Sullivan Square Hearings Back on Docket

The motion seeks to dismiss a counterclaim by the defendants against Glen, Smith & Glen as well as the Viridian Group, which was retained by Glen, Smith & Glen to sell the condominium units in the $1-billion, 1,300-unit luxury residential-over-retail development that was slated for land at Durango Drive and Interstate 215. Viridian also has filed a motion to dismiss the counterclaim. Both motions are scheduled to be heard by the judge on Monday, July 27.

Harcourt alleges that GSG, its principals and one of their spouses devised and implemented an elaborate fraudulent scheme to try to induce Harcourt to fund construction of the development based on sham condominium sales, according to the counterclaim filed with the Eighth Judicial District Court.

"We deny all allegations on behalf of GSG and its principals," Manly Stewart attorney Saul Wolf told GlobeSt.com in May, when the counterclaim was filed. "We intend to seek dismissal of all causes of action in the counterclaim."

Generally speaking Harcourt Nevada agreed to provide all funds for the development and construction of Sullivan Square in exchange for a 60% interest in the development partnership. GSG's lawsuit contends that Harcourt "never had any intention of performing" under the agreement and, as far back as June 2007, "conspired to, intended to, and, in fact, did exploit [GSG], obtaining value for the project through [GSG's] efforts, all with the eventually intended result of bankrupting or seriously damaging [GSG] so that [Harcourt] could assume control of the project for their sole benefit."

Harcourt denies the allegations, saying construction financing for the project became unavailable at commercially reasonable terms in 2007 due to the lack of sales and the deteriorating market conditions. As a result, Harcourt says it recommended a moratorium on development to GSG until marketing conditions improved and financing became available. According to the counterclaim, GSG rejected the moratorium request.

Moreover, Harcourt's counterpunch claims that GSG conspired to lie about the pace of condominium sales and made multiple poor decisions that Harcourt claims cost the project tens of millions of dollars. Specifically, Harcourt claims that GSG entered into an exclusive listing agreement Viridian Group LLC, which Harcourt claims never existed and was a "false front" for GSG principal Ken Smith and his spouse, Dale Rowse. Harcourt claims that Rowse was presented to it as the owner, president, and manager of Viridian and that his relationship with Smith was never revealed.

Harcourt alleges that GSG and Viridian reported nearly 100 valid sales in late 2006 but a year later produced only 92 "hard contracts," more than one-third of them having deposits less than the 5% or 10% required by the sales agreements. In many cases, Harcourt alleges that the brokers' fees paid on the low-deposit sales exceeded the deposit received.

"GSG and Viridian/Rowse originated and perpetrated this scam to increase "sales" of units in order to meet the Irish Bank's pre-sale requirements for furnishing additional funds and to support Kenneth Smith and Dale Rowse's lavish lifestyle," states the counterclaim. "Viridian/Rowse has refused to return the commissions paid."

To read previous stories on the case, click on any of the following headlines:

GSG Attorneys Deny Harcourt Counterclaims Sullivan Square Defendant Switches to Offense Sullivan Square: One Motion Granted, One Denied Sullivan Square Lawsuit Ramping Up Again Judge OKs Amended Sullivan Square Complaint GSG Seeks Amended Sullivan Square Complaint Judge Dismisses Bulk of Claims Against Harcourt Harcourt Moves to DismissSullivan Square Developer Sues Ireland Partner