Most Americans would like to think that the 2008 financial crisis is far behind them. However, for Highland Capital Management and Credit Suisse, there are still remnants of that time. These two companies are currently embattled in a lawsuit pertaining to a joint venture they had in Lake Las Vegas. After a lawsuit was filed in 2010, Highland won the case, and after the deadline for Credit Suisse to repay $360 million to Highland passed, they are now appealing the decision.
It began when Highland Capital Management and Credit Suisse were involved in the Lake Las Vegas project, a real estate project that was meant to be an “oasis in the desert.” The project encompassed 9,000 homes and condominiums, two hotels, and the man-made lake from which it got its name.
The project however, collapsed during the financial crisis, leaving 31 companies that helped finance the project at a loss of $540 million. Lake Las Vegas ended up filing for bankruptcy in 2017. Many companies, such as Highland, also went bankrupt in the deal.
It is an unfortunate story, and one that many companies and individuals found themselves in during the financial crisis. For Highland Capital Management though, there was something more to it. Scott Ellington, general counsel for Highland, believed there was as well.
The biggest red flag appeared when determining the property’s value. When Credit Suisse provided an independent appraisal at the beginning of the project, the appraised value was set at $891 million. After the project filed for bankruptcy, it had a value of only $23 million. Knowing that such a property could not lose so much value in such a short amount of time, that was when Highland filed their fraud lawsuit against Credit Suisse.
After the case first went to court, a Texas court found in favor of Highland Capital, and demanded that Credit Suisse pay $360 million to Highland. After the decision went to appeal court, the judgement remained the same. After the appeal, Credit Suisse was to repay the full amount by July 18, a deadline that has now passed. Still fighting the lawsuit, Credit Suisse is now taking their appeal to the Texas Supreme Court.
“This just shows,” says John L. McCraw III of The McCraw Law Group, “that no one is immune to the law, not even major banks or investment funds. Everyone is expected to conduct business honestly and when they fail to do so, they can be held accountable. This is an important case that will likely see many others following in Highland’s footsteps, as now it has been proven that it can be done.”