a unique position when the loans become due.
bravo bankslayer
Posted by sam johnson
Feb 07, 2010, 10:34 pm
i have preaching to the word on the useless members only website for three years at reunion and with the exception of a few i have chastised over and over. when are these people going to open their eyes here and realize that bankruptcy is the only way to go forward.toby clearly defines what has happened in the past and these people here keep saying how nice and clean the shrubs are. keep up the good work
Credit Suisse
Posted by bankslayer
Feb 07, 2010, 9:05 am
Bleeding heart, you are clearly not a purchaser in Reunion, if you knew how people were defrauded and you were one of the them you would not take the attitude that you are. Some people just like to gloat and you are clearly one of them. You claim people who tried to buy as an investment and flip for a profit are greedy, isn't that following the 'American Dream' of trying to better your self. Is everyone who invest in stocks and shares greedy.
The land prices in Reunion were over-inflated by Fraudulent Appraisals this is clear in the Class Action Lawsuit, it is also clear that once they got the prices so high, let's take Legends Corner for example the prices went from $200,000 to $650,000 for a 55 foot by 140 foot lot, then the house prices were over-inflated by using comps that included Lease-backs and furniture packages built in to the mortgage and recorded as sales, this got the prices up to $2.5m for a house. What people didn't realize was that the homes had $350,000 worth of furniture and a $250,000 lease back, which meant $600,000 of the appraised value didn't exist and with the land values being over-inflated by $400,000 per lot in some cases that meant people paid $1m more than the home is worth. That is why homes in Legends Corner that were 'appraised' for $2.5m are now selling for less than $700,000 some are on offer for as little as $400,000.
Do not blame the buyers for being greedy, blame the Developer, the Banks and the Appraisers they are the guilty parties. All the money Ginn and Lubert Adler made and they still did not finish the Community and never will, they have had their profits and have moved on. The Community is teetering on the edge of Bankruptcy and with Reynolds in there doing nothing of any value, in my opinion Bankruptcy is inevitable and the only way forward for Reunion. Until it is rid of the stigma of Ginn, Lubert Adler and now Reynolds it can never move forward.
mr flipper
Posted by sam johnson
Feb 05, 2010, 2:41 pm
i bought here 6 years ago to use as a second home...i couldnt care less about the value.i dont have a mortgage,but i am entitled to comment on the reason this place is the condition it is now mr fliiper. unlike you i care about being lied to by a bunch of crooks and liars...like the bankslayer and toby have stated many times adler/ginn NEVER had any intention of finishing this place as per promises and gave our money directly to the investors with lubert/adler...i hope bankslayer is correct and the investors have to repay that money because it is dirty money. the ones who are crying are the people that keep saying how beautiful reunion looks because they cant face up to the real facts
property owner
Posted by Flipper Bleedinghard
Feb 05, 2010, 11:48 am
As a property owner in Reunion I want to say that I feel for the ones like me that bought to flip and got caught looking the other way when the real estate market headed south, but the owners that bought there as a true second home, hopefully, will be in a position to ride this thing out and will eventually see their values come back. It will take some time.

To the others like me that bought to flip and got caught, “SHAME ON YOU FOR THE CONSTANT WHINING” Once you admit to yourself that no one held a gun to your head and like me “GREED” played a big part in the purchases made by a lot of us maybe you will feel better. I SURE DO GET TIRED OF THE BABIES OUT THERE. If this does not pertain to you then I am sure you will not take it wrong.

“MAN UP’ and do something constructive with your life.
hope you are right bankslayer
Posted by sam johnson
Feb 05, 2010, 9:46 am
as a owner at reunion the greatest day would be to see adler/lubert/ginn in cuffs. i am NOT even looking for any financial reward. that would make my day. and then all the idiots at reunion that are still blaming the downfall of reunion on the economy can sell and leave reunion as well
RE: Bankslayer
Posted by John
Feb 05, 2010, 8:57 am
Thanks for the response. That would be interesting is the LA investors you mention have to give the money back. Of course, that is probably why there is a law suit against CS to hedge the liability. What a complete mess this whole thing is.

It would be great to see some of these guys in cuffs. It will be like shooting fish in a barrel.

It could start at the top and trickle all the way down. Hypothetically you could have the developer, some of his employees, the bankers, title agents, appraiser, CS lenders, etc. all serving time. Not to mention the borrowers who took out a "liar loan" and or overvalued their financial position. Lets not forget that those people are facing serious charges too.

Sounds like we may need some stimulus money to build more federal prisons!!!
Credit Suisse
Posted by bankslayer
Feb 05, 2010, 6:57 am
John to answer your question Lubert Adler owner 80% of every project and 50% of the Ginn Company, so the majority up to 90% of the profits went to Lubert Adler and its Investors. If these profits are deemed to be profits of a fraud then the Investors and Lubert Adler will have to pay the money back. That's when it will get interesting as their Investors are :- Harvard University, Princetown University, Philadelphia Police and Fire Department, Kodak, Wells Fargo and more.
I can tell you that there are Criminal Investigations ongoing and people will end up losing their freedom sooner rather than later.
They will not be allowed to get away with it and the Government will make sure that they are punished for ruining thousands of peoples lives.
amazing john but it seems to be true
Posted by sam johnson
Feb 04, 2010, 2:56 pm
it is sad that these crooks are not in jail as you stated. the only difference here from madoff is the majority of people who ginn/adler has burned are normal folks while the people burned in the madoff scheme were primary rich and super rich and thats why bernie is in jail. Here there is no need to prosecute because all the people affected are middle of the road folks...pretty sad to look at what ginn/adler/and now reynolds and noble have done to reunion. it a horrible state right now
Bankslayer
Posted by John
Feb 03, 2010, 8:42 pm
Where did the money go?

In your opinion where do you see all of this going? You have mentioned the big house for some of the top players based on fraudulent activity but is there anyone kicking over these stones that can prosecute? I certainly hope so but from what I have read, the authorities are not overly interested in this case or similar cases, at least from a criminal perspective.
Credit Suisse
Posted by bankslayer
Feb 02, 2010, 4:33 pm
In reply to White, firstly Bobby Ginn did not make the decision, that was Lubert Adler and they are not stupid, they basically sold their worthless inventory to Investors in a deal brokered by Credit Suisse for $675m. That was a great deal for Ginn-LA they sold when they knew the market had crashed. They had 3 failed launches and knew the writing was on the wall, so they leveraged everything to the hilt and never intended to repay these loans.
The Guys at Credit Suisse were good but Lubert Adler are on a different Planet and have been doing this for years.
Ginn-LA are the Kings of over-inflated Appraisals, I have over 150 Appraisals in Ginn Communities to prove it. There will be further revelations in the comings months, the Attorneys who filed this Lawsuit know nothing - YET!!
There is a lot of evidence in my possession that also proves Credit Suisse and Lubert Adler could even have been working together,either that or Credit Suisse were grossly negligent, but one thing is sure and that is Lubert Adler were not naive and were certainly not victims, how could they be when they have Billions from Ginn Communities and have left nothing but distress and unfinished Communities in their wake.
The real question is where did the money go and I have the answer.
Ginn not duped
Posted by Elaine
Feb 02, 2010, 10:16 am
From what I have read, Ginn bought Ginn Sur Mer property for $7.5 million in 2005. Several month later, the land appraises for over $600 million with no development. The only reasonable explanation I can see is that Ginn wanted his $333 million payday with the CS loan. It's shameful on the part of everyone involved. Bobby Ginn at the top of the list.
Reprive For Ginn?
Posted by T. White
Feb 02, 2010, 7:35 am
In light of this new information. it makes me re-evaluate the harsh finger pointed at Bobby Ginn and makes me wonder if maybe he's more of a victim than previously thought. I'm not a Ginn groupie by any means, but if Credit Suisse used an inflated appraisal and valued the property above market, then the claims of inflated prices may have been as much to blame on CS as anyone or anything? It just seems like their actions were destined to bring down any developer, and coupled with the real estate crash, may take a little bite out of the blame centered around Mr. Ginn. I may be off base, but it seems logical to say that a scheme like CS is accused of could be more at the root of the issues than some of the other conspiracy theories. Do you agree?
Question for Toby
Posted by John
Feb 01, 2010, 3:19 pm
Toby,
In reading your article, especially the part about the third party taking over ops & development after foreclosure, I couldn't help but think of the group that took over Reunion & Hammock Beach. The same group that purchased Laurelmor. Any knowledge of them being in bed with CS? This is very interesting. I was certainly on of the naysayers but I'm coming around.

 
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Don "Toby" Tobin is a licensed real estate professional affiliated with Grand Living Realty. Toby is a member of the Flagler County Association of Realtors®, the Florida Association of Realtors, Enterprise Flagler, Flagler Home Builders Association, and the National Association of Realtors.

GoToby.com proivdes real estate news, commentary, and analysis for Palm Coast and Flagler Country Florida, as well as Realtor® referrals and consultation to buyers, sellers, and developers.