Developer, John Niemi (Andy Cross, The Denver Post)
An Austrian businessman has been ordered to pay $62 million to a Colorado developer, professional golfer Jesper Parnevik and another investor in a Breckenridge condominium deal that collapsed in debt.
But Erwin Lasshofer, a resident of Salzburg, apparently has no intention of paying, despite mounting fines of $10,000 a day, a warrant for his arrest for contempt of court and the wrath of an increasingly frustrated federal judge.
"Suffice it to say that this was a first in this court's experience," U.S. District Court Judge R. Brooke Jackson of Denver wrote in an order in April.
Jackson also ordered Lasshofer to pay $10,000 a day until he ponies up $2.18 million to Parnevik, developer John Niemi and Robert Naegele, a
Investor, Bob Naegele (Andy Cross, The Denver Post)third partner. That tab reached $820,000 on Sunday, but Lasshofer has ignored every order issued by Jackson. Kevin Evans, Lasshofer's lawyer, said Lasshofer has no U.S. assets that could be seized.
It is unlikely that the arrest warrant will lead to Lasshofer's extradition, said former Denver District Court Judge Christina Habas, a lawyer with Keating Wagner Polidori Free. "Even though it is a criminal process, it is in a civil case. Now, if he was under indictment ... "
Evans said the plaintiffs ? Niemi, Parnevik and Naegele ? have no grounds for their lawsuit, and have misled Jackson. Lasshofer's lawyers also say Jackson lacks jurisdiction in the case, and they are appealing the judgment.
Lasshofer didn't return calls from The Denver Post.
"The way he has been treated thus far, he has no appetite to speak to anybody in the states," Evans said. "Everything that has happened in this case has been suspect."
Niemi's lawsuit in U.S. District Court in Denver claims he and his partners were duped into paying millions in upfront money to Lasshofer and Michael Burgess, who worked with him, in return for financing to build the Breckenridge development.
Burgess and Lasshofer never delivered and the project fell apart, leaving Niemi and his investors with losses that Jackson calculated to be the $62 million in damages he awarded.
Judge: "They got taken"
"I have a great deal of sympathy for their situation. They got taken, taken out of a lot of money. This project would have been a huge success but for the lack of funding," Jackson said.
Niemi's tale begins in 2006, when he purchased three Breckenridge properties to develop in partnership with Fairmont Hotels and Resorts for $42 million in debt and equity.
His plan called for a blue-chip, mixed-use development with two lodges, more than 200 condominiums, underground parking, a spa and a restaurant.
The first phase of the development lasted nearly three years and saddled Niemi with $24 million in expenses for planning, architecture, design and other costs, according to the lawsuit.
Sales of duplexes completed along the Blue River shoreline, one of the properties, went well, generating $12 million in revenue.
Niemi started looking for financing of up to $220 million to pay off early loans and fund the remaining work.
A mortgage broker in Orlando, Fla., introduced him to Burgess, a South African businessman who headed now-defunct Prosperity International. Burgess had a partnership with Lasshofer and a collection of his companies ? the Innovatis Group ? that provide global asset management and consulting services.
Parnevik jumps inIn September 2009, Niemi locked into a single consolidated construction loan agreement with Prosperity, according to the suit. Lasshofer and Burgess promised to get financing from lenders, and Niemi and his partners agreed to pay upfront collateral of $2.18 million.
Burgess indicated that loan disbursements could begin in early 2010, Niemi said.
Parnevik, a longtime friend of Niemi's, jumped on the bandwagon when the developer showed him plans for a piece of the property called Shock Hill, where a lodge was to be located.
The land was "50 steps" from a stop on a gondola that rises from the town of Breckenridge to base areas in the ski resort, Niemi said.
It was a time for celebration. The project was full-speed ahead, despite a recession that had stalled development elsewhere.
"The pre-billings were very high. It was just a matter of getting it built and it would have been pretty much sold," said Parnevik, who with his family and friends invested about $6 million in the project.
"We celebrated the signing of the contract at my house in Florida," Parnevik said.
Burgess attended the party. "He seemed very nice," Parnevik said. "I talked to his colleagues, and they made me feel very secure that they were professional, and he seemed very professional. It never crossed my mind that it was a scam."
When the loans didn't materialize, Niemi became concerned, and in February 2010, he flew to Zurich to meet Lasshofer.
At the end of a week in which Lasshofer never arrived, he and Burgess drove the six hours to Salzburg and met with the Austrian.
Niemi said he asked him to return the $2.18 million and void the loan agreement. "Lasshofer looks at me like that's not going to happen. He stood up and said, 'You can call my attorney.' "
Things grew heated, and Burgess stepped between the two when the confrontation threatened to become violent, Niemi said.
Niemi returned to the U.S. to find the Fairmont Breckenridge project on the verge of collapse. Sponsors, contractors and clients were threatening to withdraw unless the Prosperity financing came through.
"Things started slowing down when we didn't receive the funds from Lasshofer and Burgess. All of us put in more money to cover it, and it just kind of fell apart," Parnevik said.
At the end of June, Burgess told Niemi he was returning to the U.S. from Europe the following day and funding would commence within a week.
But when Burgess stepped off a plane at Hartsfield-Jackson Atlanta International Airport, Secret Service agents were waiting to arrest him in a case that sounds a lot like Niemi's lawsuit.
An indictment accused Burgess of bilking Plymouth Rock Studios, a company planning a $550 million transformation of 240 acres in Massachusetts into a movie studio.
Burgess, Prosperity and unnamed co-conspirators promised to get financing for the studio project in return for a deposit of $3.5 million, according to the indictment.
Burgess sentencedAnne Conway, chief judge for U.S. District Court for the Middle District of Florida, sentenced him to serve 15 years in prison and ordered him to pay restitution of more than $94 million.
At his sentencing, Burgess implicated an "associate partner," who Niemi's lawyers believe was Lasshofer.
"I was very trusting with all those I had been working with over the past four years, and especially my associate partner for the past 11 to 12 years," Burgess said, according to a court transcript of the November 2011 hearing. "I knowingly followed everything that this associate partner instructed me to do even though I was told by others to be more (wary) of my association with him. I was easily influenced, which has been a weakness of mine."
Burgess is listed as a defendant in Niemi's lawsuit, but the developer sees no hope of collecting any damages from him. At 71, "he is 1? years into a 15-year term," Niemi said.
Wringing the damages out of Lasshofer, who has already appealed the $62 million order and whose cash is in countries with banking regulations that shroud depositors' finances in secrecy, isn't going to be any easier.
"I think the chances of him paying are very slim indeed," Burgess said in an e-mail from a low-security lockup in the Butner Federal Correctional Complex in North Carolina.
Lasshofer's lawyers blame any fraud on Burgess.
"It was Burgess who sought out Innovatis and persuaded them to help with certain aspects regarding the project finance. Innovatis believed these deals were real and that Burgess was a highly successful and prominent businessman who intended to perform," Washington D.C.-based lawyer Carl Rauh told Jackson, according to a court document. "Their belief, like everybody else's now, in Burgess was wrong."
Niemi has hired Hubertus P. Weben, an Austrian lawyer, to pursue the case. Weben has filed a criminal complaint there against Lasshofer, according to a document in U.S. District Court.
Lasshofer "has been investigated for fraud on other occasions in the recent past," Weben said in the document.
Seven years after the Breckenridge project began, the land that Niemi, Parnevik and Naegele invested so much money and hope in is owned by others, after going through foreclosure and sale.
Homes are being built on one piece, and time-share condos on another.
The centerpiece of Niemi's project, Shock Hill, where he envisioned a lodge branded with the Fairmont name, will be the location of townhomes and duplexes.
Niemi still dreams of what might have been.
"We would have made $4 million a year just renting it out," he said.
Tom McGhee: 303-954-1671, email@example.com or twitter.com/dpmcghee