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Wednesday, September 16, 1998
Peccole Ranch co-developers face lawsuit by Canadian bank
A lawsuit alleges a banking exec took bribes to approve a new loan for the world's largest mall.
By John G. Edwards
Review-Journal
A family of Canadian developers with several major Las Vegas projects is fighting a $297 million lawsuit filed by a Canadian government bank seeking to throw the world's largest shopping mall into receivership.
Alberta Treasury Branches, a bank run by the province of Alberta, filed a lawsuit earlier this year that until recently was in large part kept secret.
The bank accuses Elmer Leahy, former head of ATB, of accepting bribes from the mall's four owners -- the brothers Nader, Eskandar, Raphael and Bahman Ghermezian, according to the Globe and Mail in Toronto and other Canadian newspapers.
The Royal Canadian Mounted Police Tuesday acknowledged they were investigating the matter but declined to elaborate.
The lawsuit alleges the bribes were made to obtain $279 million in refinancing for West Edmonton Mall in 1994.
Nader Ghermezian last week denied there was wrongdoing.
"The whole thing is a joke," he said in a telephone interview from Canada. "This is all rubbish."
The bank alleged every violation it could find in the book, without regard to the truth, hoping something would stick in court, Nader Ghermezian said.
He said West Edmonton Mall, a 5.2 million-square-foot retail center, is financially strong and has made timely payments on the loan.
Ghermezian said Paul Haggis, the new president of ATB, is trying to force the family to repay the loan 16 years early. Haggis wants to clear the loan from the books so the bank can be sold for a higher price in a privatization move, the developer said.
Haggis referred a call for comment to a spokeswoman who referred to the lawsuit itself.
The developer said the bank has tried to terminate loans to other borrowers, including Peter Pocklington, the owner of the National Hockey League's Edmonton Oilers.
Nader Ghermezians said the family will challenge the suit and expects to keep its loan, because the terms are more attractive than the family could get by refinancing.
The Canadian lawsuit will have no effect on the $300 million in real estate developments the family plans over the next four years in the Las Vegas area, said spokesmen for Triple Five Nevada Development Corp., the family's Nevada development arm. Nader Ghermezian said the family's developments in Las Vegas and around the United States are held by corporations separate from their interests in Canada.
"We are very much operating on a business-as-usual basis," said said Martin Walrath IV, president of Triple Five Nevada Development. "If anything, business is expanding,"
The Ghermezians own the Mall of America in Bloomington, Minn., which is the world's second-largest shopping center, and have other interests in San Jose, Calif., Seattle and Phoenix, company executives said.
"Vegas is our No. 1 priority across North America," Walrath said.
The company has 12 years of developing experience in Southern Nevada, including the Ghermezians' role as co-developers of Peccole Ranch community with the Peccole family.
Triple Five will hold grand opening celebrations today for Village Square at Peccole Ranch, a retail center on the northwest corner of Sahara Avenue and Fort Apache Road.
The project includes the 18-screen Act III movie theater complex and 60,000 square feet of space including shops, cafes, a hotel, the Sahara West Library and Fine Arts Museum. Also, it has apartments and 50,000 square feet of office space, according to Triple Five Nevada. It will operate 350 apartments.
The company also is developing $150 million Boca Park on the northeast corner of Charleston and Rampart boulevards. The 96-acre project will include a Target and other retail outlets as well as offices, condominiums and hotels.
It developed Rainbow Sahara & Rainbow Center, Grand Canyon Commercial Center and other projects for a total of 4 million square feet of retail development in Las Vegas. It has two apartment complexes, Wellington Meadows and La Villa Estates.
"Las Vegas has gone through a tremendous growth spurt in residences and now we believe it will be going through a tremendous retail commercial growth in the suburbs," Walrath said.
The family applied to establish Peoples First Bank in Las Vegas, but withdrew its bank application from the Nevada Financial Institutions Division in August. Dan Reaser, an attorney in the bank application, said the withdrawal was unrelated to the Canadian lawsuit.
Rod McLennan, an Edmonton attorney representing the family, denied all of the allegations in the ATB lawsuit. He said they will file a counterclaim against ATB.
"For the most part, the material that has been filed by (ATB) is hearsay and a great deal of it isn't admissable (in court)," McLennan said.
Contrary to the bank's claims, "the West Edmonton Mall is doing extremely well," Nader Ghermezian said.
ATB affidavits say the mall has 11.7 percent vacancy and is poorly maintained, according to the Edmonton Sun.
The bank claims the mall is worth $200 million, less than the $277 million it has at risk. The mall needs $66 million in improvements, according to ATB. If ATB's suit succeeds, the mall will remain open but will be managed by KPMG Inc.
The mall has always made loan payments on time and has $12 million in its account at ATB, Nader Ghermezian said.
"The loan is solid as gold," he said.
Nader Ghermezian said there was no reason to bribe a bank official because the loan was approved by the province's premier and the ministers of his Cabinet. The Alberta officials favored the loan because the mall is the province's top tourist attraction, is responsible for 23,000 jobs, and generates $227 million in taxes, he said.
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Triple Five Nevada Development, a company controlled by the Ghermezian family, holds its grand opening for Village Square at Peccole Ranch at 7 p.m. today. But it is fighting a lawsuit brought by a government-owned bank in Edmonton, seeking to push West Edmonton Mall into receivership.
Photo by Gary Thompson.
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