Receiver: LV firm’s title woes worse than expected

Kevin Rademacher

Tuesday, Feb. 15, 2005 | 10:46 a.m.

After more than a year in control of the Global Express investment operations, the court-appointed federal receiver said it will be at least another year before a tangle of problems is sorted out.

In his second formal report filed with the U.S. District Court in Las Vegas, receiver James Donell said progress is being slowed primarily by a series of title problems on the investment properties in which Global and its investors owned a stake.

"As a result, the receiver has encountered severe title problems which must be corrected before these properties can be sold with title insurance to a new buyer," the receiver's report said.

Reached at his Los Angeles office, Donell described the title issues as "nightmare problems."

"These are the worst title problems I've ever seen," he said. "You would think they would have some expertise in that area ... I would expect we will probably spend the rest of the year getting this solved."

In addition to slowing the process for closing the estate, Donell said that sorting out the title issues would create unnecessary costs that are ultimately incurred at the expense of investors.

"There are going to be thousands and thousands of dollars in fees that could have been avoided," he said.

The same report also spells out, for the first time in court, speculation on the part of the receiver that investments were taken for loans that do not exist.

Donell said that the receiver was unaware of the loans until he began receiving calls from investors with questions about the five loans in question.

"The receiver has determined that these five loans ... never concluded and do not exist," the report said. " Based on the information obtained by the receiver it appears that the individuals that invested in these 'nonexistent' loans will suffer substantial losses as there is no known security for their investments," the report said.

The loans were purported to be backed by land in Bishop, Calif., Rancho Mirage, Calif., Utah and Las Vegas.

The report was accepted by U.S. District Court Judge Kent Dawson last month over the objection of Connie Farris, who controlled Global Express.

An objection filed by Farris' attorney, Richard Schonfeld, said that the receiver in his report was merely reciting back allegations made in the original complaint.

"Such a recitation of allegations, that have not yet been proven and for which discovery is still pending, is unnecessary and inappropriate," the objection said.

The objection also claimed that while the receiver originally blamed Farris for delays, "he now acknowledges that Ms. Farris met with the receiver on two separate occassions to answer questions of the receiver. The receiver also acknowledges that Ms. Farris turned over numerous files and documents to the receiver.

"This is just an example of a previous misstatement of fact that has now apparently been corrected. Nevertheless, it demonstrates that a recitation of unproven allegations is inappropriate," the objection said.

In a December 2003 lawsuit against Global filed by the Securities and Exchange Commission, the SEC claimed that the company and its subsidiaries were operating a "Ponzi-like" investment scheme. That original lawsuit estimated that Global's Real Estate Investment Fund I had 600 investors who had contributed $48 million. The assets of the fund have been estimated at about $10 million.

In the report, Donell said that, as of Nov. 15, the receiver had received 883 claims against Global totalling $53.9 million.

Last week Donell said that the process of determining how many of those claims are valid is under way. He added that the receivership estate has already recovered about $2 million from the sale of property and expected to recover a total of $10 million to $12 million.

Until the number of valid claims are determined, he said it is impossible to determine what will be available for investors.

"I don't know," he said.