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October 20, 2014

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Lender, developer accused of wrongdoing over stalled project

Sun blog

Allegations of fraud and conspiracy have been leveled against Aspen Financial Services in a new lawsuit filed by investors in a stalled Silverado condominium development.

Unlike two other investor lawsuits filed since November against Aspen and its owner Jeff Guinn, the latest suit alleges wrongdoing not just by Aspen, but by a developer, an appraisal company and a loan-control company allegedly involved in the project.

Aspen, as a hard-money lender, pools the funds of investors to finance development of projects like the condominiums at issue in the current case.

The Gorlick Family Limited Partnership and 16 other investors with Aspen filed suit Tuesday in Clark County District Court alleging irregularities in loans for the Milano Residences LLC project -- as well as allegedly questionable filings of deeds against the project, an allegedly inflated appraisal for the development and allegedly wrongly disbursed loan proceeds for construction work there.

Attorneys Aaron Maurice and Scott Taylor of the firm Woods Erickson Whitaker & Maurice LLP represent the plaintiffs. The defendants are Aspen, Guinn, developer Susan Mardian and companies she allegedly controls, the Britton Group, doing business as ROI Appraisal/Britton Group; and Nevada Construction Services, a division of Nevada Title Co.

Aspen's attorney, John Bailey, has declined comment for news stories on investor lawsuits against Aspen and Guinn. In one of the previous cases, he has argued Aspen is monitored by state regulators and has been found to be in compliance with Nevada lending regulations.

ROI declined comment Thursday, while Mardian and officials at Nevada Construction Services could not immediately be reached for comment.

The latest suit covers many of the allegations already leveled against Aspen and Guinn -- son of former Gov. Kenny Guinn -- in an earlier suit filed April 14 by investors led by Donna Ruthe.

Aspen, the investors in both cases charge, failed to represent their interests and failed to fully disclose problems and delays in the condominium project -- all allegedly while collecting substantial fees and allowing Mardian to file suspicious deeds against the project.

The development near Cactus Avenue and Bermuda Road was initially projected a few years ago to be worth $30.3 million, but is now worth only $3.8 million and needs another $9 million to be completed, the investors in the April suit said. The new lawsuit says ROI appraised it "as if completed" at $36.36 million.

"A review of the loan history on the Milano Property reveals that from July of 2004 through December of 2006 (a period of only 30 months) Aspen churned (through the brokering of six loans where Milano LLC was the borrower) $55,140,000 in loans using the Milano Property as security," the latest suit charges.

During the same period, the suit alleges, a company called Joshua Tree recorded three deeds of trust on the property totaling $11.5 million even though, the investors allege, Joshua Tree loaned no money to the project and provided nothing of value to justify the deeds. Both Joshua Tree and Milano are controlled by Mardian, a longtime friend of Jeff Guinn's, the investors allege.

The investors say the continual filing and extinguishment of deeds and the repeated issuances of new loans refinancing old ones -- using investors' money -- generated substantial fees for Aspen but failed to advance development of the project, which is now in default and sits unfinished. In all, Aspen collected $1.1 million in origination fees for the project as well as extension fees, but failed to turn the extension fees over to investors as required, the investors charge.

Investors say they were repeatedly misled by Guinn or that Guinn failed to make key disclosures about the project on such matters as the status of construction, Mardian's filing of questionable deeds, the use of investor funds to pay Mardian for her deeds, the impossibility of building the project with the funds left over after paying Mardian and about the project's loan-to-value ratio.

They also claim Aspen and Mardian's Milano company failed to monitor the project for construction liens, take care of the liens or disclose the liens.

They claim ROI provided an appraisal that had "no basis in fact" and that Nevada Construction Services made distributions from a construction account "for purposes other than construction of the project."

The investors also complain Guinn first delayed moving against Mardian for defaulting on the latest $19.24 million loan to help his family and friends -- and now is asking the investors to come up with $100,000 to pay for foreclosure proceedings on the property.

"It is alleged that Aspen did not want to foreclose on the $19.24 million loan because a number of the lenders on the Aspen loan in the second position (who would see their security eliminated by a foreclosure) were friends and family of Guinn," the suit charges.

"It is alleged that Aspen has no intention of going forward with the foreclosure on the Milano Property. Rather, Aspen intends to continue to stall -- delaying foreclosure indefinitely -- by claiming that it cannot proceed until it has first collected all of the foreclosure costs from the lenders," the new suit alleges.

In the latest lawsuit, the plaintiffs are seeking unspecified general and punitive damages as well as the appointment of a receiver to supervise their loans with Aspen.

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