PHOENIX (CN) - Four members of Scotland's Loch Lomond Golf Club claim the club is $120 million in debt, used their money to pay debts to the Bank of Scotland, and took out more loans for other ventures. The plaintiffs wonder what, if anything, they will get for their $100,000 memberships.
Loch Lomond Golf Club counts actor Sean Connery and Britain's Prince Andrew as members, according to Scottish media reports.
Landstar Holdings West, the club's former owner, bought the golf club in 1994 with money borrowed from the Bank of Scotland, which has financed the club's operations since then, according to the federal complaint.
The bank "developed a close relationship" with Landstar owner-defendant Lyle Anderson, and became primary lender for most of his companies, according to the complaint.
On May 20, 2003, the plaintiffs say, they received a letter describing the club's plan to "initiate a new membership structure and to add additional club facilities," including a new links golf course, more rooms and cottages, a Jack Nicklaus-designed golf course, and a new "golf house." The letter claimed the new facilities would cost more than $100 million.
"Under the new membership structure, existing members would be afforded the choice of converting to a new membership or permitting the club to recall the membership and refund their initiation fee in full," according to the complaint.
The complaint adds: "The membership deposit for the new membership plan was $100,000. Existing members, however, would be allowed to convert their membership for $80,000 and receive a credit for the initiation fee they had previously paid."
Two of the four plaintiffs say they had paid $100,000 apiece for their memberships.
They say that since they converted their memberships, "the Nicklaus-designed course has not been constructed, there have been no new club facilities, no golf house, and only 14 of the 40 promised rooms have been built."
They claim that loans made to Anderson's companies were "commingled and used to repay obligations that other Anderson companies owe to the bank." And they say the club "re-borrowed" money from the bank to finance Anderson's other companies.
The Bank of Scotland has "given notice of its intent to exercise its purported rights as a secured creditor and to extinguish the rights of the club's members, including the rights of the plaintiffs; place the club into receivership and thereafter foreclose," according to the complaint.
The bank plans to sell the club's assets to DeVere Hotel Corp.
"Upon information and belief, the Club is now insolvent, and its liabilities exceed its assets by roughly $120 million," the complaint states.
"The Bank has given notice of its intent to exercise its purported rights as a secured creditor and to extinguish the rights of the Club's members, including the rights of the Plaintiffs; place the Club into receivership and thereafter foreclose.
"If the Bank succeeds, Plaintiffs, and their fellow members, will suffer irreparable harm and lose their membership rights in the Club and their refundable membership deposits which total approximately $75 million."
Plaintiffs seek an injunction to stop the sale of the golf club and damages for fraud, breach of fiduciary duty and aiding and abetting. They are represented by Richard Herold with Hinshaw & Culbertson.
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