Cosmopolitan Las Vegas Project Faces New Lawsuit

by Deidre Woollard (RSS feed)
Jul 20th 2010 at 8:01PM

More bad news for the beleaguered Cosmopolitan project in Las Vegas. Earlier this year we learned that some buyers in the project would be given refunds. Now a new lawsuit filed last week takes issue with the decision of the developers to turn the Cosmopolitan into a hotel-only development rather than the condo-hotel project it originally was. The suit was filed on behalf of three individuals who placed deposits towards condominiums at the Cosmopolitan of Las Vegas and alleges that Deutsche Bank, Nevada Property 1 LLC, Nevada Voteco, LLC, 3700 Associates, LLC, and KO Realty Group knowingly committed fraud and conversion, concealing and suppressing facts in order to steal escrow deposits.

"Deutsch Bank and their partners in this venture have been caught red-handed, capitalizing on the recession to steal nearly $100 million in escrow deposits from individuals who bought into the Cosmopolitan of Las Vegas," said Dan Park, lead counsel for the Plaintiffs in a statement. "It's no secret that they have no intention of building the condominiums, as promised, and are playing with people's livelihoods instead of returning money that rightfully belongs to them."

The Cosmopolitan of Las Vegas is set to open in December. The project has not recorded a subdivision map with Clark County showing any condominium units. he $3.9 billion project will include nearly 3,000 rooms, a casino, spa, nightclub and retail space. The Casino City Times reports that the plaintiffs in the newest lawsuit paid 20 percent deposits on units and have not agreed to the times of other settlements. Deutsche Bank bought the project for $1 billion when it was half-finished after its original developer and owner entered foreclosure proceedings.

Tags: cosmopolitan, las vegas, las vegas casino, las vegas real estate, las vegas real estate market

Filed under: Luxury Travel & Hotels, Real Estate Developments

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Reader Comments (Page 1 of 1)

gambler Jul 20th 2010 9:43PM

This casino is a disaster waiting to happen. Not only are they charging exorbitant rates for a resort run by a bunch of unknowns, but they have set up a 3 level casino! Whoever heard of having a casino on 3 floors? Yeah, I want to trek up and down escalators all night after I’ve had a few drinks. These germans are real geniuses.

lsmp Jul 21st 2010 12:04AM

* Why can't banks just lend and save wrote:

Once again Big Business, a foreign bank at that, figures out a way to make money by failing to perform on a contract. The deep pockets ability of large firms to keep legal due process from occurring should be a wake up call to Americans everywhere. This is not about just another group of property purchasers losing monies on a investment NO this is about how big business has figured out one more way to take advantage of not only their “too big to fail status” but their belief the Bank is “TOO BIG
TO BE BEATEN BY THE LITTLE GUY IN THE EYES OF THE LAW”. Hey, maybe Deutche Bank is right about not living up to contractual requirements after-all Deutche was rewarded for this behavior by retaining nearly 100 MILLION American dollars by frightening investors into giving back their units at a huge loss of deposit monies. Funny, Deutche did not even have a plan filed with the building department showing any Condo’s being built on the site rather it only showed a hotel. I can only imagine the executives at Deutche laughing all the way to the bank. Oh wait, they only needed to go downstairs.

Nevada law requires condominium projects of this size to be subdivided. At this time, only 6 months before an announced grand opening Deutche does not even have an approved subdivision map with the building department. Do not let the Deutche bank spin machine fool you about who is getting the shaft here. Maybe yesterdays motto of “It’s just business, It’s nothing personal” might just apply here.

One more loop hole found by endless amounts of legal dollars spent by a giant corporation. America BEWARE, this is not the first or last time big business will beat up on the little guy. The time of hit men is mostly over it is now the time Giant Corporations use the legal system
to reap huge profits by failing to meet even their most basic legal requirements. After all, how many of us can afford to sue a giant corporation even if we are completely in the right. So, if you cannot afford to sue then 99% of the time the schemes and money making ploys of big business will be rewarded with success.
The 1% they fail is if finally the government steps in as they can afford to fight but wait… banking has been deregulated…. Oh my.

For those who might not be aware it is believed Deutche Bank and their American partners Goldman Sachs brought the use of derivatives to the banking industry. Now there is a shocker.

honestabe7777 Jul 21st 2010 5:22PM

THE TRUTH & MAJOR LEGAL FACTS AT COSMOPOLITAN HOTEL LAS VEGAS:

FACT 1: I was a Buyer at Cosmopolitan Las Vegas with intimate knowledge of the contracts and legal arguments in this case. Public records will verify that what Deutsche bank did at the failed Cosmopolitan Hotel Condo was (and remains) purely criminal (at best their actions have been grossly negligent with a breach of both contract and good faith).

FACT 2: The Deutsche Media machine has lied to the press repeatedly without accountability or fact checks - they have successfully manipulated reporters for two years (as their predecessor owner, Bruce Eichner did, 3 years before Deutsche took over). Deutsche would lead public sentiment and media to believe the "declining market place" was the reason Buyers asked for their money back. This is a boldface lie and bogey.

FACT 3: The purchase contracts never disclosed the water pump system under the parking structure of this property - striking water early on - during foundation digging - causing major budget and time delays from the start in 2005 (ironically at the same time of levy breaches during Hurricane Katrina). This was a major violation in disclosure law, not to mention pure ethics -- this is where the initial deception occurred to all buyers in 2005. Had people known up front - which they were entitled to - they never would have entered contracts.

FACT 4: A $1.5 BB budget and 3 year time table soon exploded to $4BB and 5-6 years. Half way through construction delays - the original Seller (Eichner) and construction financier (Deutsche), knew they could not perform on the contractual obligations of this project (timelines and otherwise). They were also keenly aware of their disclosure failures so they began an elaborate scheme to avoid accountability - breach contracts - and ultimately pilfer as much of the Buyer's deposits and accrued interest as possible.

FACT 5: By the time Deutsche was considering foreclosure in 2007, and ultimately bought the property assets and contract liabilities (including disclosure responsibilities) in 2008 (when the project was actually due), they already knew they had failed to deliver the 2/3 residential condo, 1/3 hotel room project per the contracts with 1800 Buyers.

FACT 6: Deutsche Bank unilaterally changed the project closing date to 2010 on Tower 1, which was due in January, 2009 - they then conveniently announced this new grand opening date of summer 2010 (they have since changed the date to end of 2010 - -needing even more time to finish a skeleton property and eliminate as many buyers as possible from interfering with their pure hotel plan (no condos / or just a few condos - maybe). Deutsche bank then pitched the media as if these date changes were accepted by buyers. Nothing could be farther from the truth. In fact, the January 2009 contract due date in Tower 1 is what triggered all the initial lawsuits. Deutsche was technically in default of delivering the first tower deeds (18 months ago). Buyers had a right to their money back 18 months ago.

FACT 7: Deutsche bank next concocted a clever scheme to avoid all BUYER calls, emails, and complaints through a typical BIG BANK strategy -- silence, stall, delay, avoid tactics. This frustrated buyers, brokers, and attorneys, forcing buyers who were entitled to full refunds and accrued interest to sue. They had no alternative. This played right into Deutsche Bank's scheme. A year later (end of 2009), 1400 of 1800 buyers were coerced and threatened into a misleading settlement offer where they would net an average of 60-64 percent of their deposits. Had these buyers been fully informed of all the non-disclosures - or true completion projection dates of the property - or the fact Deutsche had never finalize its subdivision map for condos - or the fact the the property sat on a non-disclosed water pump system pumping 100,000 gallons of water in the parking garage, Buyers may not have been so quick to settle. Most Buyers by end of 2009 however were exhausted after 4 years - watching this nightmare turn into a projected 5-6 years of lies. Victims needed to move on with their lives - families and businesses were being destroyed. People had health issues. Retirment money was locked up for some. These are the true facts the media missed because average Joe and plain Jane do not hire PR consultants. They live real lives - they don't sit in ivory towers thinking of ways to scam people, hide behind lawyers, and manipulate media.

FACT 8: Deutsche Bank has stolen an estimated $100 million of $250 million in Buyer deposits and accrued interest from those first 1400 Buyer escrow accounts. This strategy of abusing the legal system and bleeding innocent buyers to the point of frustration is the only reason those first 1400 people walked away at the end of 2009. Deutsche Bank knew they had to settle fast - knowing time was no longer on their side once they reached mid-2010. Here we are - summer 2010. 6 months from the "grand opening". Why can't Buyers get any information on condo disclosures, unit inspections, HOA, CC+R's, etc? Even buyers not suing the project cannot get return calls. The answer is simple. Deutsche Bank will continue to attempt settlements until the an arbitrator forces the deposits returned or the grand opening exposes the fact that the 2000 condo / 1000 hotel room set up sold to buyers does not exist. In the meantime, Deutsche Bank and their atorneys pocket millions.

FACT 9: Most people are not accustomed to fighting trillion dollar institutions -- Deutsche Bank has a war chest for these legal and media strategies. Their systemic abuse of the legal and media system in order to breach the contracts at Cosmo is a part of their corporate strategy and everyone knows it. A few million in legal fees is a rounding error to Deutsche Bank. Still, it is Deutsche Bank, not the buyers, who failed to perform in every way (the buyers put up their 20% deposits in 2005 & 2006, signing contacts in good faith. Deutsche Bank did not perform in good faith or even disclose what they knew all along about the project failures.

FACT 10 - TOTALITY OF FAILURES: Deutsche never provided the 2000 condos (on time or ever). They failed to provide proper disclosures about the water pump system, lied to Buyers about an HOA and Property Management program (neither of which were ever provided to Buyers for document review in 5 years), and then made it sound like the buyers were to blame. In fact, what Deutsche Bank has now done is admitted to only "maybe planning 300 of the initially planned 2000 condos." Let's assume they have 300 condos to deliver when all is said and done -- it would not be the end product sold to buyers (Deutsche bank unilaterally changed the residency ratio of the project 2000 condos with 1000 hotel rooms). Buyers were sold a 2/3 residential project with private condos separated from hotel rooms. Deutsche cannot possibly deliver what they sold to buyers now that they have changed the residency ratio to a 90% transient hotel (again, assuming there are really even 300 condos coming). Nothing Deutsche has ever said to the 1800 Buyers has panned out to be true since 2008 -- during their 2 years of ownership. Why should anyone believe them now? This is why the most recent legal filings now include fraud, and formal complaints to HUD and the DRE. The totality of violations by Deutsche bank in a single transaction is off the charts. Most lawyers and buyers have never seen anything like it - it is no wonder the media were confused for 5 years.

FACT 11: Deutsche has also permanently screwed up the ability of future buyers and sellers to secure potential financing and the ability to establish a market value for condos with a reasonable owner residency ratio. Had this project been a legitimate 2/3 residential project with a proper HOA - Buyers might actually have a reason and ability to still purchase. However, Deutsche Bank cannot now claim that it was Buyers who wanted to get out because of unavailable financing. Financing was never a contingency of the contracts. That argument is a bogey media spin by Deutsche Bank. Instead, Deutsche threatened Buyers to make a buying decision before the inspection of their units at close of escrow was available (Imagine buying a home and being asked to decide before your final inspection). Today, Deutsche bank is telling the media that if they build at least these 300 condos, they are living up to their end of the bargin since all those other 1400 buyers "wanted out." This is laughable. Public records at Clark County, Nevada have already confirmed to the law firms suing on behalf of frustrated Buyers that there is no final subdivision map for the 2000 condos initially sold. In other words - the lawyers have already confirmed the residential ratio was manipulated by Deutsche Bank and no longer contractually correct even if they do deliver 300 condos.

FACT 12: Deutsche is also in violation of how they set up a single meter electrical system, rather than the sub metered system required for residential units where people will live in their homes more than 90 days. Remember - this project was sold and marketed as a 2/3 residential condo project not a 90% transient hotel. The bastardized version of whatever Deutsche Bank claims to be opening in December is irrelevant at this point. It's not what any buyer purchased and anyone that reads the contracts will understand this. Even the proposed casino in this hotel will not be ready until 2011 per Cosmo's CEO. Imagine being a Buyer - told your new home would be ready in 3 years - then being told to wait 6 years when the escrow was supposed to close. "Oh btw - you will receive no inspections or disclosures during escrow -- but if you don't commit to buying before final inspection, we will sue you for damages." says Deutsche Bank in written letters to buyers. They alkso did this while bypassing the brokers and attorneys who represented buyers. Yes, they unilaterally interfered and sabotaged known contracts in order to gain windfall profits.

SUMMARY: Any reporter, lawyer, arbitrator, judge, jury, can verify all of the facts herein. It's all public record. Hopefully some good will come of this nightmare for 1800 victims. Fortunately, some 300-400 remaining buyers were brave enough to stay and fight to the end. Deutsche Bank of course laughs along the way, snubbing their nose at the law.

Spread the word. The kind of abuse by the Deutsche Banks of this world cannot continue in America. The victims of Cosmopolitan desperately need attention, voices, and honest reporting in this matter. Thank you for your support.

Ronny Valdez Jul 28th 2010 12:10AM

I know the people at Deutsche Bank in charge of Cosmo - Tom Fiato is the head guy and he'll do anything he can to help a person who has a deposit in limbo / unit / etc.

Email him or call him up - tom.fiato@db.com

Also, the thing I am most concerned about with Cosmo is that they're primarily marketing it as a 'Gay' or G&L resort - which will probably not help to bring in the rest of the crowds, families, etc. I never knew Vegas was a big G&L destination for tourism, but apparently Cosmo did their homework and this is what they're going to provide the experience for.

Ronny Valdez Jul 28th 2010 12:15AM

The truth is that Cosmo is going to be very expensive, and only will appeal to the G&L community that is going to flock in from cities such as San Francisco and Chelsea, NYC where there are large gay populations. I think it's a brilliant idea, but I don't know if the gambling revenue will be there or if it may not be.

One thing is for certain, though - Cosmo is going to cost upwards of $5 billion dollars once it's been completed - the only way this property won't be the worlds biggest resort / casino failure EVER is if they really bring in 100% occupancy, busy casino gaming, and charge more money than any other hotel in Las Vegas has ever charged.

It seems impossible, although.