Creditors still trying to recover money from Las Vegas businessman

By Steve Green

Saturday, Oct. 16, 2010 | 4:07 a.m.

Thirteen months after he was arrested on suspicion of defrauding investors out of millions of dollars, creditors are still trying to recover money and assets from Las Vegas businessman Jean Marc El Jwaidi.

They appear to be having only limited success.

That was illustrated Friday when the trustee in El Jwaidi’s personal Chapter 7 bankruptcy liquidation case in Las Vegas sued El Jwaidi, charging he has failed to provide requested financial information.

“Certain transactions occurred within the two-year period preceding the bankruptcy filing which caused a loss of assets to the estate or a deficiency of assets to meet the debtor’s liabilities. After request by the trustee, debtor has failed to explain the loss and/or deficiency,” charged the lawsuit filed by trustee William Leonard, one of the private trustees routinely appointed by the office of the U.S. Trustee to administer Chapter 7 cases.

The office of the U.S. Trustee is part of the U.S. Justice Department and, besides administering certain cases, serves as the watchdog over the bankruptcy process.

The trustee’s suit asks the bankruptcy court to deny El Jwaidi’s discharge from bankruptcy.

That means El Jwaidi would remain liable for debts that otherwise would be canceled, should the court grant the trustee’s request.

Besides the lawsuit, attorneys for Leonard filed an objection in the main bankruptcy case Friday to exemptions claimed by El Jwaidi. The exemptions are assets El Jwaidi maintains are off-limits to seizure for the benefit of creditors.

The exemptions challenged by the trustee cover a homestead exemption of an amount listed as “unknown” for a Summerlin-area home El Jwaidi values at $3.4 million at 525 Spruce Canyon St. Since El Jwaidi listed two homes on his asset sheet, it’s unclear which one he lives in and, in any case, the exemption should be limited, the trustee said.

Saying El Jwaidi didn’t provide enough detail to justify additional exemptions, objections also were lodged against his claims for household goods and furnishings ($10,000), checking and savings accounts (unknown); pictures, art and collectibles ($2,000), furs and jewelry ($1,500); and office equipment, supplies, furnishings, machinery and fixtures ($10,000).

A similar objection to the exemptions was filed earlier in the case by creditor Mustapha Assi, who through attorneys said El Jwaidi is believed to control assets through his wife and his wife’s sister that the trustee could seize and liquidate, including real estate, expensive jewelry, designer and custom-made clothing, multiple Hermes leather handbags worth more than $20,000 apiece, a bank account in Monaco and a “Vertu” cell phone valued at more than $5,000.

Whether the homestead exemption claimed by El Jwaidi will do him any good remains to be seen, as Bankruptcy Judge Linda Riegle has already authorized lenders to proceed with plans to foreclose on a home valued by El Jwaidi at $2.25 million at 114 South Royal Ascot Drive. That foreclosure sale could occur as soon as Nov. 1.

Another secured lender, in the meantime, is asking the court for permission to foreclose on the 525 Spruce Canyon St. property.

El Jwaidi, in his personal bankruptcy, listed assets of $6.273 million again liabilities of $31.2 million.

Those numbers don’t include assets of $28.345 million and liabilities of $26.392 million for his development company, Babuski LLC, which also filed for bankruptcy last year.

Babuski was liquidated after the bankruptcy court allowed Vestin Mortgage to foreclose on Babuski’s key asset: land at Russell Road and the Las Vegas Beltway that El Jwaidi told investors he would develop into a luxury shopping and mixed-use center.

A request for comment on Friday’s court filings was placed with an attorney who has represented El Jwaidi in the bankruptcy filings.

Records show that while several creditor lawsuits remain active against El Jwaidi, a criminal case alleging elder abuse, for which he was arrested, was “conditionally dismissed” in April under unusual circumstances.

Under a plea arrangement with the state, the charges were dropped when El Jwaidi paid $338,306 in restitution to two of the victims. That payment raised questions in the bankruptcy case, because other creditors potentially would have a claim for that money if it came from El Jwaidi.

But attorneys for El Jwaidi said, and trustee Leonard confirmed, that the money came from a benefactor who provided it as a gift intended solely so the victims in the criminal case could be paid and that case could be closed.

The benefactor was Tony Skayem, who owns a limousine company in Paris and confirmed the $338,000 he gave to El Jwaidi was a gift and not a loan.

“The trustee was told by Mr. Skayem and his counsel that the reason for gifting these funds to the debtor is not only because of his close relationship for a number of years with the debtor, but that he feels indebted to the debtor because the debtor has influential friends throughout the world and has utilized his friendship, connections and influence to help Mr. Skayem’s son, who has muscular dystrophy, obtain medical care that he would otherwise have been unable to receive,” a court declaration says.

The criminal case and some of the civil lawsuits and bankruptcy litigation involve loans El Jwaidi obtained from investors for the failed beltway shopping center project on 9.23 acres.

The criminal complaint alleged El Jwaidi scammed an elderly Las Vegas man who suffers from a diminished mental capacity out of $400,000 by promising to make the man an equal business partner.

In that case, state Securities Enforcement Division investigators alleged that evidence shows El Jwaidi engaged in a Ponzi scheme by raising as much as $80 million from investors to develop the shopping center called “PG Plaza.”

As described in a state search warrant that was part of the criminal probe, the marketing of PG Plaza included a two-page advertisement in 2008 in In Business Las Vegas, a newspaper read by many affluent individuals. In Business is a sister publication to the Las Vegas Sun.

The ad described PG Plaza as a 9.23-acre “Monte Carlo-style, open-air plaza” with 500,000 square feet of Class A office and retail space, luxury condominium units, a boutique hotel, a high-end grocer, a gym, five restaurants, multiplex theaters and 30 boutique shops on a streetscape modeled after Rodeo Drive in Beverly Hills, Calif.

Instead of developing the plaza, investigators say, El Jwaidi diverted most of the money to repay prior investors, cover gambling debts and support the lavish lifestyle of El Jwaidi and his family.

Besides initiating the criminal case, the Secretary of State’s Securities Division last year issued a cease and desist order to El Jwaidi, Babuski and associated companies and individuals JKG Property Management and Development, JKG Development, Clint R. Howard and John Serabia.

The order said El Jwaidi, his companies, and some employees had been selling securities in the form of short-term promissory notes.

The order said it was believed El Jwaidi employees were “engaging in acts, practices or a course of business which operates as a fraud in connection with the sale of securities.”

The order barred El Jwaidi, his companies and employees from acting as unlicensed sellers of securities and from selling securities that are unlicensed.

But Babuski and El Jwaidi insisted “PG Plaza” was a viable real estate development opportunity.

“Since the bankruptcy filing (on June 29, 2009), the debtor has worked tirelessly to locate funds to continue the development of its properties. At this time, the debtor is attempting to find post-(bankruptcy) financing which will enable it to complete the development of the properties. The debtor is confident that it will locate the financing required to sufficiently fund its reorganization efforts,” Babuski said in a court filing before its financing efforts collapsed and Vestin completed the foreclosure.