A Swiss bank is being sued for $24 billion by property owners who claim it schemed to defraud investors in several development resorts in the US including the bankrupted Yellowstone Club.
In a lawsuit filed on Sunday in the federal court in Idaho, the plaintiffs, on behalf of 3,000 investors, said banking giant Credit Suisse colluded with real estate firm and co-defendant Cushman & Wakefield in a ‘loan to own’ scheme to artificially inflate the value of resort projects.
According to papers lodged in court the scheme was designed to burden resorts and purchasers of property in resorts with too much debt, while winning Credit Suisse ‘enormous fees’ and letting the bank foreclose on or take control of resorts at well below market value.
‘The scheme has been a financial heist for Credit Suisse with no risk,’ according to 81 pages of detailed allegations that include the claim that the scheme began in 2004 when Credit Suisse encouraged developers to take cash out of their resort projects in the form of loans or ‘profit dividend’ based on projected future growth.
That led developers to ‘mortgage their development projects to the hilt,’ leaving resorts with ‘excessive and unsustainable debt,’ the complaint says. The bank collected fees and sold the loans to investors, the lawsuit adds.
When the real estate market collapsed the resorts went into default or sought bankruptcy protection, devastating property owners who were promised pools, golf courses, shops, hotels and other luxury amenities.
Credit Suisse ‘has received huge fees up-front and consummated ownership or control over all but one high-end resort,’ the complaint continues.
The lawsuit alleges losses relating to Yellowstone, a private club for millionaires in Montana, as well as to Lake Las Vegas in Nevada, the Tamarack ski resort in Idaho and Ginn Sur Mer on Grand Bahama Island.
The plaintiffs are L.J. Gibson and Beau Blixseth. Blixseth, the son of Timothy Blixseth, a timber baron and onetime billionaire who developed Yellowstone, says he lost money and the use of his property rights in Yellowstone.
In the lawsuit they are seeking class-action status for purchasers of property and homes in the developments. It seeks $8 billion of actual damages and $16 billion of punitive damages.
When contacted Credit Suisse head quarters in Zurich declined to comment. Cushman & Wakefield also refused to talk about the legal case.
