By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
Advantage Capital Group, a Phoenix-based collection agency that has pursued Reese through an elaborate sting and several federal courts, sued Reese and his wife last week claiming they engaged in "trickery, deceit, and fraud" by hiding assets abroad. In its suit, Advantage describes a Reese money pipeline that originates in the Cayman Islands, runs through Bermuda, and disgorges millions of dollars into shopping centers and other Reese properties in Dallas.
Advantage has hunted the 50-year-old developer since early 1997, (see "Hide and Seek," June 8), backing him into bankruptcy court and attempting to follow a bundle of leads from Reese's own mouth. Posing as Swiss bankers, Advantage investigators lured Reese to a Milan hotel and tricked him into talking about "my offshore money." As a hidden tape recorder rolled, Reese described how he thumbed his nose at the government and moved tens of millions of dollars into companies and trust funds owned by his wife and three children in advance of his imprisonment in 1992. Convicted of defrauding bank regulators and cheating the IRS, he spent three years in a federal prison camp before going back to work in Dallas' rejuvenated real estate market.
Reese's attorney, bankruptcy specialist Phil Palmer, calls Advantage's search for offshore assets "an Easter egg hunt with no eggs." He is equally skeptical of the new allegations. "Sooner or later they will have to bring this to a judge and then the b.s. and the lawyer-talk and pleadings will end. The judge will be looking for evidence. We'll see if they can come with it."
Stacey Napp, a principal in Advantage Capital, says her company's investigation of Reese yielded a breakthrough this fall when they discovered money that was being moved into a Dallas shopping center venture from an entity in Bermuda. At the same time, Napp says she began concentrating on a man named Michael Alberga, whom Reese named during the sting as someone whose confidence he counts on. Alberga is a lawyer in the Cayman Islands with considerable experience in asset protection, Napp says.
Advantage claims in its lawsuit that in1998, Reese refinanced a $50 million shopping center in Dallas, called Village on the Parkway, through an entity called 2001 Greenville Venture Ltd. It documents the transaction with a deed record showing that the source of the money was MSA Limited in Bermuda. Greenville Venture is an entity composed of Dunhill Partners, a real estate company associated with Reese, and a trust established for the benefit of Reese family members.
Advantage's lawsuit states that a private investigator hired by the company "has established the connection between Michael Alberga, the trustee of the hidden assets identified by Reese in the sting tapes, and Anthony Pilling, the agent for the Bermuda-based entity that refinanced the Village on the Parkway transaction."
The lawsuit says that similar transactions have been made over the past year and should have been disclosed to creditors. "Reese was duty bound to disclose the existence of the hidden assets," the lawsuit states.
In the past, Advantage has only been able to point to shreds of evidence--an overnight mailer slip, for instance--to back up their contention that Reese parked assets abroad, as he claimed in the sting.
"You're not going to find something labeled 'Lou Reese's Offshore Money Hidden Here, Please Don't Touch,'" says Napp, when asked whether the new evidence constitutes the type of solid claim that could stand up in court.
At the very least, Advantage and its lawyer, Gerrit Pronske, say the new information would be enough to keep Reese's bankruptcy from becoming final. If it did, Advantage would be forced to settle for about $1.7 million under a plan agreed to by Reese and the federal government. Advantage holds 15-year-old real estate notes originally worth $29 million. With interest, that amount has more than doubled.
"By filing this complaint, we have a vehicle to do more discovery and gain more information," says Pronske, who claims Reese's bankruptcy plan would yield his client nothing but promises.
Earlier this year, a lawyer for the Federal Deposit Insurance Corp. agreed to accept $500,000 to settle a $3.4 million criminal restitution claim pending against Reese. That money has already been paid, according to court documents, and a federal lien on Reese's large Preston Hollow estate has been released.
Now, the feds and a bankruptcy trustee are aligned with Reese against Advantage, which is the only creditor that wants to continue to fight. It is appealing the bankruptcy to the U.S. Fifth Circuit Court of Appeals in New Orleans, which has agreed to stay the matter and will hear the case early next year.
Arguing that the dispute has run its course, Robin Phelan, a lawyer for Reese's wife, Susan, quoted a proverb of the Wangoni tribe of Tanzania as capturing the essence of their views. "Nimetoka mbali, safari imenichosa," Phelan told one federal judge. "Which is Swahili for, 'I have come a long way; the journey has exhausted me.'"
Not Napp and Advantage Capital, who have a more protracted Caribbean treasure hunt in mind.
"We're still alive and kicking," Napp says. "I believe we will be successful in the end."