The Corporate Veil – How Many Corporate Identities Does a Company Need?
Developers set up separate legal entities to shield each project from the potential failure of another. Do they go too far?
Palm Coast, FL – August 24, 2009 – Real estate developers commonly set up separate legal entities for each project, ostensibly to protect the assets of a successful venture from the financial failure or misdeeds of another. Palm Coast’s largest real estate developers; WCI Communities, Crescent Resources, and Ginn all do it. It’s called the corporate veil. It protects the assets of corporate shareholders and LLC members from many types of claims against the company. It’s a legitimate practice, but do developers go too far. Does the practice amount to a corporate asset shell game?
Last year’s WCI bankruptcy included about 130 of its subsidiaries. Levitt & Sons’ 2007 bankruptcy included 37 subsidiaries. Crescent Resources’ recent Chapter 11 filing also encompassed about 130 subsidiary entities. A recent GoToby.com examination of Florida public records found 150 active entities tied to the Ginn organization (list below). Assets of seven of these were liquidated recently as a result of a Chapter 7 bankruptcy filing.
Crescent’s recent bankruptcy caught my attention since I live in one of their communities. In particular, I wanted to know who owned the Grand Haven Golf Course and Clubhouse, since I was told by a Crescent spokesperson as well as the President of the Hampton Golf, the management company operating the course, that it was not included in the bankruptcy. The public records are inconsistent on the ownership issue. I covered this in a previous article, but I’ve since discovered a 2007 ‘Membership Offering" that claims the facilities are owned by Grand Haven Golf Course, LLC, a Delaware corporation. This entity does exist, but so too does another, named Grand Haven Golf Course Holdings, LLC. Coincidentally, Grand Haven Golf Course Holdings, LLC was registered just days before Crescent’s bankruptcy.
The bankruptcy of Ginn’s Tesoro entities uncovered complications. One of the community’s sections, Tesoro Preserve, was sold by a separate Ginn entity, one not included in the Chapter 7 bankruptcy. Tesoro Preserve residents have a deed restriction requiring that they maintain a membership at The Tesoro Club, but the Tesoro Club was part of the bankruptcy. It was sold to West Coast Investors, leaving Tesoro Preserve owners in a sort of limbo.
The Tesoro bankruptcy prompted legal action by members seeking recovery of club member deposits. According to club membership offering documents, member deposits would be retained in an escrow account until amenities were completed. The promised Beach Club was never built, but the bankruptcy trustee was unable to locate any associated escrow account.
Buyers enter into a contractual relationship with the entity selling the development property, but buyers typically learn little about that entity. To what extent is the parent company obligated if the development does not produce what the buyer expected? Is the entity properly capitalized? Perception is reality. The creation of a labyrinth of corporate entities leads to a perception of a shell game whose sole purpose is to hide or disguise asset transactions. That’s probably why we have words like obfuscate [obfuscate verb; 1. to make dark or obscure 2. confuse].
Ginn legal entities identified on www.Sunbiz.org, Florida’s public record site include:
GINN AIRPORT GP, LLCGINN ALICO BEACH CLUB, LLCGINN-BALLYHOO GP, LLCGINN BATTLE LENDER, LLCGINN BATTLE NORTH, LLCGINN BATTLE ONE GP, LLCGINN BATTLE SOUTH, LLCGINN BATTLE SOUTH PERSONALTY, LLCGINN BELLA COLLINA GOLF, LLCGINN-BRIARROSE HOLDINGS GP, LLCGINN-BULOW GP, LLCGINN BULOW SHORES, LLCGINN-BURSKI GP, LLCGINN-CHARLESTON HOLDINGS GP, LLCGINN CHARLESTON MANAGER, INC.GINN CLUB MANAGEMENT, LLCGINN COBBLESTONE, LLCTHE GINN COMPANIES, LLCGINN CONSTRUCTION COMPANY, LLCGINN DEVELOPMENT COMPANY, LLCGINN DEVELOPMENT INTERNATION, LLCGINN FINANCIAL SERVICES, LLCGINN-GLADYS FORK GP, LLCGINN GOLF, LLCGINN-HAMMOCK BEACH GP, LLCGINN-HAMMOCK BEACH OCEAN GP, LLCGINN HOME SERVICES, LLCGINN HOSPITALITY, LLCGINN-HUTCHINSON GP, LLCGINN-JOSE PARK GP, LLCGINN-LA AIRPORT LTD., LLLPGINN-LA BALLYHOO LTD., LLLPGINN-LA BATTLE ONE LTD., LLLPGINN-LA BATTLE ONE A, LLCGINN-LA BATTLE TWO LTD., LLLPGINN-LA BRIARROSE HOLDINGS LTD., LLLPGINN-LA BULOW LTD., LLLPGINN-LA BURSKI LTD., LLLPGINN-LA CHARLESTON HOLDINGS LTD., LLLPGINN-LA CHARLESTON RIVER TOWNE, LLCGINN-LA CONDUIT LENDER, INC.GINN-LA CS BORROWER, LLCGINN-LA CS HOLDING COMPANY, LLCGINN-LA FUND IV CHARLESTON PP BELVIDERE, LLCGINN-LA FUND IV CHARLESTON PP BRIDGESIDE, LLCGINN-LA FUND IV CHARLESTON PP GOLF, LLCGINN-LA FUND IV CHARLESTON PP LAND, LLCGINN-LA FUND IV CUMMINGS POINT, LLCGINN-LA FUND IV PROMENADE, LLCGINN-LA FUND IV PROMENADE FBT, LLCGINN-LA FUND IV PROMENADE NORTH, LLCGINN-LA FUND IV PROMENADE WEST, LLCGINN-LA GLADYS FORK LTD., LLLPGINN-LA GRIMBALL FARMS, LLCGINN-LA HAMLET, LLCGINN-LA HAMMOCK BEACH LTD., LLLPGINN-LA HAMMOCK BEACH OCEAN LTD., LLLPGINN-LA HUTCHINSON LTD., LLLPGINN-LA JOSE PARK LTD., LLLPGINN-LA LAUREL CREEK LTD., LLLPGINN-LA MARINA, LLLP, LTD.GINN-LA NAPLES LTD., LLLPGINN LAND COMPANY, LLCGINN-LA OBB LTD., LLLPGINN-LA OBB, LIMITED – CORP.GINN-LA OCEAN TOWER, LLCGINN-LA ORLANDO, LTD., LLLPGINN-LA PALM BEACH GARDENS LTD., LLLPGINN-LA PINE ISLAND LTD., LLLPGINN-LA PLANTATION, LLCGINN-LA PROMENADE 990, LLCGINN-LA PROMENADE CC, LLCGINN-LA PROMENADE FBT 970, LLCGINN-LA PROMENADE SYS, LLCGINN-LA QUAIL WEST LTD., LLLPGINN-LA QUAIL WEST NON-CS ASSETS LTD., LLLPGINN-LA REUNION GRANDE & VILLAS PROPERTIES, LLCGINN-LA RIO LTD., LLLPGINN-LA ST. LUCIE LTD., LLLPGINN-LA TESORO NON-CS ASSETS LTD., LLLPGINN-LA TOWER & TESORO HOLDINGS LTD., LLLPGINN-LA UC GOLF, LLCGINN-LA UNIVERSITY CLUB LTD., LLLPGINN-LAUREL CREEK GP, LLCGINN LAURELMOR CONDOMINIUMS, LLCGINN-LA USVI GOLF, LIMITED LIABILITY LIMITED PARTNERSHIPGINN-LA WEST END LTD., LLLPGINN-LA WEST END, LIMITED – CORP.GINN-LA WEST FM LTD., LLLPGINN-WILDERNESS LTD. LLLPGINN-LA WSL LTD., LLLPGINN LIFESTYLE HOMES, LLCGINN LIFESTYLE GROUP, LLCGINN-MARINA GP, LLCGINN MARINE SERVICES, LLCGINN MINTURN INN, LLCGINN MLS, LLCGINN-NAPLES GP, LLCGINN-OBB GP, LLCGINN OCEAN TOWERS, LLCGINN ONE CLUB, LLCGINN OPEN, LLCGINN-ORLANDO GP, LLCGINN-PALM BEACH GARDENS GP, LLCGINN-PALM HILLS MANAGER, LLCGINN & COMPANY PARTNERS, LLCGINN-PINE ISLAND GP, LLCGINN PROPERTY MANAGEMENT, LLCGINN PURCHASING GROUP, LLCGINN QUAIL WEST BEACH, LLCGINN-QUAIL WEST GP, LLCGINN-QUAIL WEST NON-CS ASSETS GP, LLCGINN REAL ESTATE COMPANY, LLCGINN RESORT MANAGEMENT, LLCGINN REUNION BORROWER, LLCGINN REUNION GOLF COURSE, LLCGINN REUNION MEZZANINE, LLCGINN-RIO GP, LLCGINN SECURITY SERVICES, LLCGINN SEVEN EAGLES, LLCGINN SLIP ONE, LLCGINN SLIP THREE, LLCGINN SLIP TWO, LLCGINN SOUTH VILLAGE, LLCGINN SPORTS ENTERTAINMENT, LLCGINN-ST. LUCIE GP, LLCGINN SUR MER CLUB, LIMITED – CORPGINN TECHNOLOGY GROUP, LLCGINN TESORO GOLF, LLCGINN-TESORO NON-CS ASSETS GP, LLCGINN TITLE SERVICES, LLCGINN-TOWER & TESORO HOLDINGS GP, LLCGINN TRIBUTE, LLCGINN-UNIVERSITY CLUB GP, LLCGINN USVI GOLF GP, LLCGINN-WEST END GP, LLCGINN-WEST FM GP, LLCGINN-WILDERNESS GP, LLCGINN-WSL GP, LLCHAMMOCK BEACH DISCOVERY CENTER, LLCHAMMOCK BEACH II, LLCHAMMOCK BEACH III, LLCHAMMOCK BEACH RESORT CO., LLCHAMMOCK BEACH RESORT MANAGEMENT, LLCHAMMOCK BEACH RIVER CLUB, LLCHAMMOCK GP, LLCTHE TESORO CLUBTESORO BEACH CLUB CONDOMINIUM, LLCTESORO GOLF CLUB CONDOMINIUM, LLCREUNION RESORT MANAGEMENT COMPANY, LLCTHE REUNION CLUB OF ORLANO, LLCBecome a Member of GoToby.com: Receive email notices of news, rumors, newsletters, and articles. [click here] It’s free.
Golf "Communities"
Perhaps the marriage home and golf/country club is destined for the divorce courts as developers have manipulated home buyers into believing they’re getting a good deal when the reality is they’re left to pay the bills long after the developers have departed.
Ginn is especially pernicious. Even though there was ample evidence he couldn’t be trusted long before he showed up in Flagler, county, Palm Coast & Flagler Beach officials couldn’t fawn over him enough.
It was only a concerted effort by a handful of Flagler Beach residents that prevented us tax payers being left with the debts Ginn would have piled up had succeeded in annexing practically all the land west of the river, east of I95 south of Rte 100 to FB for his grandiose resort. We didn’t get off scot free. The current occupants of city hall saddled taxpayers with a debt of millions to pay for a water/sewer facility built to accommodate the now moribund Ginn project along John Anderson approved by the county.
Even now, if Ginn came back waving a fist full of dollars, they’d all fall for his flim-flam all over again.
Corporate Veil
Only one word defines the Corporate Veil,Crooks.