January 4, 2010
Credit Suisse is being sued in Montana for allegedly making loans based on inflated appraisals, so that it could take over when the debts couldn’t be repaid.
Classic. This would set a pretty gnarly precedent if the lawsuit goes anywhere.
Blixseth is suing for losses from his property at the Yellowstone Club in Montana, developed by his father Tim. That resort borrowed $375 million from Credit Suisse in September 2005 and sought bankruptcy protection in November 2008. The Zurich-based bank retained the right to collect on the loan after the resort’s purchase by CrossHarbor Capital Partners LLC was approved in June.
The lawsuit alleges racketeering, breach of fiduciary duty, fraud and negligence. The lawsuit seeks $24 billion in damages, triple the $8 billion in alleged losses for property owners and names three Credit Suisse units and Cushman & Wakefield Inc. as defendants. Cushman & Wakefield provided appraisals, according to the complaint.
Things were pretty crazy in 2005-2007, and investment banks were pulling all sorts of shenanigans to get and fund loans. No doubt about it, but nobody forced these guys to leverage themselves “to the hilt”.
Hopefully Credit Suisse’s counter suit will allege stupidity.
Back in November we indicated that banks were wary of taking back property and selling them for a profit out of fear of getting sued. Lawsuits like this, if it goes anywhere or not, put banks in fear of taking property back period. Perhaps if they do take it back, this will incline them more to sell it for a steep loss.
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