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Packer Must Face Lenders’ Las Vegas Lawsuit, Court Says

May 17 (Bloomberg) -- James Packer, chairman of Australia’s biggest gambling company, and Crown Ltd. must defend themselves in a Las Vegas lawsuit alleging they hid cost overruns in a gaming development, an appeals court ruled.

A three-judge panel of the Nevada Supreme Court on May 15 denied Packer’s request to remove him and his companies from the litigation, which stemmed from the bankruptcy of Fontainebleau Las Vegas LLC.

Lenders including Brigade Leveraged Capital Structures Fund Ltd. and Caspian Capital Partners LP, provided more than $700 million in financing for the construction of the $2 billion Fontainebleau resort on the north end of the Las Vegas Strip. Packer and his companies invested in the project and helped developers hide cost overruns of hundreds of millions of dollars, according to a Jan. 18 filing from the plaintiffs.

“When funding failed to materialize and the defendants could no longer conceal the cost overruns from the lenders, the project collapsed, and the plaintiffs’ loans became substantially worthless,” the lenders said in the filing.

Crown and Packer had no relationship with the lenders, they said in a Nov. 7 filing in the appeals court, requesting the case against them be thrown out. A lower court judge had earlier rejected the request.

Packer, citing the plaintiffs’ claims in the lawsuit, said Jeffrey Soffer conceived the project and personally exercised substantial control over the development, financing and construction.

Minority Investor

“None of the three Crown defendants is alleged to have had any type of control over any aspect of the project,” according to the Packer filing, which also referred to Crown’s U.S. subsidiary Crown Services (US) LLC. Crown “is alleged to have been a minority equity investor.”

The lower court found the lawsuit “properly alleged both an underlying fraud and the Packer defendants’ participation in it,” the plaintiffs said in their filing.

Authorized by the bankruptcy court in January, 2010, Fontainebleau sold the project on Feb. 18, 2010, to a company affiliated with Carl Icahn for about $150 million.

The case is In Re: Brigade Leveraged Capital Structures Fund Ltd. v. Fontainebleau Resorts LLC. A-11-637835B. Supreme Court of the State of Nevada (Las Vegas).

To contact the reporter on this story: Joe Schneider in Sydney at

To contact the editor responsible for this story: Douglas Wong at

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