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StumbleLehman Brothers seeks millions in suit against Fontainebleau developer
Thursday, Feb. 11, 2010 | 5:50 p.m.
Carl Icahn
Sun Archives
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Fontainebleau
Bankrupt investment bank Lehman Brothers Holdings Inc. on Thursday sued Fontainebleau Las Vegas resort developer Jeff Soffer and one of his companies, seeking to recover hundreds of millions of dollars lent for the bankrupt Las Vegas hotel-casino.
Since the Fontainebleau Las Vegas project is being purchased by investor Carl Icahn for only $156.2 million, creditors owed some $2 billion are likely to recover little of what they are owed.
Lehman Brothers, however, in two lawsuits filed in Lehman's New York bankruptcy case Thursday, isn’t going after Fontainebleau Las Vegas.
Instead, the defendants are Soffer and his Fontainebleau Resorts LLC company. Lehman Brothers is seeking to enforce guarantees it says Soffer and Fontainebleau Resorts signed to obtain two loans for the Las Vegas project.
In one lawsuit Thursday, Lehman sought to enforce guarantees for a loan of $85 million to finance construction of the retail component of Fontainebleau.
"To date, no payment has been made to Lehman under the 'retail mezzanine loan,'" the complaint says. "The mezzanine payment guaranty allows Lehman to seek full repayment if the retail mezzanine borrower files petitions for bankruptcy."
The lawsuit says that with interest, $129.3 million is due on the loan.
Under a second loan agreement, $168.2 million is now due from Soffer and Fontainebleau Resorts, Lehman Brothers said in a second complaint filed Thursday.
Soffer and Fontainebleau Resorts LLC have not filed for bankruptcy protection. The Las Vegas entities that filed for bankruptcy protection included Fontainebleau Las Vegas and Fontainebleau Las Vegas Retail.
While Lehman Brothers seeks $298 million in its lawsuits filed Thursday, Fontainebleau Las Vegas Retail said in its November bankruptcy filing that Lehman was owed $228 million and that amount was "disputed."
"We are surprised at Lehman’s actions given its own behavior on this project," Soffer said Thursday in a statement. "Lehman’s bankruptcy and default on its obligation to fully fund the retail portion of the project forced us to have to seek outside funding at a time when the credit markets were frozen."
"While there are guarantees, we believe those guarantees are invalid and that we can readily show that they are invalid," Soffer said in the statement. "Lastly, we strongly believe that we have material counterclaims against Lehman."
Icahn hasn't indicated when he would resume construction on Fontainebleau, which was 70 percent completed when banks shut off funding and construction was halted last year.
Soffer -- based in Miami but known in Las Vegas for building high-rise luxury condominiums -- is involved in a separate lawsuit involving Lehman Brothers and Las Vegas.
Jeff Soffer and his sister, Jacquelyn Soffer, and three of their companies sued Lehman Brothers in February 2009, charging Lehman had reneged on part
of a commitment to provide $1.5 billion in financing for three projects developed by the Soffers' Aventura, Fla.-based Turnberry Associates development company, where the siblings are executives.
The projects were the Fontainebleau hotel-casino retail project, the 93-acre Town Square shopping center in Las Vegas and the Aventura Mall in Florida.
While the Fontainebleau and Aventura financings closed, Lehman Brothers failed to provide promised long-term financing for Town Square in Las Vegas, the lawsuit charged.
The Turnberry companies said the initial $520 million in Town Square construction financing was provided principally by Deutsche Bank. Development of Town Square started in 2004 and Turnberry later sought customary long-term take-out financing as well as an additional $100 million for the project, the lawsuit said.
The Soffers asserted in their suit that at the insistence of Lehman, they personally were the borrowers in July 2007 under a $95 million "interim advance" credit facility for Town Square, with the expectation that Lehman would later include the interim advance in permanent financing.
"Lehman has now made clear that it is refusing to honor its commitment to provide the permanent financing," charged the lawsuit, filed several months after Lehman filed for bankruptcy on Sept. 15, 2008.
But Lehman Brothers, in responding to the lawsuit, denied it made representations it would provide long-term financing for Town Square and filed a counterclaim accusing the Soffers of breach of contract for failing to pay amounts due under the loan -- $72 million -- when it matured Feb. 27, 2009.
The counterclaim also alleges Turnberry Retail Holding LP, one of the Soffer companies behind Town Square, had guaranteed the loan but also has failed to pay the balance due.
That lawsuit is pending in Lehman's New York bankruptcy case.
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Wait a minute! isn't a loan a promisary note? like our conversation on the drunken millionaire from Wisconsin. That means that the Lehman Bros. can get the DA and gaming control board to go after Jeff Soffer and threaten debtor's prison!! LOL!!! What a joke this whole thing is! are we supposed to take this stuff seriously?
New cottage industry for Vegas, lawsuit and bankruptcy litigation. It will stimulate the economy, if they win they will go to strip clubs.
You raise a good point, what happened with the guy who said he was kept drunk to gamble? I didn't see the outcome of that case.
There should be no government involvement in markers, why should casinos get special status? They won't do anything for anyone else to get money owed, the DA says it is civil.
Fountainebleu Resorts should contact Oscar Goodman. He can show them how to build an unnecessary building (as long as it will carry his name) with no money available. Even if your city (organization) is technically bankrupt, Oscar can show you how to build it!
ugly building
MORE NEVADA 'INVESTOR' STUPIDITY.
YoWzA!
I say GO LEHMAN!
These Southern Florida sharpies and the CORRUPT Nevada Politicos who let do this got it comin' baby...
I say GO LEHMAN!
I TOLD YOU ALL WEEKS AGO THAT I HAD $5 BUCKS RIDING ON THIS 'BLUE MONSTROSITY' BEING TORN DOWN IN A YEAR.
And there NEVER was any money to pay workers, pay insurance, pay taxes, or pay for ANYTHING else.
A REAL CON GAME.
Whaddid ah telllya.....
This is the Lehman Brothers that the government bailed out, right? The same company that defended it's million dollar bonuses, right?
the evil empire harrah's has corrupted the D.A. and Gaming Control Board into becoming its henchmen....i hope the feds put an end to debtors prison for gaming debts and investigate the modern day mafia connection between GOP Party Chair and crooked D.A. Bernie Zadrowski, the Gaming Control Board and Harrah's...
I agree Harrah's cheats and is the culprit of sin city...
Good luck with that..... while your at it try squeezing blood from a turnip, you may have more success.
wanna see how harrahs cheats by buying off corrupt judges, politicians, and the D.A.
check out this link regarding illegal construction and asbestos exposure at caesars for 20-plus years...
http://www.thebeargrowls.com/?p=602
HARRAHSCHEATS and eddie-bitton:
What does Harrah's have to do with this situation???? Your posts are totally irrelevant to the story at hand. Next time - Pay Attention!!!
woody3733 - Lehman did not receive a government bailout. That is also why the article states that Lehman is bankrupt, unlike the banks that received bailouts and paid it back (most of them anyway) at a nice lttle $1.1 billion profit for the feds.
Lehman has been bankrupt for about 16 months. Probably abother 160 months and the courts will finally finalize that bankruptcy. It's going to take forever.
This has been a soap opera of lawsuits and countersuits, in several different venues, for months now and there's no end in sight. Nor is there likely to be any cash in sight for any of the litigants. The attorneys, though, will clean up in billable hours.
Of greater concern to us here in LV is what Icahn plans to do with the "blue elephant". I've heard rumors that he's going to "mothball" it for a while, and I noticed just today that some of the missing windows on the facade have been sealed up with some sort of gray/white material (drywall?)
I have been following these events concerning Fontainebleau with great interest for awhile now. The litigation just continues to pile-on ! It is all very amazing to follow.
It would be interesting to know the number of gaming related legal cases that are pending in Nevada at present and the values represented in these suits (?). This economic downturn has done a job on your state. May you see better days sooner than later !