Judge Dismisses $24 Billion Lawsuit Against Credit Suisse
July 28 2016 - 6:20PM
Dow Jones News
A federal judge has dismissed a $24 billion lawsuit accusing
Credit Suisse of running a predatory loan-to-own scheme that
plaintiffs claimed loaded four luxury ski and golf resorts with
debt so it could foreclose on their assets.
Judge Justin L. Quackenbush of the U.S. District Court in Idaho
granted a request from Credit Suisse and real estate adviser
Cushman & Wakefield for summary judgment, dismissing the suit
and handing a big victory to the two companies in a six-year-long
legal battle involving ultra-luxe vacation resorts in the Caribbean
and western U.S.
The lawsuit, filed in 2010 on behalf of more than 3,000
homeowners, property owners and other investors, accused Credit
Suisse of piling the resorts up with debt during the real estate
boom so it could foreclose on their assets.
The property owners accused Cushman of aiding Credit Suisse's
purported scheme by creating a property-appraisal methodology that
artificially inflated the resorts' values.
Representatives for the property owners, Credit Suisse and
Cushman weren't immediately available for comment.
In a 45-page opinion, Judge Quackenbush said the homeowners
failed to show "Credit Suisse wanted to own the resorts." In
addition, the judge ruled Cushman's appraisals didn't cause the
property owners' losses.
The judge said property owners failed to show that a loan-to-own
program devised by Credit Suisse—and not the nationwide housing
market collapse—caused the resorts' developers to default.
The property owners claimed to have lost more than $8 billion,
for which they sought three times that amount in the damages, on
their investments at Ginn Sur Mer Resort in the Bahamas, the Lake
Las Vegas resort in Nevada, the Tamarack Resort in Idaho and the
Yellowstone Club in Montana.
Credit Suisse was a big player in arranging the financing of a
number of upscale Western resorts that have since tumbled into
bankruptcy. The bank marketed the loans to the developers of the
high-end resorts.
The bank and its appraisers, however, used an uncommon appraisal
method to value the properties. Known as "total net value," the
method relied on future expected revenue for the developers, rather
than more traditional methods based on how the market valued the
properties at the time.
The plaintiffs argued that the property valuations and loans
were too high, burdening the developers when the property market
crashed a decade ago.
Eventually, a dozen properties valued by the new method
collapsed into bankruptcy or were forced to restructure, resulting
in hundreds of millions of dollars in losses for investors and
property owners.
Credit Suisse ended up buying some of the properties at
discounted rates after they collapsed in value.
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
(END) Dow Jones Newswires
July 28, 2016 18:05 ET (22:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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