Vestin conversion trial to resume in January with more testimony

The trial in a class-action lawsuit against Vestin Mortgage of Las Vegas and two real estate investment trusts will resume next year.

California Superior Court Judge Joan Lewis recessed the trial in San Diego on Tuesday and scheduled testimony to start again on Jan. 5, said plaintiffs' attorney Erwin Shustak.

The plaintiffs are 1,400 investors in two Vestin real estate funds who voted against converting the funds into real estate investment trusts in 2006. The investment trusts are called Vestin Realty Mortgage I and Vestin Realty Mortgage II.

The lawsuit claims that the dissenters were entitled to cash for the value of the fund units at the time of conversion and says Vestin gave them shares in the investment trusts, instead.

Since the conversion, the market price of the two investment trusts has fallen in trading on the Nasdaq National Market.

If Shustak wins the lawsuit, both Vestin Mortgage, which is operated by Mike Shustek, and the two investment trusts would be liable for a judgment, Shustak said.

However, Vestin Mortgage and Mike Shustek may be entitled to indemnification from Vestin I, according to reports filed with the Securities and Exchange Commission.

The latest quarterly financial reports show that Vestin II has about $6.6 million in legal expenses related to lawsuits over the conversion, of which $2.2 million have been reimbursed through directors' and officers' insurance. Vestin I has incurred $1.3 million in legal expense for these conversion lawsuits of which $500,000 have been reimbursed through directors' and officers' insurance.

The two Vestin investment trusts together have about $3.4 million in cash and marketable securities.

Shustak expects the judge to rule in the nonjury trial some time during January. Vestin spokesman Steve Stern of Stern and Co. public relations said Vestin doesn't comment on lawsuits.

Vestin I was unchanged Thursday, closing at $1.25 a share on the Nasdaq. Vestin II gained 2 cents, or 1 percent, to close at $2.14 on the Nasdaq.

Contact reporter John G. Edwards at jedwards@ reviewjournal.com or 702-383-0420.