REAL ESTATE

Suit alleges fraud in cross collateralization of real estate

 

mbrannigan@MiamiHerald.com

An investor in Palmetto Gardens Industrial Park in Hialeah accused his fellow investors of fraudulently cross collateralizing the property to refinance more than $20 million in defaulting loans on other properties.

The suit was filed in Miami-Dade Circuit Court by MP LLC, which is controlled by Miami businessman Seth Nachman, against fellow investors in Sterling Holding LLC, the owner of the Hialeah warehouse. It alleges the defendants conspired to pledge the jointly-owned property as collateral on other investments without Nachman’s knowledge.

“Seth would never ever ever agree to cross collateralize his property with others,” said Glen H. Waldman, an attorney for MP and Nachman.

The defendants include Miami Beach attorney Eugene J. Howard; Scott Weinberg, a hotel investor; and Julio C. Arriaga, the property manager and and investor in Sterling.

The lawsuit, which seeks damages and appointment of a receiver, also names Howard’s wife, Elsie Howard, past head of the Miami Beach Visitor and Convention Authority, who wasn’t involved with Sterling, but allegedly “collaborated’’ with her husband in the matter.

Paul Sack, an attorney for Eugene Howard, Arriaga, and Sterling Holding, said, “This is a classic Miami story. People got into a deal when the market was roaring along. When the market turned south and the money is not rolling in, everyone is looking to blame someone else.’’

Sack added: “None of these folks have done anything wrong.’’ Sack said Nachman knew about the cross collateralization, which was properly authorized by 87.5 percent of the investors back when the loans were refinanced in 2010.

William Richey, a Miami attorney for Elsie Howard, said the allegations against her “are completely incorrect. They’re just wrong.’’

The suit also names Manuel J. Vadillo, a title attorney, and Walter Steadman, a Miami Beach businessman who wasn’t an investor in Sterling, but in other properties the investors were involved in. They couldn’t be reached.

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