Entities of Highland Capital Management LLP are suing Credit Suisse Group AG (CS) for over $350M. The plaintiffs are Haygood LLC and Allenby LLC. They claim that the financial firm marketed loans for high-end residential communities using appraisals that were deceptive and not reasonable. The disagreement is related to dividend capitalization loans for the Turtle Bay Resort, the Yellowstone Club, Ginn Clubs & Resorts and Rhodes Homes and the Park Highlands Master Planned Community. The securities case was filed in New York State Supreme Court.
According to the financial fraud lawsuit, managed investment funds that served as the loans’ lenders assigned the plaintiffs the claims. The latter are accusing Credit Suisse of working with “compliant stooges” in global appraisal firms to overvalue the communities that secured the loans so that lenders would invest in under-collateralized loans that would go on to fail.
A spokesperson for Credit Suisse says that Texas-based debt manager Highland Capital Management and entities related to it are behind this securities case and that this is one sophisticated investor’s “unfounded” effort to wrongly use the legal system to get back losses. The investment bank says it will fight the case.
The very same day that the securities complaint was filed, Credit Suisse sued the Highland Capital entities, contending that they did not meet they commitments to pay for and buy commercial loan interests. The bank said this cost Credit Suisse Loan Funding LLC and its bank in the Cayman Islands tens of millions of dollars in damages.
According to Credit Suisse’s securities lawsuit, a number of trades were made in 2008 between May and July that involved the bank consenting to purchase portions of commercial loans with a $78 million or greater face value. Credit Suisse says that Highland has yet to pay what is owed on the interest or loans.
Just one day before, and in Dallas state court, Claymore Holdings LLC sued Credit Suisse, Credit Suisse Securities USA LLC, and the Cayman Islands branch contending that in 2007, the bank’s brokers employed an inflated and unreasonable appraisal of a Nevada-based residential and resort master-planned community to market a refinancing loan of $540 million.
Claymore Holdings is the assignee of investment funds that behaved as the real estate deal’s lenders. Credit Suisse says that Highland owns Claymore, which contends that it would never have closed on the refinancing deal had it received an accurate appraisal of the resort, and not only did Credit Suisse use an appraiser to market the loan that was biased but the bank earned $11 million for helping to make the loan happen.
Credit Suisse Sued by Highland Capital Over Resort Loans, Bloomberg, July 17, 2013
Credit Suisse, Highland Face Off Over RE Loan Trades, Law 360, July 17, 2013
More Blog Posts:
Credit Suisse Must Face ARS Lawsuit Over Subsidiary Brokerage’s Alleged Misconduct, Says District Court, Stockbroker Fraud Blog, January 11, 2013
Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012
Texas Judge Throws Out Verizon Retirees’ Class Action Lawsuit Over $8.4B Pension Sales to Prudential, Stockbroker Fraud Blog, July 9, 2013