Credit Suisse Sued Over Resort Failures
Should a lender be held accountable for a resort's failure? A class action suit may bring one answer. The Wall Street Journal reports on a suit filed by property owners at four resorts. The suit accuses Credit Suisse Group AG of predatory lending. The $24 billion suit was filed on behalf of over 3,000 homeowners and investors and includes Beau Blixseth, the son of former Yellowstone club owners Tim and Edra Blixseth. Yellowstone Club is one of the properties named in the suit, the others are Ginn Sur Mer in the Bahamas, the Lake Las Vegas resort in Nevada and the Tamarack Resort in Idaho. So far all of these properties except for Ginn Sur Mer have wrestled with bankruptcy. The plaintiffs have lost more than $8 billion in their investments.
Court papers accuse Credit Suisse and related corporations of wire and mail fraud, racketeering, money laundering and conspiracy all in the name of coercing developers to take out huge loans. The suit also takes on real-estate adviser Cushman & Wakefield Inc., saying that the firm aided the bank by creating property appraisals that inflated the value of the properties for sale. The suit says that the bank knowingly drove up the value of the properties, made massive loans and then charged exorbitant loan fees that it knew the resorts wouldn't be able to pay. The suit alleges that all this was done so the banks could take control of the resorts.
All of the resorts launched with very ambitious plans. When Tamarack was launched in 2003, tennis stars Andre Agassi and Steffi Graf were attached to the project and buyers committed more than $500 million for condos, houses and building sites. Former President George W. Bush visited the resort for a summer hike in 2005. But the town, which swelled to accommodate a future as a big resort town, is now facing massive unemployment and many of the structures created for the resort remain partially finished. Lake Las Vegas began with similar high hopes. The community offered a less glitzy retreat still within striking distance to Sin City. Luxury resorts moved in and real estate spiked. But as the Las Vegas real estate market plummeted along with Vegas tourism, the once prosperous resort began to face hotel foreclosures and stalled construction. The Yellowstone Club was perhaps the most famous of them all. It was a luxury enclave for the megarich, offering a woodsy retreat with the most exclusive and exquisite goods and services. Once a $155 million spec home was planned for the resort. Now the club has been sold off and the furnishings have been auctioned off as the now bitterly divorced former owners, Tim and Edra Blixseth try to sell off their remaining assets and pick up the pieces.