Las Vegas lender prevails in class-action lawsuit

By Steve Green (contact)

Thursday, Feb. 11, 2010 | 7:25 p.m.

Las Vegas “hard money lender” Vestin Mortgage Inc. on Thursday said it prevailed in a class-action lawsuit filed by some shareholders in San Diego.

Vestin, the manager of publicly traded Vestin Realty Mortgage I Inc. and Vestin Realty Mortgage II Inc., said the California Superior Court ruled in favor of Vestin.

The lawsuit alleged that Vestin had engaged in a “roll up” when the companies merged the two funds into real estate investment trusts (REITs) in 2006.

The lawsuit claimed that dissenters, those who voted against the mergers, were entitled to roll-up rights.

Vestin is known as a hard money lender because it pools investors funds and loans the money directly to developers. These loans typically are for borrowers who can’t — or don’t want to — gain traditional bank funding.

Michael Shustek, chairman, chief executive and president of both REITs, said in a statement: “We are obviously very pleased with the court’s decision. When we began the merger process, Vestin engaged experienced and respected legal and accounting firms and followed the Securities and Exchange Commission procedures diligently. We were always confident in our position that the mergers were not roll ups and the court agreed with us.”

“This case continued for three and a half years and has been a significant expense to our shareholders,” he said.

“There is currently pending in Nevada a related case alleging essentially the same core claims that were made in the class action lawsuit. While the plaintiffs in the Nevada case opted out of the class action in favor of pursuing their own lawsuit, the claims arise from the same core argument — that the mergers resulted in a ‘roll up,’ giving the plaintiffs special rights. Now that a court has heard all of the evidence and ruled in favor of Vestin, the company intends to continue to vigorously defend the Nevada lawsuit,” he said.