Frank Sinatra bought the Cal Neva resort, on Lake Tahoe, in 1960 with Dean Martin and Chicago mobster Sam Giancana, an association that led to Sinatra’s gambling license being suspended by the Nevada Gaming Control Board. After passing through various hands, including a lease to movie mogul Jack Warner and purchase by Kirk Kerkorian, it was bought in 2013 by defendant Criswell Radovan LLC, and closed for renovations. It was never reopened and Criswell Radovan filed for bankruptcy in 2016.
Nevada-based IMC Investment Group CNR on Wednesday accused Criswell Radovan owners Robert Radovan and William Criswell of bilking investors of $20 million.
Co-defendant Brandyn Iverson bought the Cal Neva Lodge with the other defendants in 2013, according to the complaint. The trio prepared a private placement memorandum seeking to raise $18 million from investors to renovate the 191-room lodge and its 17,000-square-foot casino, IMC says.
The defendants told prospective investors in 2014 that the lodge and property were in good condition and it would cost about $32 million and take a year to renovate it, IMC says. After making various other representations, described in the complaint, “Finally, Criswell, Iverson and Radovan represented [that] only $14 million was actually needed in equity to complete the project, and an additional $6 million to fully subscribe the $20 million outlined in the PPM would provide a ‘cushion’ for the project,” the complaint states.
IMC says the defendants falsely represented that they were experienced luxury property developers who played critical roles in redeveloping the Ritz Carlton in San Francisco, Aetna Springs in Napa Valley and the Calistoga Ranch in Napa Valley. They claimed those projects demonstrated their expertise and success in “developing one-of-a-kind properties in markets with very high barriers to entry,” according to the complaint.
Actually, IMC says, the defendants “had limited or no involvement or were pushed out of the projects for poor management.”
Based on these representations, IMC says, it became the project’s largest investor, contributing $6 million on Aug. 26, 2014.
During an investors meeting in February 2015, IMC says, the defendants said the project was on budget and would open by the end of the year. But $11 million in cost overruns created the need for another $15 million in debt, which jeopardized the project by mid 2015, according to the complaint.
IMC says the defendants secretly agreed to obtain another $1.5 million from an existing investor and agreed to conditions that harmed other investors, without seeking approval from them.
The defendants sought even more loans to complete the project, but failed, and Cal Neva Lodge and New Cal Neva Lodge filed for chapter 11 bankruptcy in June 2016, according to the complaint.
The bankruptcy court auctioned off the property to Lawrence Investments for $38 million on Sept. 14, 2016, IMC says. That money will go toward partially paying off loans and partial payments to contractors and subcontractors, while all of the equity, including IMC’s $6 million, is wiped out, IMC says.
IMC seeks more than $6 million in damages, and treble damages, punitive damages, lost profits and attorneys fees for RICO fraud, breach of fiduciary duty, negligence and fraud in the inducement.
A telephone call to Criswell Radovan in St. Helena, California, received a message saying the company’s voicemail is full and incapable of accepting messages.
IMC is represented by Richard Campbell Jr. in Reno, who could not be reached for comment after office hours Wednesday.