Credit Suisse conspired to impose "predatory lending practices" on the original stakeholders at Ginn Sur Mer, according to a U.S. court document, resulting in the crash of one of the country's most high-profile developments.
The Swiss multinational and property services firm Cushman & Wakefield are now in U.S. federal court facing $24 billion in damages from four luxury resorts.
The former Ginn Sur Mer development, the only plaintiff not located in the U.S., claims it was the victim of a "Loan to Own" scheme that artificially inflated the value of the resort project. The U.S. document, obtained exclusively by Guardian Business, sheds further light in a legal battle with wide-ranging implications for the hundreds of investors in a $4.9 billion "mega-mix" resort on the western tip of Grand Bahama.
In 2005, Ginn and the Bahamian government signed on to develop 2,000 acres of land in December 2005. The government provided concessions on import duties and stamp tax to simulate growth.
Comprising nearly 900 homes, two championship ocean-front golf courses, 4,400 condominium hotel units, two marinas and a casino, medical facility and a private airport expansion, investors allege the project was on track before Credit Suisse forced it into default in 2008.
Hundreds of millions had already been invested in the venture.
"This newly developed syndicated loan scheme was deliberately designed by Credit Suisse with the knowing assistance of Cushman & Wakefield in order to enrich Credit Suisse and its employees, while placing the resorts in a perfect position to be taken over by Credit Suisse and/or in collusion with its note-holders by leaving the developments too thinly capitalized to survive, precisely as Credit Suisse intended, planned and schemed from the beginning at each resort," the court document stated.
In essence, Ginn Sur Mer investors allege they were induced to borrow "unreasonably excessive amounts" based on inflated valuations. Credit Suisse, the document said, subsequently charged tens of million of "exorbitant" loan fees which eventually caused the project to become financially insolvent and fail.
Indeed, in 2008 Ginn Sur Mer and its subsidiary development defaulted on loans it took on after mortgaging the land to the tune of $276,750,000 in favor of Ginn-LA Conduit Lenders Inc. These rights were transferred to Credit Suisse.
Credit Suisse insists that the charges are baseless.
One of the plaintiffs in the case, L.J. Gibson, was an investor and property owner in the Ginn Sur Mer development. According to the court document, the plaintiff class "is so numerous that joinder of all members is impracticable".
Therefore, the plaintiffs, with approval from the court, proposed separate funds to be created for stakeholders in the four luxury resorts allegedly victimized by the bank.
"Included in said fund will be amounts reserved for payment of all unsecured creditors who have not been paid in connection with each resort whose developers have assigned their claims against the defendants to the plaintiffs class," the document said.
After Ginn Sur Mer went into default, the defendants allege Credit Suisse "wrongfully acquired ownership" and became "defacto" successor developer.
They go on to accuse the bank of refusing to honor the promises to continue work on the mega development by only completing infrastructure. It called this action "intentional, malicious and oppressive, and done for the purpose of causing injury and economic damage to the plaintiffs".
Stalled development and depreciation of land values resulted in losses running well into the millions for Grand Bahama investors.
Since then, although the legal battle remains, Credit Suisse has ended foreclosure proceedings on the property. In November 2011, the controlling title of Ginn Sur Mer was acquired by G-LA Resort Holdings (Bahamas) Ltd. The firm received 1,500 acres of land, an airport, helicopter pad, 632 unfished lots and associated development rights.
Meanwhile, Replay Resorts, a Canadian developer, has been hired to move forward to "re-engage the market and continue development of the residential component of the resort".
The developer claims it's now pursuing a far more organic and modest vision given the state of the global economy.
The other resorts seeking damages in the case against Credit Suisse include Tamarack Resort, Yellowstone Club and Lake Las Vegas.
Charges include racketeering, fraud, negligent misrepresentation, breach of fiduciary duty, conspiracy and breach of covenant of good faith and fair dealing.
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