Billionaires and Bankers Tangle in Luxury Real Estate Suit

Just because you're rich and do business with a famously reputable Swiss bank doesn't mean you won't get filched in a real estate scam.

Yes, it turns out, the rich are like us - easily suckered into buying homes at inflated bubble prices and then, when the Great Recession hits and the real estate market tanks, going down in flames. Just on a grander scale.

That's why 3,000 well-heeled investors are suing Credit Suisse and real estate services company Cushman & Wakefield for $24 billion in damages, alleging that the bank defrauded them in a vast "loan-to-own" scandal involving luxury properties in mountain resorts in Montana, Nevada and Idaho.

As in Detroit, Florida and other locales hammered by the real estate crisis, many of these swanky outposts have gone bust, leaving investors less rich than before as the sub-prime mess moves up the value chain.

So let's all shed a tear for these folks and their investments gone awry: the property owners say they were hurt because Credit Suisse, among other alleged crimes, promised amenities such as golf courses, ski runs and lifts, restaurants, pools and trails - and failed to deliver, as the Wall Street Journal writes.
But wait, there's more: the lawsuit, according to the New York Times, the Swiss are accused of racketeering, breach of fiduciary duties, mail and wire fraud, money laundering and negligence. Did we forget anything? Oh, because this is a Swiss bank, there are Iranian and Cayman Island connections, too.

(The suit, says the Times, describes Credit Suisse as an "international banking predator." On the other hand, that's better than "a great vampire squid wrapped around the face of humanity," as another investment bank has been called.)

But we digress. Here's what supposedly went down at resorts like the famed Yellowstone Club in Big Sky, Montana, where Bill Gates and other bigwigs hang out.

Allegedly, the Swiss were eager to loan money against the properties, raking in huge fees, then bundling the loans and selling them to hedge fund managers, according to the complaint. If the resorts couldn't pay back the loans, which the plaintiffs say were based on inflated values, Credit Suisse could either assume ownership or sell the properties. After the resorts defaulted, the bank moved to foreclose.

Still with me? Property owners contend that the Swiss were out to make money on both ends of the deal - smart! - - collecting millions in fees and then flipping the resorts, foreclosing on the properties and buying them back at fire sale prices, MSNBC reports via Reuters.

Now comes the Hollywood thriller part. The suit alleges the Swiss financed the scam with money from a separate fraudulent scheme to help Iranian banks dodge U.S. economic sanctions, for which the Swiss recently agreed to pay the U.S. $536 million to settle a lawsuit (that's not the same case in which the IRS is pursuing Credit Suisse for helping American citizens evade paying taxes).

Profits from the Iranian dealings were funneled through a Cayman Islands bank branch to high-end mountain resort developers, the lawsuit alleges.

Credit Suisse and Cushman & Wakefield say the suit is without merit.

But tell that to Timothy Blixsmith, a developer of Yellowstone Club and one of the plaintiffs who had planned to build a 53,000-square foot (you read that correctly) home at the resort. The Times says the club's new owners had some of Blixsmith's possessions removed - including a black walnut throne from a Bavarian castle.

Best of luck to Blixsmith. Everyone has a right to seek justice if a crime has been committed. But let's get real here and think about the lower and middle-income folks who've been tossed out of their homes and are living in motels and shelters. They're the true victims of this real estate bust.
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