Fontainebleau files amendment to $3 billion lawsuit

Fontainebleau Las Vegas on Tuesday filed an amendment to its $3 billion lawsuit against a group of banks, claiming Deutsche Bank with a conflict of interest because of the bank's ownership of the nearby Cosmopolitan project.

Deutsche Bank is one of 11 lenders who pulled $770 million in Fontainebleau Las Vegas funding after serving the project's developer with a notice of default.

The amended lawsuit accuses Deutsche Bank of "seeking to destroy the Fontainebleau in order to minimize competition" against the $3.9 billion Cosmopolitan, which is owned by the bank and is scheduled to open the middle of next year.

The amended lawsuit seeks additional penalties against Deutsche Bank because of its role in stopping the Fountainebleau's funding.

The lawsuit accuses the bank of "tortious interference" in convincing other banks to breach their commitments to loan Fountainebleau the money to complete the project. Further, Deutsche Bank is continuing to undermine the developer's "attempts to resolve the pending dispute" with the banks, according to the lawsuit.

Deutsche Bank officials declined to comment on the lawsuit Tuesday.

Deutsche Bank is responsible for $80 million of the disputed loan. Five banks had committed more, including Bank of America, which controls $200 million of the loan.

Bank of America officials have said they are in discussions with the developer regarding restructured financing for the Fontainebleau. Bank of America officials could not be reached for comment Tuesday.

The Cosmopolitan will have 2,998 hotel-condominium units on 8.5 acres on Las Vegas Boulevard between MGM Mirage's CityCenter and Bellagio properties.

The $3.1 billion Fontainebleau project, scheduled to open late this year, is designed for 3,815 hotel and condominium units on 24 acres on the Strip.

Both projects are designed with casinos, retail, restaurants and other amenities.

Deutsche Bank bought the Cosmopolitan in a foreclosure sale in August for $1 billion after original developer Bruce Eichner defaulted on the project. The bank has been funding construction.

Deutsche Bank is rumored to have an agreement with Hilton Hotels Corp. to purchase the Cosmopolitan prior to its completion, although both sides have declined comment.

In the initial lawsuit, filed April 23 in Clark County District Court, Fontainebleau's developers said they did not default on any loans and that the banks' termination of the loan was "nothing more than the banks' baseless attempt to walk away from the project and abandon their obligations."

The project's officials and supporters, which includes Senate Majority Leader Harry Ried, have pointed out that many of the banks that stopped the loans received billions of dollars in federal bailout money that was intended to be used to increase the flow of credit for businesses.

The Germany-based Deutsche Bank, however, received no federal money from the U.S. government.

The lending dispute has forced construction on the Fontainebleau project to a near standstill with the vast majority of the 3,300 construction workers laid off in late April.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.