Ex-tenants sue Boca Park developer

He looks more like a Luigi than a Versace.

Rick Knight acknowledges the transition from pizza chain owner to a women's fashion boutique operator five years ago was unusual, but he said he was persuaded by the Canadian-based Ghermezian family to switch paths in 2003.

He would be able to afford Ferraris, he said he was told. He could open 30 more shops across the country. He could be one of them -- a billionaire.

Knight believed it. After all, he said, the suggestion came from a wealthy developer who built America's largest shopping center, a worldwide tourist attraction.

And so he opened his first boutique, Rage, at Boca Park in Summerlin in 2003.

"When you meet with these guys, they are so intimidating, they are so powerful. You think their word is gold," said Knight, whose Mr. Eatz pizza stores had turned him into a successful Las Vegas businessman.

Knight is referring to the father-son team of Eskander and David Ghermezian, now defendants in lawsuits filed by Knight and six other former tenants of Ghermezian properties who claim the family's business tactics torpedoed their dreams and left them broke.

The six tenants are being sued by the Ghermezian's Triple Five Nevada Development Company for breach of contract. Each filed counter-suits echoing Knight's complaint that they were "induced to enter into leases based on unfair bargaining practices and unconscionable conduct."

They also claim they signed their leases under false pretenses that the shopping centers were thriving when in reality they struggled. The former tenants say Triple Five agreed to release them from their leases and then sued them for breach of contract and lost rent.

"Basically what they (the Ghermezians) did was they came here to Las Vegas as entrepreneurs and they're making their millions off the backs of locals," said Sigal Chattah, a Las Vegas attorney representing the former tenants. "They have managed to use the locals' money and bring locals in to conduct their business in a way that lacks serious integrity."

Knight admits he had no business entering the fashion industry. A high school drop-out, he worked as a cook at a pizza joint. Driven to succeed, he opened five pizza restaurants in Las Vegas. His fortunes allowed him to purchase a high-end home, investment properties and luxury cars.

Knight says he now has nothing.

He blames his loss on the Ghermezians, whom he claims persuaded him to lease larger units and promised he would make profits of $40,000 each month with his Rage boutique. He said the Ghermezians encouraged him to open more stores, so Knight leased space in three other Ghermezian shopping centers. Within three years, he was broke.

"I lost my wife, I lost my houses, I lost my cars, I lost my friends; I lost everything," the 33-year-old said Tuesday. "My friends went bankrupt because of me."

Knight claims the Ghermezians steered him away from the restaurant business because retail is more beneficial to commercial developers. Retail shops are more stable and therefore more appealing to loan institutions, he said. And knowing that his stores were struggling, they persuaded him to open more, he said. Things would turn around, the developers promised, according to his lawsuit.

"I'm not a victim; I'm not stupid," Knight said. "But I'm talking to these people who are powerful and they believed in me."

Andrew Rankin, an attorney for Triple Five Development, said it was Knight who proposed opening a clothing boutique and the Ghermezians did what they could to accommodate him.

"This has gained publicity because it's Triple Five," Rankin said. "I don't think the claims have any merit whatsoever."

The names Ghermezian and Triple Five gained unwanted attention in Las Vegas two years ago during a political corruption scandal that sent four former Clark County commissioners to federal prison.

Former Commissioner Erin Kenny, the government's star witness, testified in 2006 that Eskander Ghermezian delivered to her $3,000 a month in illegal payments over a three-year period after she attempted to push through a controversial casino in the Spring Valley neighborhood.

"Las Vegas has worked very hard to get rid of the reputation for corruption that it had for the past 20 years," Chattah said. "The Ghermezians are now bringing their toxic business practices back into the new Las Vegas."

Neither the Ghermezians nor their development company have been criminally charged in connection with the political corruption case.

Disgruntled former tenants of Ghermezian-owned properties say they fear the family is so powerful, they might be deprived of a fair trial. They are in the process of requesting that all seven lawsuits be consolidated.

"I'm not implying there is any wrongdoing," said Chattah, who agreed to represent the tenants on a contingency fee basis. "But it would be suspect to deny" the request to consolidate the cases.

Chattah said the complaints are virtually identical and it would be a waste of taxpayer money to hold seven separate jury trials. Consolidating the cases would strengthen the tenants' claims before a jury, she said.

Rankin said Chattah convinced the business owners they have a case when in reality, the Ghermezians were not to blame for the failing businesses.

"I think they are all latching on to a theory she created," he said. "The realistic thing is there are certain tenants who vacated their units and didn't fulfill their lease obligations."

Boca Park's current tenants are doing very well, the attorney said. Vacancies are higher at the 145-unit Village Square, he said, but the economy could be a factor.

Rankin suggested it is a coincidence the seven tenants involved in the legal dispute find themselves in the same position.

"They may have been under-capitalized," he said.

The tenants tell a different story.

Knight believes he was wronged by the Ghermezians when they persuaded him to open four clothing shops, even though he was pulling in as little as $50 a day on units the family said would generate profits of $40,000 a month. He said the company never conducted background checks on his finances or credit.

"I was investing on their promises," said Knight, who added he believed he was forging a solid business and personal relationship with Eskander Ghermezian.

Knight said he now believes he served as a pawn that allowed the Ghermezians to dupe other business owners into leasing space at shopping centers loaded with vacancies. When prospective shop owners toured his store, Knight said, the Ghermezians urged him to misrepresent his profits. He figured he would also benefit by turning neighboring vacancies into thriving businesses.

"I'm floored," Knight said. "Everybody got sucked in because of me."

The Ghermezians told prospects of Knight's riches.

"They pointed to his Range Rover and said he owned a million-dollar home," said Amjad Kisswani, who signed a lease to open a frame shop at Village Square, at Sahara Avenue and Fort Apache Road after seeing Knight's business.

But in reality, Knight had refinanced his home, sold investment properties and borrowed from friends and families to stay afloat. To keep their hopes of bringing in more lessees, Knight said the Ghermezians kept his businesses alive by allowing him to operate rent-free for a year.

Knight figures the Ghermezians lost out on $3 million because he didn't pay rent on his 16,000-square-feet of retail space.

And Knight is the only one of Chattah's clients who has not been sued for breach of contract by the Ghermezians. Knight thinks the family backed off because of favors he provided. He said he signed bogus leases worth nearly $20,000 so the Ghermezians could secure loans.

"Rick is the first one suing that hasn't been sued," Chattah said. "They knew he could whistle-blow. He's the one who should have been sued."

Rankin balked at Knight's allegations. He said Eskander Ghermezian met only once with Knight to wish him well. Claims that the Ghermezians requested Knight sign bogus leases for loans are "absolutely incorrect," he said. Rankin added that a lawsuit wasn't filed against Knight because he was in collections.

Kisswani's case was different.

He signed a lease to open a picture frame shop at Village Square in February 2006. He was told of an advertising campaign for the shopping center and that all necessary improvements on his space would be completed by August. In November, his unit still was not ready.

Kisswani said he received a phone call from Triple Five saying it had another businessman interested in leasing the unit. Kisswani, having lost money after he invested in merchandise but was unable to recoup the costs in sales, obliged.

"I thought it was over," he said.

But in February 2007, Kisswani was served with a lawsuit saying he owed the company $300,000. Fearing the suit would ruin him financially, Kisswani closed two other businesses he owned on the Strip.

Liberty Curtis opened Liberty Touch, a home decor store, at Village Square in 2006. She too said the Ghermezians told her the shop would bring in $40,000 a month. Instead, she netted $1,000 a month. She said that with Triple Five's blessing, she opted out of her lease after her business was burglarized twice.

She said although her space was leased immediately, the company is suing her for $498,000.

Curtis said she was headed into bankruptcy when she contacted Chattah for representation.

Rankin said the tenants' claims are simply untrue. He explained that the Ghermezians are a successful business family that cares about its tenants and does what they can to accommodate them.

"We are willing to work with our tenants," Rankin said. "For a lot of them it's their first store and we sympathize with their plight. We are always willing to negotiate."

Contact reporter Adrienne Packer at apacker@reviewjournal.com or (702) 384-8710.