Paulson & Co. executives were sued for alleged conflicts in the handling of assets in the bankruptcy of a group of resorts including the Doral
Michael Barr, Daniel Kamensky and Jonathan Shumaker were sued in New York State Court by Five Mile Capital Partners, which accused them of “abject failure” to get the highest value for assets as directors.
“The conflicted directors not only ignored these valuable assets, but took affirmative steps to render them less valuable before, during and after the bankruptcy,” Five Mile said in the complaint filed yesterday in New York State Supreme Court in Manhattan.
The lawsuit stems from the bankruptcy filing in 2011 of five resorts owned by Paulson, a hedge-fund firm: the Grand Wailea in Hawaii, La Quinta and PGA West in California, the Arizona Biltmore, the Claremont in California and the Doral in Miami. Doral was sold to Donald Trump and the other four were sold to Government of Singapore Investment Corp., a sovereign wealth fund, for $1.5 billion.
Armel Leslie, a spokesman for New York-based Paulson, didn’t immediately comment on the lawsuit.
Five Mile is a lender under a $50 million mezzanine loan to an affiliate of MSR Hotels & Resorts Inc., which guaranteed the debt. MSR Hotels is one of a related group of companies that owned and operated the resorts, and it separately owns resort trademarks, logos and copyrights, according to the complaint.
Barr, Kamensky, Shumaker and a fourth defendant, Mohsin Meghji, were conflicted because they served as directors of MSR Hotels at the same time they were directors of subsidiary companies that owned the resort hotels, Five Mile said in the complaint.
They allowed the entities in bankruptcy to use the intellectual property without paying for the assets and allowed the Singapore fund to continue to use them at no cost, according to the filing. Five Mile, saying it’s entitled to damages of $59 million, is seeking a receiver to take control of the assets so they can be sold or licensed.
