LNR Property Corp., the real estate finance company co-owned by Cerberus Capital Management LP, was accused in a lawsuit of defrauding creditors including retired California public employees of $700 million.
Creditors of a defunct California land company sued LNR in U.S. Bankruptcy Court in Wilmington, Delaware, claiming LNR and homebuilder Lennar Corp. drained $1.4 billion out of a joint venture that left their partners with nothing. Those partners, including the California Public Employees’ Retirement System, lost their $970 million investment, according to the suit.
LNR and Lennar knew that the company they controlled, LandSource Communities Development LLC, was insolvent when lenders represented by Barclays Capital Plc loaned it as much as $1.55 billion in February 2007, creditors claimed in the lawsuit. Instead of using the money to recapitalize LandSource just as the real estate market began to collapse, the company paid a special distribution of $1.4 billion to LNR and Lennar, creditors claimed.
“LandSource painted a fraudulent picture of its corporate health in order to induce an equity payout to Lennar and LNR under the guise of a recapitalization,” the lawsuit said.
LandSource filed for bankruptcy in June 2008. Under the company’s plan of reorganization approved last year, creditors set up a litigation trust that filed the lawsuit against LNR. Lennar wasn’t named in the complaint, filed on June 8. The Sacramento Bee first reported the lawsuit today.
Declined to Comment
LNR spokeswoman Jen Brown declined to comment. A spokesman for Lennar didn’t immediately return a message.
LandSource owned more than 50 development communities with more than 33,000 homesites at the end of 2007, according to court records. Much of that land is in the Santa Clarita Valley communities of Newhall Ranch and Valencia, about 30 miles north of Los Angeles. The company had 34,000 acres of land in that area in various stages of development and 24,000 homesites near freeways that feed Los Angeles, according to court papers.
The case is Landsource Creditor Litigation Liquidating Trust V. LNR NWHL Holdings, Inc. 10-51219, U.S. Bankruptcy Court, District of Delaware (Wilmington).