Attorneys use ruling from 1601 in fight about mob artifacts

Candice Rodriguez and Sergio Tamez listen to virtual guide James Caan during a preview of the Las Vegas Mob Experience at the Tropicana on Tuesday, March 1, 2011.

Las Vegas Mob Experience developer Jay Bloom has made such unusual legal arguments in a case over mob artifacts that there’s no Nevada case law to directly address them, attorneys for Bloom’s opposition say.

So they dredged up an English court ruling from 1601 to try to disprove what they call nonsensical and fraudulent legal claims.

The ruling made more than 400 years ago in what is believed to be the first lawsuit ever concerning “fraudulent conveyances” speaks directly to the issue at hand. That historic case was decided by an Elizabethan-era “Star Chamber” court but now is being used by attorneys for Bloom creditors in the dispute over who owns some 1,500 mob artifacts – knives, guns, photos and the like – that Bloom collected for the $25 million Mob Experience at the Tropicana. The artifacts are valued at an estimated $3.2 million.

Bloom’s Mob Experience company went bankrupt in 2011, and its space at the Tropicana was taken over by the Mob Attraction. That exhibit had new ownership, but included the same artifacts and most of the same staff.

Bloom still claims to own the artifacts and wants to take possession of them so he can show them in a traveling mob-themed exhibit he says could generate $250,000 to $300,000 a month in revenue. His creditors, however, say they’re entitled to foreclose on the artifacts because Bloom and his companies defaulted on the debt raised from investors and finance companies to acquire the artifacts and build and operate the Mob Experience. The creditors include businessman John Vipulis, owner of the current Mob Attraction.

While the legal dispute plays out, the artifacts remain under the control of the Mob Attraction at the Tropicana. That’s where the 1601 court ruling comes into play.

Vipulis and another creditor, Toronto company GC-Global Capital Corp., say they are owed $5.3 million and since Bloom hasn’t paid them back, they have the right to enforce liens and repossess the artifacts. (Bloom had been allied with GC-Global against Vipulis in the dispute for a while, but that arrangement fell apart this summer.)

Bloom, however, claims his company the Mafia Collection LLC owns the artifacts, leased them to the Mob Experience and now has the right to take them back despite the loan defaults. Bloom claims to have acquired $8 million of the debt secured by the artifacts from 29 individual investors early this year. He appears to have obtained the debt, essentially paying it off, in part by granting the investors equity in one of his companies.

The situation initially left attorneys for Vipulis and GC-Global scratching their heads, wondering how Bloom could be both a debtor and a creditor in the same case and why he paid off only certain creditors. They eventually concluded that under the law, he can’t fill the competing roles of debtor and creditor, and that as a debtor he breached his obligation to treat all creditors equally.

“The Mafia Collection’s theory would be akin to Mafia sitting in a room alone, lending money to itself and granting collateral to itself,” a Sept. 5 court filing by Greenberg Traurig attorneys says. “What commercially-viable reason would Mafia have to do such a thing? The answer is simply to defraud debtor’s secured lenders and hinder, delay or completely thwart their attempt to execute on their rightful security interest. This transaction amounts to a fraudulent transaction that cannot be allowed.”

Bloom’s Las Vegas attorney, Joseph Gutierrez, insists that everything is on the up and up and is asking a Clark County District Court judge to require Vipulis to immediately turn over the mob artifacts to Bloom. He claims Vipulis has failed to safeguard the collection while the ownership dispute plays out – charges Vipulis denies.

“The Mafia Collection property continues to be in imminent danger of being lost, stolen or destroyed,” Gutierrez wrote in his own court filing.

Attorneys for Vipulis and GC-Global, however, insist that as a defaulting debtor, Bloom has no standing to make such claims. They hope a judge will reject Bloom’s efforts during a hearing next month so they can foreclose on the artifacts.

His “proposed transaction is so unusual, no Nevada case relating to fraudulent transfer addresses a situation quite like it,” the attorneys wrote in a court filing. “However, the very first case ever adjudicated regarding fraudulent conveyance in England in the year 1601 involved a similar circumstance in which a defaulting debtor entered into a transaction with one creditor in order to hinder a second creditor’s ability to collect on its debt. Because the defaulting debtor and the creditor engaged in the transaction specifically to thwart another creditor’s enforcement actions, the transaction was void.”

The 1601 ruling is called “Twyne’s Case” and was brought by “Coke,” the Queen’s attorney general. “Twyne of Hampshire” was accused of the “making and publishing of a fraudulent gift of goods.”

A party named “Pierce” owed Twyne 400 pounds, and Pierce also owed party “C” 200 pounds. Pierce secretly settled with Twyne by providing Twyne all of his “goods and chattels,” including sheep, worth 300 pounds. “C,” who had been defrauded by the deal, obtained a judgment against Pierce and sent the Sheriff of Southampton to retrieve the collateral.

“This gift was fraudulent,” the Star Chamber court said of Pierce’s transfer of assets to Twyne. “Therefore, reader, when any gift shall be to you in satisfaction of a debt, by any one who is indebted to others also, let it be made in a public manner and before the neighbors, and not in private, for secrecy is a mark of fraud.”

The Mob Experience ended up in bankruptcy with $20.8 million in debt after visitation to the attraction fell short of projections, and it couldn’t meet its financial obligations.

Bloom left the Experience after it opened in March 2011 amid lawsuit allegations that he used investors’ money to pay for his personal expenses, including a $1.3 million home in the Southern Highlands. Creditors say he was forced out, but Bloom insists he left voluntarily because of he was told that his departure would clear the way for the Experience to gain new financing.

Bloom says those promises turned out be to false, and he was further victimized when his former partner, Louis Ventre, unnecessarily put the Experience parent company Murder Inc. into bankruptcy. Ventre said Murder Inc. had to file for bankruptcy because Bloom mismanaged it and looted it of funds.