Unsecured creditors of Las Vegas real estate figure Jean Marc El Jwaidi would recover only about $800,000 under his plan to exit bankruptcy — a far cry from the $19.1 million they claim to be owed.
Under a contested plan to be aired in U.S. Bankruptcy Court on Monday, a benefactor to El Jwaidi is providing $1 million to El Jwaidi’s bankruptcy estate.
The $1 million loan or gift would settle a complaint against El Jwaidi filed by the case’s Chapter 7 bankruptcy trustee charging financial irregularities cost his bankruptcy estate hundreds of thousands of dollars.
After administration costs, it’s estimated the settlement will net some $800,000 to be distributed to unsecured creditors on a proportionate basis, an attorney for Trustee William Leonard Jr. said in a court filing last week.
This is in addition to side deals El Jwaidi made in the case with certain creditors.
In one such deal, Vestin Mortgage agreed to reduce its $13.3 million claim against El Jwaidi by $9 million and gave him an option to buy back land that Vestin had foreclosed on — the land at the center of the bankruptcy case.
In other deals, El Jwaidi arranged for one or more benefactors to pay certain creditors $738,000. Those creditors were two senior citizens El Jwaidi was accused in a criminal case of defrauding ($338,000) and investor Rito Favela Jr. ($400,000).
Las Vegas attorney Timothy Cory, representing Trustee Leonard, said in his court filing last week that if Bankruptcy Judge Linda Riegle approves the settlement of the trustee’s complaint against El Jwaidi, there will be an estimated $800,000 for distribution to unsecured creditors, “debtor will receive a discharge (from debt), and creditors will not have the ability to pursue claims against Mr. El Jwaidi.”
If the deal is not approved, Cory wrote in his filing, “it is anticipated that no distribution of funds will be available to unsecured creditors from the bankruptcy estate, and pending objections to discharge will be litigated.”
Some creditors are fighting the settlement.
An attorney for Manouchehr Dezfooli, for instance, said in a court filing Friday that his client is owed $992,500, of which $666,666 is secured.
“No challenge to the Dezfooli claim has been made by the debtor or any creditor,” attorney Jeffrey Whitehead wrote in his filing. “Nevertheless, the trustee’s proposed compromise makes no mention of the debt, and no provision for its repayment.
“Bankruptcy Court approval of a settlement or compromise under (bankruptcy rules) should only be given if the settlement is ‘fair and equitable and in the best interest of the estate,’” he wrote, citing case law. “A compromise which does not provide for the properly filed claim of a significant creditor, without any discussion as to why his claim was excluded, cannot be construed as fair or equitable.”
But in another court filing a day earlier, Cory objected to Dezfooli’s claim.
“This creditor alleges a secured interest in real property that was not part of the bankruptcy estate. Trustee intends to abandon any interest there may be in the collateral to the creditor,” Cory’s filing said.
“The trustee is prepared to make final distribution to creditors, but cannot do so until this claim has been resolved for purposes of distribution. Failure to do so will cause undue delay in the administration of this estate,” his filing said.
Cory and Leonard last week filed objections to about two dozen more claims, asking Riegle to either reduce them or extinguish them.
Those claims were filed by creditors Georges Nader, McDonald Carano Wilson LLP, Andrea Weiland, Judith Anderson and Anicia Cheng.
Also, Joshua Paul Lehman, Timothy Ballard, Nancy Grigor, Edna Lasala and Phillip Fabella.
Also, Shelly & Charles Grimes, Paul Hackspiel, Davric Corp., Jerry E. Polis Family Trust and Jason Agudo.
Also, Roland G. Lucero, Scott & Sherry Klempke, Julie O’Mara, Dr. Rico Fontillas & Myrna Alforque, Elma Zenarosa and Mariella Zenarosa.
Also, Walid Sayegh, Lamar Central Outdoor Inc., the Nevada Department of Employment and Eva Dimaano.
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WHO IS EL JWAIDI?
New court records, in the meantime, shed more light on how El Jwaidi and his companies are believed to have raised an estimated $13 million for his failed PG Plaza retail and mixed use project at the Las Vegas Beltway and Russell Road.
Leonard, in a report to the court, said El Jwaidi, a Lebanese citizen at the time, had been working in Dubai as operations manager for a stone manufacturer and then moved to Las Vegas in September 1999.
El Jwaidi’s attorney said in a court brief that El Jwaidi became a U.S. citizen in October 2008 and that at the time, his name was changed from Jamal El Jwaidi (Joveidi) to Jean Marc El Jwaidi.
While Leonard reported El Jwaidi had worked in Las Vegas as a salesman for Bernini Clothing Co., El Jwaidi’s attorney said he actually was general manager at Bernini at the Forum Shops at Caesars.
Leonard reported that in January 2001, El Jwaidi joined Triple Five Nevada Development Corp., working in leasing, and rose to executive vice president.
Leonard said that in March 2006, El Jwaidi had contracted for the property at the Beltway and Russell Road and he described El Jwaidi as “a neophyte in real estate development” and that he “had no real ‘A to Z’ experience in the development of real property and had no completed projects on his resume.”
But in a court declaration, El Jwaidi attorney Matthew Johnson said El Jwaidi had “extensive experience in developing commercial real estate property.”
He submitted a court declaration from David Ghermezian, principal of a Las Vegas company called Manchester Leasing Inc.
The Ghermezians are known as one of Canada’s wealthiest families and their Triple Five Nevada company has been a prominent developer in Las Vegas.
“During the time Jean Marc El Jwaidi served in his capacity as senior executive vice president of our Triple Five Nevada subsidiary, his involvement spanned most areas surrounding commercial real estate development,” David Ghermezian said in his court declaration.
Leonard went on to report that in trying to develop the land on the Beltway, El Jwaidi in September 2009 saw the offices of his companies — Babuski LLC and JKG Property Management and Development LLC — raided by securities investigators for the Nevada Secretary of State.
Secretary of State investigators later claimed El Jwaidi and his companies had ran a Ponzi scheme in which he raised $80 million from investors, with none of the money used to actually build PG Plaza.
Rather, the funds paid off prior investors or were used by El Jwaidi to fund a lavish lifestyle and pay off gambling debts, state investigators said at the time.
Leonard, in his report, said he reviewed documents seized by state investigators and found some $107 million in promissory notes.
It turned out, however, that many of these notes were duplicative or, according to El Jwaidi, written in anticipation of receiving investment funds that never arrived.
Leonard concluded El Jwaidi actually raised about $13 million.
Between February 2006 and November 2009, El Jwaidi claims his companies spent about $15.9 million, not counting money paid to Vestin Mortgage.
The difference between the amount raised and the money spent includes about $2.725 million El Jwaidi claims was borrowed from “family and personal reserves,” Leonard’s filing said.
“El Jwaidi and his wife Kamila reported salaries totaling $5.704 million during this time frame of operation,” Leonard’s report said. “When queried about the discrepancy between reported income on income taxes and the scheduled salaries, he responded that these were only ‘draws’ and not recorded as income.
“This accounting irregularity brings tax reporting questions into the issues surrounding Babuski and JKG Development as well as the El Jwaidi tax returns,” his report said.
Leonard filed his report to confirm that the $1 million to settle his complaint is not coming from the bankruptcy estate.
“The motion to approve compromise and settlement appears to be nothing more than a loan from an unrelated party to El Jwaidi for a subsequent real estate development with El Jwaidi,” his report said.
“The debtor advises, but has not provided back up that he contributed (the unaccounted for) $2.725 million from family and personal funds. Based on this information, I believe the debtor has accounted for funds which he borrowed personally and through Babuski and JKG Development beginning in 2006. Accordingly, I believe the settlement to be in the best interests of the estate,” his report said.
Leonard noted claims of $23.2 million had been filed in the case, including $19.1 million in unsecured claims.
That compares to assets El Jwaidi claimed in his 2009 bankruptcy filing of $6.273 million. Those assets included a $4 million home his filing said was exempt from liquidation as part of the Chapter 7 case.