Specter of new criminal charge raised in Las Vegas developer’s case

Jean Marc Eljwaidi, right, appears in court with attorney Steven Wolfson at the Regional Justice Center in Las Vegas on Jan. 21, 2010.

The possibility of another criminal charge against Las Vegas developer Jean Marc El Jwaidi has been raised in his bankruptcy case.

In the 2-year-old bankruptcy case filled with unusual twists, this possibility was revealed Thursday by El Jwaidi’s bankruptcy attorney.

In a filing arguing El Jwaidi has the right to object to creditor claims in his case, his attorney wrote: "The debtor cares very much about the amount of claims ultimately allowed as it affects the amount he may be required to pay if his (bankruptcy) discharge is not granted and it affects the distribution to his creditors and the amount of any restitution, if any, that he may be required to pay in any subsequently-filed criminal matter."

Attorney Matthew Johnson, who filed the brief, said Friday he was unaware of any pending criminal actions against El Jwaidi.

"I included it in my argument as a precaution,'' Johnson said.

The context of the filing is that while El Jwaidi has been trying to reduce the dollar amount of claims in his case, so far totaling $23.2 million, his attorneys say "the majority of these claims have been grossly exaggerated." These claims compare to El Jwaidi’s declared assets totaling $6.273 million.

And several creditors’ attorneys say debtors in Chapter 7 liquidation cases like El Jwaidi have no standing to file such objections.

Bankruptcy Judge Linda Riegel in Las Vegas has not yet ruled on this dispute.

El Jwaidi filed for bankruptcy in 2009, the same year he was arrested by Nevada securities regulators on charges of bilking elderly investors in a failed real estate development project.

Those charges were resolved when a benefactor for El Jwaidi stepped up to pay $338,306 in restitution to the victims.

Additional potential criminal charges, as suggested by Johnson as a precaution in El Jwaidi’s filing Thursday, wouldn’t be surprising as investors and lenders have told the Las Vegas Sun and its sister newspaper VEGAS INC that they’ve been in contact with state and federal law enforcement officials about El Jwaidi.

El Jwaidi’s company, Babuski LLC, which also filed for bankruptcy in 2009, told investors it was developing a mixed-use retail center at Russell Road and the Las Vegas Beltway.

State securities regulators, however, took action against El Jwaidi and his company in 2009 after state investigators alleged he had ran an $80 million Ponzi scheme in which investors’ funds were used to repay earlier investors or were diverted to El Jwaidi to finance his lavish lifestyle and frequent gambling excursions to local casinos.

In the bankruptcy case, however, El Jwaidi says it was he who was victimized by a Connecticut man who had falsely promised $30 million in funding for the retail center. The funding would have paid off some of Babuski’s existing lenders and financed construction of the center, El Jwaidi has said.

That man, Joseph Sorrentino, last year was sentenced to 48 months in prison by a federal judge in Hartford after pleading guilty in what prosecutors called a $2 million scheme in which he and his company, Kenlin Capital, collected advance fees for loans that he never provided and could not provide.

El Jwaidi, in the meantime, has reached settlements with several parties in his bankruptcy case, including key Babuski lender Vestin Mortgage and the trustee assigned to the case.

The trustee, William Leonard Jr., had alleged financial irregularities contributed to the insolvency of El Jwaidi.

Riegel has set hearings for later this month on whether to approve those settlements, in which Vestin’s $13.3 million claim was reduced to $5 million and El Jwaidi received an option to buy back from Vestin the Babuski land Vestin had foreclosed on; and in which an unnamed financing source will provide $1 million to the bankruptcy estate on behalf of El Jwaidi to settle Leonard’s complaint.

Separately, Leonard set a Nov. 22 deadline for creditors to file claims in El Jwaidi’s bankruptcy case. His filing said he "found assets in this bankruptcy estate from which a payment of a dividend appears possible."

The filing by El Jwaidi’s attorney on Thursday, however, cast doubt on whether a dividend will be paid to most creditors.

"If the Vestin settlement is approved, which provides Vestin with an allowed claim of $5 million, there would be no surplus. However, if the settlement is not approved, and the debtor were ultimately successful in his objection to claims, a surplus would exist," said the filing by Johnson.