Credit Suisse Appraisal Fraud Cited by Investors

In the complaint, the plaintiffs’ lawyers contend that Credit Suisse and Cushman & Wakefield conspired by setting up a Cayman Islands branch to circumvent federal law on real estate appraisals.

Credit Suisse knew the resorts would most likely default under the weight of inflated values, which would allow the bank to take ownership as agent on behalf of the creditors, the suit contends.

Editor’s Note: Don’t overlook this piece. It points directly at the heart of the mortgage meltdown crisis. They knew how to inflate values for the purposes of inducing people to buy into financial instruments. That is what happened to homeowners and the investors who purchased mortgage-backed securities.
Read on. It also outlines the scheme by which the banks played “heads I win, tails you lose.” They structured the investments such that there could be no winner other than the bank. Again, exactly what happened to homeowners and investors. Create an investment you know is bad on both sides, and while the foreclosures come piling into courtrooms, quietly walk away with trillions of dollars leaving the investors and the homeowners with nothing.
January 5, 2010

Credit Suisse Is Accused of Defrauding Investors in 4 Resorts

HELENA, Mont. — Investors at four high-end resorts have filed a class-action lawsuit against Credit Suisse and the real estate services company Cushman & Wakefield, contending that they conspired to inflate the value of the properties so they could take them over.

The suit, outlined in an 84-page complaint filed Sunday in federal court in Boise, Idaho, details what it calls a sweeping loan-to-own scheme. Credit Suisse, according to the complaint, raked in huge fees on loans against the properties, which it syndicated and sold to hedge fund managers. If the resorts could not pay back the hundreds of millions of dollars in loans, based on the inflated values, Credit Suisse could either assume ownership as the agent for the creditors or sell the resorts.

The properties include the Yellowstone Club at Big Sky, Mont., which has multimillion-dollar “ski-in-ski-out” homes and private slopes. Its members include Bill Gates, the Microsoft chairman; the golfer Annika Sorenstam; former Vice President Dan Quayle; and Peter Chernin, former president and chief operating officer of the News Corporation.

In addition, developers and property owners at Lake Las Vegas in southern Nevada, the Tamarack Resort in central Idaho and Ginn sur Mer in the Bahamas are also party to the lawsuit.

The suit was brought on behalf of at least 3,000 investors by L. J. Gibson, who owns property at three of the resorts, and Beau Blixseth, the son and business partner of Timothy L. Blixseth, the developer who bought land near Yellowstone Park and developed the famous club. The involvement of 4,000 to 5,000 more litigants at 10 other resorts, including the Promontory Club in Utah, is pending.

A Credit Suisse spokesman, Duncan King, said, “We believe the suit to be without merit, and we will defend ourselves vigorously.”

Dwayne Doherty, a spokesman for Cushman & Wakefield, which provided appraisals of the property, echoed that statement. “The allegations are completely without merit, and we will defend ourselves vigorously,” he said.

The lead lawyer in the suit, Michael J. Flynn, of Rancho Santa Fe, Calif., said he could not comment until the judge allowed the class action to proceed.

The suit accuses the defendants of engaging in a sweeping conspiracy that focused on the developers of the resorts. Specifically, the complaint accuses Credit Suisse and Cushman & Wakefield of racketeering, breach of fiduciary duty, mail and wire fraud, money laundering and negligence. The suit describes Credit Suisse as an “international banking predator.”

In the complaint, the plaintiffs’ lawyers contend that Credit Suisse and Cushman & Wakefield conspired by setting up a Cayman Islands branch to circumvent federal law on real estate appraisals. The complaint also alleges that they inflated the value of the resorts and made millions of dollars in fees on loans against the properties. Credit Suisse knew the resorts would most likely default under the weight of inflated values, which would allow the bank to take ownership as agent on behalf of the creditors, the suit contends.

The Yellowstone Club borrowed $375 million from Credit Suisse in 2005. After the economy began to falter, Edra Blixseth, who won control of the property in a divorce from her husband, Timothy, was forced to declare bankruptcy in 2008. The property was sold to CrossHarbor Capital Partners in 2009 for $115 million, about a quarter of the estimated value of the club at the peak of the market, though Credit Suisse retained the right to collect the loan after it was sold.

In May, in the Blixseth bankruptcy case, Judge Ralph B. Kirscher of Federal Bankruptcy Court in Butte, Mont., wrote: “The naked greed in this case, combined with Credit Suisse’s complete disregard” for the developer and others, “shocks the conscience of this court.”

“While Credit Suisse’s new loan product resulted in enormous fees to Credit Suisse in 2005, it resulted in financial ruin for several residential resort communities,” he wrote. “Credit Suisse lined its pockets on the backs of the unsecured creditors.” The statement was written in a judge’s order that has since been vacated as part of a settlement agreement.

The complaint also contends that the money to finance loans came from a separate case in which Credit Suisse helped Iranian banks avoid United States sanctions by hiding profits. Credit Suisse paid the government $536 million in December to settle that case.

The suit seeks $8 billion in damages, which it says should be tripled as allowed under federal racketeering statutes.

The decline at many posh Western resorts has been stunning. Values have dropped precipitously, projects are unfinished and investor interest has waned. At the Tamarack Resort, 90 miles north of Boise, the tennis star Andre Agassi has abandoned plans to build a five-star hotel, unfinished buildings have been mothballed and Bank of America is asking a court to allow it to repossess the resort’s ski lifts. Homeowners who bought property and built homes are fuming.

In November, the new owners of the Yellowstone Club liquidated 13 tractor-trailer loads of antique furniture bought by the Blixseths, including a two-seat black walnut throne from a castle in Bavaria that Timothy Blixseth once planned to place in his 53,000-square-foot home. That home was never built.

22 Responses

  1. Attention,
    I apologize for intruding into your privacy, especially by contacting you through this means for a business transaction of this magnitude, but due to its seriousness and necessity, it became necessary for me to seek for your assistance. My name is Mr. David Nelson Jr, one of the investment managers of Aviva Investors. Aviva Investors is a business consulting firm, offering business advisory services worldwide. Recently we have been confronted with the task of investing funds for our investors with Aviva which runs into billions of British Pound Sterling and hundreds of millions of pounds was made as profits for our investors but sincerely, I secretly extracted 1.2% from the Excess Maximum Return Capital Profit on each of our investors profit margin there by making a total of £28,000,000.00 (Twenty eight million British pound Sterling). I personally cannot lay claim to this fund because of my position as one of the investment managers and I decided to seek your partnership to co-operate with me in laying claim to the fund. Our sharing modalities will be negotiated between us. In View of this foregoing issue, I look forward to receive your response so that I can intimate you with further details.

    Regards,
    Mr. David Nelson Jr. and Mrs.Lisa Kilpatrick
    mrdvnl@aol.com
    +233 266 176 545
    +233 241 101 653
    Investment Project Partners

  2. One more comment:

    Credit Suisse purchased Select Portfolio Servicing in 2005. SPS is the servicer on my loan. The holding company for my CSFB HEAT is in the Cayman Islands and was set up in 2005..

    HMMMMMM……need some bloodhounds….

  3. Here is contact information if you wish to complain about that Deferred Prosecution agreement with Credit Suisse or their actions…….we all should take some time to complain and oppose…..

    Brady W. Dougan, CEO

    Credit Suisse Group
    Paradeplatz 8
    PO Box 1
    Zurich, 8070
    Switzerland – Map
    Phone: 41 44 212 16 16
    Fax: 41 44 333 25 87
    Web Site: http://www.credit-suisse.com

    Eric Holder

    U.S. Attorney General

    U.S. Dept. of Justice

    950 Pennsylvania Ave, NW

    Washington, DC 20530

    Main switchboard 202-514-2000

    Faxing the White House is best———–

    President Obama

    The White House

    The White House
    1600 Pennsylvania Avenue NW
    Washington, DC 20500
    Please include your e-mail address

    Phone Numbers

    Comments: 202-456-1111
    Switchboard: 202-456-1414
    FAX: 202-456-2461

  4. Alina,

    I thank you for the info.
    Appreciate it.

  5. We are at war with terrorists–some people call them “bankers.”. If the Depression era gave us the term “banksters,” I propose the term “bankerrorists” as a similar pejorative based on our experience in these dark days with the kingpins of finance.

  6. what makes me extremely angry about this whole deal is that we are in a war with terrorists. if Credit Suisse get away with a slap on the wrist, what is holding any other bank back from doing the same thing?

    we wonder how al-Quaeda gets its funding, how Iran is able to purchase plutonium, etc. it’s the actions of these greed hungry banks that keep us in perpetual fear. if the transfer of money is difficult, it will make it a lot harder for terrorists to get their bomb supplies. I’m not saying that it will put an to terrorism, but it sure can slow it down a bit.

    I feel as if our country has betrayed its citizens again. we don’t need or want blood money. this country was built on a set of values that world envied. when did abandon those values?

  7. there’s an attachment that I downloaded onto my flashdrive earlier today. I left the flashdrive at work though so I will send that tomorrow.

  8. […] here: Credit Suisse Appraisal Fraud Cited by Investors « Livinglies's WeblogArtículos relacionados05/01/2010 — A Warning To Western Governments And Investors – The […]

  9. Alina!

    Could you please post a link to that DOJ Release?
    Remember sometimes you have to “dummy” the link
    or your post never publishes.

    Please I would like to see THAT.

    Thanks!

  10. I am so outraged!!!! I have just finished reading the DOJ’s Deferred Prosecution Agreement with Credit Suisse.

    Credit Suisse has been assisting Iranians and nationals from other countries that are under embargo in moving their money through the U.S. financial system. Unbelievable!!!!

    Why did our DOJ agree to deferred prosecution? They should have slammed the book, door, anything at these guys.

  11. Well, isn’t this interesting? I tracked my loan which supposedly is part of CSFB HEAT 2005-6 to the Cayman Islands and then could not find it afterwards.

    I need to look at the DOJ’s website and find out if my loan was part of the loans used to cover up Iranian assets.

  12. zurenarrh,
    Sorry I took some shortcuts in the post because I had made so many posts on pledging before. You can read the rest of this below (which is long). What I am saying is that the transfer from the Seller to the Depositor was a pledge and not a sale. The text below shows that the transfer from the Depositor to the Trustee was a pledge and not a sale. The Trustee never received perfected title to the property because (among other things) the LOANs were NEVER delivered. Here is what actually happened. The Seller pledged the loans to the depositor in exchange for the Certificates. The Depositor pledged the loans to the Trust in exchange for the certificates. The trust issued the certificates which it gave to the Depositor. The depositor returned the certificates to the Seller.

    The Certificates were worth (approx.) the same as the mortgages (or maybe a lot more). The Seller promised to transfer the mortgage loans but they never did.

    Here is another way to look at it. A Promissory note for $100,000 is pledged to the Depositor who then pledges it to the Trustee. The Trustee returns a Certificate (worth $100,000) to the Depositor who returns the Certificate to the Seller. What happened? The Trustee and Depositor passed something of value back but the Seller never transferred anything – except a promise to pay. The Seller (who in my case is the master servicer) sends the principal and interest payments through to the Trustee for years until the loan is reduced to $10,000. At this point the Seller can optionally pay off the Certificate and end the “deal”. So, they can either send the $10,000 cash or they can send the promissory note (which is cash). Which do you think they will do? If they send the promissory note the deal stays active and they will have to continue sending payments to the Trustee. So they will not do this – they will send the cash and keep the notes (ending the pledge).

    Why do they want to end the “deal” when the aggregate principal balance falls below 10%? This is easy – the sub-servicer, master servicer and Trustee get paid fees based on the current aggregate principal balance. So a loan that was originally $500,000 might pay $1,000 in fees at the beginning of the loan, but by the time it gets to $50,000 it is only paying $100.00 in fees. Now it is just costing too much for the effort. I mean come on, these guys in this to make money and this low of an amount just doesn’t cut it.

    Here is what my SEC filings say about the transfer of the loans from the Depositor to the Trustee (it basically says the same thing for the transfer from the Seller to the Depositor). Sorry this is long but if you read it you will see that they have an interest in EVERYTHING. You should also know that Maher has pointed out that they cannot just clear this cloud on title magically. The only way is through an open market transaction. And a foreclosure sale does NOT count as an open market transaction (but they are using it anyway). It also means that the Trustee is not the owner. It also means that the assignment of the Mortgage (or Deed of Trust) from the originator to the Trustee (done in foreclosure) is completely INVALID. This is because they are saying the Trustee has perfected title to the Mortgage (and/or Deed of Trust). How can they have perfected title and then assign the mortgage (and/or Deed of Trust) FROM the originator? And of course let’s not forget that the Trustee and MERS have no pecuniary interest, not to mention the fact that they do NOT possess any of the loan documents.

    It is intended that the conveyances by the Depositor to the Trustee of the Mortgage Loans as provided for in this Section 2.01 and the Uncertificated Regular Interests be construed as a sale by the Depositor to the Trustee of the Mortgage Loans and the Uncertificated Regular Interests for the benefit of the Certificateholders. Further, it is not intended that any such conveyance be deemed to be a pledge of the Mortgage Loans and the Uncertificated Regular Interests by the Depositor to the Trustee to secure a debt or other obligation of the Depositor. Nonetheless, (a) this Agreement is intended to be and hereby is a security agreement [ ]…

    It goes on with the following:

    (b) the conveyances provided for in this Section 2.01 shall be deemed to be (1) a grant by the Depositor to the Trustee of a security interest in all of the Depositor’s right (including the power to convey title thereto), title and interest, whether now owned or hereafter acquired, in and to (A) the Mortgage Loans, including the related Mortgage Note, the Mortgage, any insurance policies and all other documents in the related Mortgage File, (B) all amounts payable pursuant to the Mortgage Loans in accordance with the terms thereof, (C) any Uncertificated Regular Interests and any and all general intangibles, payment intangibles, accounts, chattel paper, instruments, documents, money, deposit accounts, certificates of deposit, goods, letters of credit, advices of credit and investment property and other property of whatever kind or description now existing or hereafter acquired consisting of, arising from or relating to any of the foregoing, and (D) all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including without limitation all amounts from time to time held or invested in the Certificate Account or the Custodial Account, whether in the form of cash, instruments, securities or other property and (2) an assignment by the Depositor to the Trustee of any security interest in any and all of Residential Funding’s right (including the power to convey title thereto), title and interest, whether now owned or hereafter acquired, in and to the property described in the foregoing clauses (1)(A), (B), (C) and (D) granted by Residential Funding to the Depositor pursuant to the Assignment Agreement; (c) the possession by the Trustee, the Custodian or any other agent of the Trustee of Mortgage Notes or such other items of property as constitute instruments, money, payment intangibles, negotiable documents, goods, deposit accounts, letters of credit, advices of credit, investment property, certificated securities or chattel paper shall be deemed to be “possession by the secured party,” or possession by a purchaser or a person designated by such secured party, for purposes of perfecting the security interest pursuant to the Minnesota Uniform Commercial Code and the Uniform Commercial Code of any other applicable jurisdiction as in effect (including, without limitation, Sections 8-106, 9-313 and 9-106 thereof); and (d) notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from, securities intermediaries, bailees or agents of, or persons holding for, (as applicable) the Trustee for the purpose of perfecting such security interest under applicable law.

    Disclaimer: I am not an attorney and this is not legal advice.

    Dan Edstrom
    dmedstrom@hotmail.com

  13. CREDIT SUISSE SUED FOR $24 BILLION OVER RESORTS

    The lawsuit seeks class-action status for purchasers of property and homes in the developments.

    It seeks $8 billion of actual damages and $16 billion of punitive damages.

    The case is Gibson et al v. Credit Suisse AG et al,
    U.S. District Court, District of Idaho, No. 10-00001.

    LINK
    X_http://media.spokesman.com/documents/2010/01/CreditSuisse-complaint_.pdf

  14. Dan
    where can we find a copy of the Credit Suisse Complaint?

    Ellen Hodgson Brown’s book is a must read asap!!

  15. Dan,
    I’m not sure I follow where you’re going on your new discovery re: “Optional Termination.” If the Master Servicer has the option to purchase the loans from the Trust, wouldn’t that mean that the Trust does in fact own the loans? If the Trust did not own the loans, couldn’t they just be transferred via assignment back to the Master Servicer?

    Also, inquired about the status of my Fannie Mae FOIA request today since it’s now been longer than the statutory 20 days allowed for a response. They told me that there were other requests ahead of mine that had been received on the same day and that they were working on those first. They also said that it is unlikely that they can get individual loan information. I find that difficult to believe since FHFA’s conservatorship of Fannie Mae means that FHFA “directs and controls the operations of” Fannie Mae (language from an FHFA press release), but that’s what they said.

    So OK, no big deal. I just need to find my loan in an SEC filing I guess, but I don’t know what to search for other than “Fannie Mae” and none of the results that I’ve looked at mention specifics of ANY loans. If anyone has any clues they could drop my way, that’d be much appreciated.

    Mike H–you’re right on target. Ellen Brown’s book is the shiznit for sure.

  16. The problem is the banks flat out own the government. As such, we can expect no help from them. They don’t dare go against their masters.

    Steve
    99Libra@gmail.com

  17. We should all read “Web of Debt” to truly understand how our system works, namely the
    “monetization of assets” using fraudulent appraisals
    and the creation of “credit money” out of thin air.
    Banks are not like “piggy banks” where someone
    has to put in, before someone can take out. They operate more like “counterfeiting operations”. They
    have a licence from the FED to create money out of
    nothing and put everyone in debt. This causes inflation at first until the interest burden becomes so great that everyone starts defaulting and a downward
    price spiral begins, deflation. That’s where we are now and nothing can stop it until it runs its course.
    Attempts to stop it are only bandaids on a hemorraging wound.
    We need to return to the original Constitution where
    only Congress can create new money, and the banks
    must go back to the “piggy bank” model of banking.
    Banks won’t like that at all. It takes most of the profit
    out of banking and rewards those who actually produce goods and services to make a living.
    It’s the old battle between the Federalists, led by
    Hamilton and the Democratic Republicans led by
    idiots like Andrew Jackson, who destroyed the Second
    United States Bank and handed the country over to the
    bankers, whom he claimed to hate, but was actually
    helping. He coined the phrase “to the victor go the spoils” and institutionalized corruption in “our” government. We need a return to the idea of government service as an honor for honorable men,
    not “as a business to get rich”. So come on all of you
    natural born “aristocrats” who put service to nation,
    above “private profit”. Resurrect the old Federalist Party and run for Congress or the Senate. Give the
    American people a real choice for a change!

  18. Neil has stated their are TWO trusts and not one. While I haven’t actually found the evidence of this yet in my “deal”, I just found that the Trust contains two REMICs:

    Tax Status
    For federal income tax purposes, the depositor will elect to treat the trust, exclusive of the yield maintenance agreement, as two REMICs. The offered
    certificates will each represent ownership of a regular interest in a REMIC,coupled with an interest in a yield maintenance agreement. The offered certificates generally will be treated as debt instruments for federal income tax purposes.

    Dan Edstrom
    dmedstrom@hotmail.com

  19. This seems to be very important information I just found in my prospectus. It’s under the Optional Termination section.

    This is not ambiguous. It flat out states the following:

    … when the aggregate stated principal balance of the mortgage loans [ ] is less than 10% [ ], the master servicer may, but will not be required to:

    o purchase from the trust all of the remaining mortgage loans and cause an early retirement of the certificates;

    or

    o purchase all of the certificates.

    The optional termination price paid by the master servicer will also include certain amounts owed by Residential Funding as seller of the mortgage loans, under the terms of the agreement pursuant to which Residential Funding sold the mortgage loans to the depositor, that remain unpaid on the date of the optional termination.

    This is the PROOF that the TRANSFER of the mortgage loans from the seller (Residential Funding in this case) to the Depositor (RASC in this case) was NOT A TRUE SALE.

    This confirms to me what I have long suspected – that it was ALWAYS a pledge and was NEVER a true sale.

    This also confirms another item I have long suspected:

    o The securitizer (RFC or one of it’s affiliates) – wanted the mortgage loans for assets on its balance sheet – so they could borrow money on them (through one or more REPO lines)

    o The Trust only needed the payments to send on to the certificateholders (it didn’t need the actual loan assets)

    You can see this actual document here (the Prospectus for RASC Series 2005-EMX4 trust):

    X_http://www.secinfo.com/dsvRa.z46u.htm#16v4

    Dan Edstrom
    dmedstrom@hotmail.com

  20. “Specifically, the complaint accuses Credit Suisse and Cushman & Wakefield of racketeering, breach of fiduciary duty, mail and wire fraud, money laundering and negligence”

    Hmmm, everything I am seeing in the “deals” I am looking at.

    Dan Edstrom
    dmedstrom@hotmail.com

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