Whistleblower Emerges in $24 Billion Suit Against Credit Suisse, Cushman & Wakefield

Recently dropped RICO Charges against Credit Suisse and Cushman & Wakefield may be resurrected based on new information.

Palm Coast, FL – April 4, 2011 – A ruling handed down March 31 by Judge Edward Lodge of the U.S. District Court for the District of Idaho was a good news/bad news event for plaintiffs in a $24 billion lawsuit against international bank Credit Suisse and international real estate company Cushman & Wakefield. The good news was that Lodge confirmed most of a magistrate judge’s February preliminary findings by ordering Credit Suisse to stand trial on allegations of conspiracy, breach of fiduciary duty and tortuous interference. The way is cleared for class-action certification.
The bad news was the dismissal of racketeering [RICO] claims against both Credit Suisse and Cushman & Wakefield. But neither CS nor C&W should feel the least bit heartened by the RICO news based on information gleaned from recent documents filed in the case.
The lawsuit [Gibson v. Credit Suisse] seeks $24 billion for property owner plaintiffs. Nearly 3,000 investors bought land or homes at four luxury developments backed by massive loans from Credit Suisse, including Tamarack, Yellowstone Club, Lake Las Vegas, and Ginn sur Mer. The lawsuit claims Credit Suisse encouraged the loans based on wildly inflated appraisals performed for CS by Cushman & Wakefield.
The "Loan to Own" scheme was allegedly designed by CS to overburden luxury master-planned developments with massive debt allowing CS or a proxy to sweep in and pick up the pieces for cents on the dollar. The money backing the loans came from individual hedge fund investors. It was not Credit Suisse’s loss when the loans went bad. In fact, Credit Suisse earned huge fees along the way.
A former C&W appraiser Michael Miller has come forward as a whistleblower. According to a draft Declaration, Miller is prepared to testify to facts showing that C&W senior management was well aware of the implications of the Total Net Value or Total Net Proceeds method C&W employed to appraise the Credit Suisse-backed communities. Neither was compliant with the Financial Institutions Reform, Recovery, and Enforcement Act [FIRREA] or Uniform Standards of Professional Practice [USPAP] as required by law.
Credit Suisse, fortified with Cushman & Wakefield’s alleged fraudulent appraisals, turned master-planned communities’ debt into bond-type instruments. The cyclical nature of real estate does not lend itself to such a structured repayment plan. The communities were doomed to fail. They all faced bankruptcy soon after the loans were originated. The developers were unable to complete amenities promised to plaintiffs.
Further, Miller is prepared to testify to the existence of significant electric evidence documenting C&W’s activities. None of these documents could be found among the hundreds of thousands of documents submitted by C&W in an earlier Yellowstone Club Bankruptcy trial, prompting plaintiffs’ attorneys to suggest concealment. Fearing its possible destruction, plaintiffs’ attorneys have moved to preserve the evidence.
Expert Witness and Racketeering
The Plaintiff Class has retained one of the foremost FIRREA and USPAP experts in the United States. Based on new facts revealed by the whistle blower, the expert essentially describes the Total Net Value methodology as a premeditated criminal enterprise in violation of FIRREA and USPAP. These facts involve specific provisions within the Credit Agreements executed by Credit Suisse in the four loan transactions which mandated the application of FIRREA and USPAP; and that Cushman & Wakefield and its senior management knew FIRREA applied and requested indemnity agreements from Credit Suisse.
Judge Lodge dismissed RICO claims against CS and C&W because plaintiffs had failed to show that the actions of CS and C&W directly harmed property owner/plaintiffs. The judge left the door open for a revival of the racketeering claim if attorneys can show harm. The Tamarack and Yellowstone Club individual investors and owners have assigned their RICO claims and/or proceeds to the Plaintiff Class, reopening the door for an amended filing.
Unanswered Questions
  • Why did Lubert Adler and Bobby Ginn’s attorneys not pursue Credit Suisse and Cushman & Wakefield aggressively? Chapter 11 reorganization would have been preferable to liquidation (Tesoro and Quail West). Recently surfaced information suggests Credit Suisse’s foreclosure should have been vigorously defended.
  • How will evidence arising from Gibson v. Credit Suisse be employed to assist other litigation against Credit Suisse or Ginn-LA [Bobby Ginn and Lubert-Adler]?
  • Tesoro/Quail West Bankruptcy Trustee Drew Dillworth is suing Bobby Ginn and Lubert-Adler to win the return of millions of dollars distributed directly to Ginn and LA from the proceeds of their $675 million Credit Suisse loan. Will Dillworth wish he had gone after Credit Suisse instead of or in addition to Ginn and LA?
  • Will more lawsuits arise? One court document implies that Credit Suisse made similar loans to as many as 22 separate luxury resort developments.

3 replies
  1. Frank Lawton
    Frank Lawton says:

    This sounds all too familiar

    After reaeding this article, it all sounds too familiar – Lubert Adler, Ginn and Credit Suisse. They are the threesome that placed innocent homeowners into jeopardy not to mention the stupids that fell for the song and dance. Greed is disgusting and these creeps hopefully NOW will face justice. Cheers to the whistle blower!

    Thank you, Toby!

  2. Vern
    Vern says:

    Are the appraisal reports still on-line?

    Thanks for sharing this fascinating case, Toby. I recall seeing the appraisal reports posted on-line a couple of years ago but can’t find them now. Do you know of any place on the Internet that the reports can be read?

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