A Chapter 11 bankruptcy petition filed by the developers of The Signature Towers at MGM is merely a ploy to delay discovery in a fraud lawsuit brought by purchasers of condominium units at the towers, said Norman Blumenthal, an attorney representing 545 condo owners.
The bankruptcy petition was filed June 26 in the U.S. Bankruptcy Court for the District of Nevada. Dr. Kenneth Wiles and his wholly owned entity Andare Corp., manage Turnberry/MGM Grand Towers LLC’s three high-rise condominium towers and are seeking relief from creditors. Each tower consists of 576 units for a total of 1,728 units. Debtors have identified more than 3,800 possible debtors, court filings show.
Blumenthal is founding partner of Blumenthal, Nordrehaug &Bhowmik, a California-based law firm. He said Turnberry/MGM Grand Towers, the developers of The Signature Towers, made $420 million in profit from the sale of the condo units.
“Our clients are seeking a return of out-of-pocket costs plus whatever the loss of value that occurred as a result of what we allege to be a bait-and-switch fraud scheme,” Blumenthal said. “The motions to dismiss have been denied in federal and state courts and in federally ordered arbitration and state-ordered arbitration, and the cases are now set for discovery.
“Basically, the bankruptcy petition is what we believe to be a strategic litigation filing.”
Units in the Signature Towers were sold as condominiums to individual owners who have the right to live in or rent their unit, court filings show.
However, Blumenthal said this is where the bait-and-switch occurred. While the purchasers of the units were told these would be luxury condominiums, the units were used as economy accommodations for Wet Republic clientele.
Wet Republic is a dayclub offering multiple pools, dance disc jockeys, cabanas, daybeds and a lounge at the MGM Grand.
“They advertised the units as luxury rental suites,” Blumenthal said. “Instead of renting the units at luxury prices, they were renting them for as low as $99 a night. As a result, most of the original purchasers were foreclosed upon and the property has in fact never recovered its value.
“The clientele is so rough that the Las Vegas Metro Police Department has a substation at the entryway to the Wet Republic, and they file thousands of incident reports a year,” Blumenthal said. “That is the clientele that they are putting into The Signature. That is not what the buyers were told, and not what was promised to them. Everything was concealed until after the closings.”
According to the bankruptcy petition, Turnberry/MGM Grand Towers claims at the time of initial sales (2004-06), the Las Vegas real estate market was active, with significant increases in real estate prices being realized annually.
Shortly after the construction of the third tower, the Great Recession of 2008 hit, devastating the local economy and real estate market.
Given the economic downturn, the petitioners claim the condo buyers’ lawsuits are a case of “buyer’s remorse.”
However, Blumenthal disputes that claim by Turnberry/MGM Grand Towers.
“The loss wasn’t caused by the downtown in the economy,” he said. “The loss was caused by a fraud scheme. All of those motions to dismiss filed by (Turnberry/MGM Grand Towers) as regard to the fraud claims have all been denied.
“This is not a case of sour grapes. This is a case of out-and-out, bait-and-switch fraud. They were selling luxury and delivered economy.”
Las Vegas attorney Greg Garman is representing Turnberry/MGM Grand Towers LLC. He did not return phone messages or an email by press time.