ZURICH (Reuters) - Credit Suisse (CSGN.S) said on Friday it would fight on after a Texas appeals court upheld a $351 million award against the Swiss bank over its role in a Las Vegas resort project whose finances collapsed a decade ago.
The Texas Court of Appeals this week upheld the award, which includes damages and interest, in favor of Texas-based Highland Capital Management that in 2007 helped refinance the Lake Las Vegas resort on an artificial Nevada lake.
The decision followed a 2014 Texas jury's conclusion that Credit Suisse had fraudulently enticed investors including Dallas-based Highland to back a $540 million loan, only to have the Lake Las Vegas project quickly seek Chapter 11 bankruptcy. [reut.rs/2EOy1wk]
On Friday, Credit Suisse said it would continue its appeals, a process it expects to take up to 12 months.
“Credit Suisse ... does not believe the decision is supported by applicable law,” the bank said in a statement.
“This is a legacy matter dating back to 2007. Given the number of favorable verdicts in Credit Suisse vs Highland Capital cases to date, we look forward to the outcome of the appeal process.”
The case can now go to the Texas Supreme Court.
Credit Suisse said it would not have to pay anything until the matter was finally resolved, though Highland said the judgment would accrue at an annual interest rate of 9 percent.
“Today’s ruling is a major milestone in our efforts to recover damages for our investors,” said James Dondero, president of Highland Capital Management.
“We are pleased the appellate court recognized the harm caused to our investors by Credit Suisse’s fraud and breaches of contract.”
Lake Las Vegas was among ill-fated real estate projects that included Tamarack Resort in Idaho, Montana’s Yellowstone Club and resorts in Florida, North Carolina and the Bahamas in which Credit Suisse arranged some $3 billion in syndicated loans to fund their development.
When resorts' finances collapsed around 2007, some investors alleged Credit Suisse and others committed fraud by using an unacceptable appraisal method to overvalue the properties. [reut.rs/2HERscZ]
A separate lawsuit in U.S. District Court Idaho alleging a predatory “loan-to-own” scheme by Credit Suisse was dismissed in 2016, the Swiss bank said in its 2016 annual report, though plaintiffs are appealing.
Meanwhile, there have also been lawsuits in New York state court pitting Highland against Credit Suisse, some of which have been settled.
Lake Las Vegas and other resorts were partially completed when their finances collapsed during the 2007-8 financial crisis. Some, including Lake Las Vegas, the Yellowstone Club and Tamarack, have continued in various forms following the entry of new investors.
Editing by Mark Potter