Legal News

In Lawsuit of the Decade (So Far), Property Owners Sue Credit Suisse

By Ashby Jones

Granted, the new decade is only five days old, but until a bigger and better lawsuit comes along, we’re going to go ahead and anoint a $24 billion suit filed Sunday against Credit Suisse The Lawsuit of the Decade. (Plaintiffs to the suit, hopefully this post will suffice as our hearty congratulations.)

Joking aside, the suit, filed in Idaho federal court, could be a whopper. (Click here for the complaint.)

Here’s the deal: Property owners at four U.S. luxury ski and golf resorts have accused Credit Suisse of running a “loan-to-own” program that loaded the resorts up with debt so the bank could foreclose on their assets when the debt couldn’t be repaid. Click here for the NYT story.

L.J. Gibson and Beau Blixseth filed the lawsuit seeking class-action status, seeking damages on behalf of more than 3,000 investors who purchased property and homes at the four developments known as Lake Las Vegas, Tamarack, Ginn Sur Mer and Yellowstone Club (pictured). All of the developments, financed by Credit Suisse, have been in default or under bankruptcy protection, causing “billions of dollars” of losses to their investors, the suit says.

Credit Suisse spokesman Duncan King said Monday that “we believe the suit to be without merit, and we’ll defend ourselves vigorously.”

In the lawsuit, the property owners allege the bank engaged in a plan to artificially inflate the values of the resort so it could make huge loans and charge the resorts “tens of millions of dollars of exorbitant loan fees.” They allege that Credit Suisse knew the resorts wouldn’t be able to perform under the loans, which would allow the bank to take the reins to the debt-saddled resorts cheaply. The suit also names Cushman & Wakefield as defendant. The New York commercial-brokerage firm provided inflated appraisals to assist Credit Suisse in the plan, the complaint alleges.

A Cushman & Wakefield spokesman said: “The allegations are completely without merit, and we will defend ourselves vigorously.”

The property owners aren’t the first to take issue with Credit Suisse’s role in the resorts’ troubles. U.S. Bankruptcy Court Judge Ralph B. Kirscher, who oversaw Yellowstone’s bankruptcy case, last year said Credit Suisse devised a “predatory” loan scheme that encouraged developers of several high-end resorts throughout the country to borrow large sums without regard for their ability to repay.

Photo: AP

Full post as published by Law Blog - WSJ.com on January 05, 2010 (boomark / email).