Highland Capital Management’s Claymore Holdings Wins $40 Million Verdict Against Credit Suisse
Jury Finds Swiss Bank Fraudulently Induced Funds Managed by Highland Capital Management to Participate in 2007 Refinancing of Lake Las Vegas Development
DALLAS, Dec. 19, 2014 /PRNewswire/ — Highland Capital Management L.P. (“Highland”) today announced that a Highland-managed entity, Claymore Holdings LLC, won a $40 million verdict against Credit Suisse after a Texas State Court jury found the Swiss firm concealed key information in order to fraudulently induce Highland to participate in a 2007 refinancing of the Lake Las Vegas development, including primarily concealing relevant facts and conspiring with appraisers to inflate valuation.
“The avarice and reckless disregard displayed by Credit Suisse for lenders to Lake Las Vegas and in other, similar deals, such as Yellowstone, Promontory, Tamarack, Ginn, Turtle Bay, Rhodes Homes, Flag (Anguilla), and North Las Vegas, was the most egregious behavior we had seen in 30 years,” said James Dondero, Highland’s Co-Founder and President. “We are proud to have recovered damages for our funds and investors.”
The 12-member jury found Credit Suisse liable for fraud after a three-week trial in Dallas. Claymore Holdings accused Credit Suisse of fraudulently manipulating the property’s appraisal, artificially inflating the value of the Lake Las Vegas Development. According to the 2013 lawsuit, Claymore Holdings believes the appraisal methodology was concocted by David Miller, Credit Suisse’s Co-Head of Global Credit, and promoted by Dana Klein, Managing Director at Credit Suisse, after prior appraisals failed to place sufficient value on the Lake Las Vegas collateral to warrant the $540 million refinancing.
“We pursued this litigation only after repeated attempts to reach a settlement with Credit Suisse. We simply wanted Credit Suisse to take responsibility for contriving and manipulating the appraisal process,” said Scott Ellington, Chief Legal Officer and General Counsel for Highland. “We want to thank the jury for their service and are pleased they held Credit Suisse accountable for its actions.”
During trial, the evidence showed that Credit Suisse increased the value of the collateral by more than $230 million over a single weekend. Credit Suisse, as agent lender for the refinancing, never disclosed the change in the value to the lender group, Claymore Holdings said in the lawsuit. Despite telling investors that Credit Suisse also was putting its own money into the investment, Credit Suisse began taking steps to exit its own position on the very day the loan refinancing closed. Months later, Lake Las Vegas filed for bankruptcy protection and the property ultimately sold for less than 2% of the original appraised value.
As detailed in recent media reports, the appraisal firms and the deal sponsor settled for approximately $150 million in aggregate.
Claymore Holdings was represented by William T. Reid IV, Lisa S. Tsai, and Nathaniel J. Palmer of Reid Collins & Tsai LLP. Credit Suisse was represented by T. Ray Guy and David J. Lender of Weil, Gotshal & Manges LLP and Jeffrey M. Tillotson of Lynn, Tillotson, Pinker & Cox LLP.
About Highland Capital Management
Highland Capital Management is an SEC-registered investment adviser which, together with its affiliates, has approximately $19 billion of assets under management. Founded in 1993 by Jim Dondero and Mark Okada, Highland is one of the largest and most experienced global alternative credit managers. Highland’s strategies include collateralized loan obligations (CLOs), high yield bonds, distressed credit, public and private equities, structured products and natural resources.