Ex-Las Vegas gaming executive sued by bank over short-sale deal
4 April 2012
Glenn Schaeffer, a top Nevada casino executive in the mid-2000s, has been sued over allegations he failed to disclose all of his assets in a bank short-sale request.
Bank of Nevada filed suit against Schaeffer on March 23 in Clark County District Court alleging intentional misrepresentation, fraud and other counts.
The bank’s lawsuit said that, in 2006, it loaned Schaeffer $1.373 million in a mortgage deal backed by a condominium at Turnberry Place on Paradise Road. The lawsuit went on to give the following account of the situation:
By 2011, Schaeffer had defaulted on the note and, through one of his Las Vegas attorneys, Samuel Schwartz, asked the bank to approve a short-sale deal. Under the deal approved last September, he would sell the condo for substantially less than the loan balance and the bank would forgive the remaining debt.
Under the sale to Armen Yemenidjian, an executive at the Tropicana Las Vegas hotel-casino, Yemenidjian paid at least $715,000 for the condo. At least $654,550 of that at closing was to go to the bank. Some of the money at closing may have been paid to a real estate broker.
On top of that, Schaeffer agreed to pay $50,000 to the bank so the bank would then release him from the deficiency balance on the loan.
That balance — the amount of debt forgiven — was about $631,000 as of March 22.
The bank said approval of the short sale was subject to conditions, including that if any information provided to the bank was inaccurate or materially misleading, it could pursue the loan’s deficiency balance.
The lawsuit said that although Schaeffer provided a financial statement for an entity in which he is a principal, Constellation Partners, as well as a personal financial statement, it later discovered some substantial omissions.
''Defendant, in fact, owned, and now owns, significant assets located in New Zealand and elsewhere which were not included in any of defendant’s financial statements, and which were not otherwise disclosed to plaintiff,'' the lawsuit says. ''Such assets include residential real property located in New Zealand, valued in excess of $1.5 million, as well as an interest in a New Zealand company known as 'Woollaston Estates Holdings,' which in turn owns significant real and personal property assets valued in excess of $6.787 million.
''Plaintiff would not have consented to the short sale request and released the lien of the (loan) deed of trust if plaintiff had been informed by defendant of the true nature and value of defendant’s real and personal property assets."
Woollaston Estates is a winery that features Schaeffer on its website as a partner. The website notes that New Zealand is a second home for Schaeffer and that his private wine collection there is one of that nation’s most significant.
Bank of Nevada seeks to recover the $631,000 loan balance plus attorney’s fees and costs and unspecified punitive and exemplary damages.
Schwartz, Schaeffer’s attorney in the short sale deal, couldn’t immediately be reached for comment.
Another attorney representing Schaeffer in unrelated litigation over the stalled Fontainebleau casino resort in Las Vegas said he was aware of the suit, but that it was premature to comment on the allegations.
Bank of Nevada is represented in the lawsuit by the Las Vegas law firm Smith Larsen & Wixom.
Schaeffer is well known in the gaming industry, having served as president and chief financial officer of Mandalay Resort Group from 1995 until its acquisition by MGM Resorts International, then called MGM Mirage, in 2005.
Schaeffer then became CEO of Fontainebleau Resorts, which tried to develop the $2.9 billion Fontainebleau casino resort on the Las Vegas Strip that ended up in bankruptcy.
Schaeffer resigned a few days before the bankruptcy filing.
Now, he and other Fontainebleau executives are defendants in a bankruptcy trustee complaint as well as an investors’ lawsuit over problems at the Las Vegas project.
Schaeffer was initially one of the defendants dismissed from the investors’ complaint, but Clark County District Court Judge Mark Denton is allowing the investors to file an amended complaint contending they were harmed by cost overruns, alleged coverups and other problems at the Fontainebleau.
Attorneys for Schaeffer have denied any wrongdoing on his part related to Fontainebleau.
Schaeffer also is known in Las Vegas for helping to create the National Center for Responsible Gaming, and as a scholar.
At UNLV, he founded the International Institute of Modern Letters, funded a chair in creative writing and established Las Vegas as the first U.S. City of Asylum, which provides fellowships for oppressed writers who had to flee their homelands.
He’s also known for making a substantial endowment to the Iowa Writers’ Workshop, which has a Glenn Schaeffer Library.
His interests in New Zealand have been well documented, and he established a post there of the International Institute of Modern Letters.
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