Creditors defend claims in Las Vegas developer’s case

Creditors of Las Vegas developer Jean Marc El Jwaidi are fighting his efforts to have their bankruptcy court claims reduced or extinguished.

El Jwaidi is trying to emerge from Chapter 7 bankruptcy following the collapse of his plans to develop a mixed use shopping and entertainment center called PG Plaza at Russell Road and the Las Vegas Beltway.

He was arrested in 2009 on suspicion of bilking a vulnerable Las Vegas senior citizen out of $400,000 in investment funds as part of what state Securities Division investigators called an $80 million Ponzi scheme.

A state cease and desist order against El Jwaidi, his company Babuski LLC and associated individuals and companies said money raised from investors for PG Plaza was used to repay prior investors, cover gambling debts and support El Jwaidi’s lavish lifestyle.

The criminal case was resolved when a benefactor to El Jwaidi, Paris limousine company owner Tony Skayem, paid $338,000 to two victims.

This month, El Jwaidi filed objections to several claims in his personal bankruptcy case including $13.3 million claimed by Vestin Mortgage Inc. entities that foreclosed on the land intended for PG Plaza.

El Jwaidi charged in the objection that Vestin’s claim was "unconscionable."

That’s because, according to El Jwaidi, Babuski borrowed $8.7 million from Vestin, repaid more than $8.2 million and then saw Vestin foreclose on the land valued at $8.8 million.

El Jwaidi also claimed Vestin in 2009 refused to accept payments on the mortgage because the Securities Division was investigating him.

Attorneys for Las Vegas-based Vestin Mortgage fired back at El Jwaidi this week, disputing his facts and conclusions.

Vestin said it had made a one-year loan for $9.5 million at 12.5 percent interest to Babuski in March 2006.

Such short-term loans are not unusual for Vestin, a hard money lender that pools investors’ funds and loans them to real estate developers and investors.

After Babuski defaulted on the note prior to its extended maturity date of June 2008, the interest rate was increased to the default rate of 21 percent, Vestin said in its filing.

After continued defaults, Babuski filed for bankruptcy in June 2009 to block Vestin’s foreclosure of the property. The bankruptcy court later allowed the foreclosure to proceed; and the Babuski bankruptcy case was closed as the land was the company’s only asset.

Vestin then filed its $13.3 million claim against El Jwaidi, as personal guarantor for the note, in his personal bankruptcy case.

Vestin said this amount includes principal of $9.5 million, interest of nearly $2.8 million, late fees of $1.7 million and other fees. The claim of $14.3 million was reduced by Vestin’s $1 million credit bid for the property at the foreclosure auction.

In fighting El Jwaidi’s objection to its claim, Vestin said El Jwaidi has no standing to object as he’s not a “party of interest.” Where a trustee has been appointed in a bankruptcy case, as in this case, only the trustee has standing to object if advised to do so by the debtor or creditors, Vestin said in its filing.

Case law has required that “objections by raised by a single voice, the trustee, who will serve as the spokesperson for the estate and general creditors,” Vestin’s filing said.

Even if El Jwaidi had standing, his argument that Vestin refused to accept payments at some point in 2009 fails because, "Vestin was clearly under no obligation to accept partial payments tendered post (loan) maturity, nor to accept payments which were potentially connected to the Nevada Secretary of State’s (Securities Division) criminal investigation," Vestin’s filing said.

Vestin added that El Jwaidi had offered no proof the land it foreclosed on was worth more than its $1 million credit bid and that if the court entertains El Jwaidi's objection, the value of the land needs to be determined.

Four other creditors so far also are fighting El Jwaidi’s efforts to reduce the amount of their claims against his bankruptcy estate.

They are:

-- Andrea Weiland and Judith Anderson, who said they gained a judgment against El Jwaidi last year of $40,000 plus interest and attorney’s fees for breach of a promissory note. El Jwaidi has tried to reduce their claim to $15,000.

-- Davric Corp., owed $1.9 million against one of El Jwaidi’s homes. El Jwaidi said that claim should be reduced to $350,000, but Davric’s attorney said El Jwaidi offered no evidence to support that reduction.

-- Jerry E. Polis Family Trust, owed nearly $920,000 against the same home. El Jwaidi also wants that reduced to $350,000.

Davric and the Polis Trust also argued El Jwaidi lacks standing to object to their claims.

A hearing is set for next month on El Jwaidi’s objections to these and other claims.

El Jwaidi is trying to get some of the creditors’ claims extinguished or reduced as they total $23.4 million vs. just $6.3 million in assets in his Chapter 7 liquidation case.