$200M Legal Battle Now Playing Out in Dallas

DALLAS-An all-star cast of characters is using Dallas as the battlefield for another go-round over a failed timeshare plan for the former Maxim Hotel in Las Vegas. The stakes in the game could easily surpass $200 million for lost business interests from a plan gone awry for a twice-sold property along the Strip.

Timeshare pioneer Hillel A. Meyers of Miami, investor Donald G. Saunders of Las Vegas and attorney Thomas K. Russell of California are suing a pair of high-powered Dallas businessmen, Gary and Michael Kornman, and Howard Jenkins, chairman of Florida-based Publix Supermarkets Inc., for allegedly undermining the hotel plan in 1998. Also under fire is a host of businesses, including Premier Interval Resorts Inc. in Dallas and Houston-based Meralex LP and Revanche LLC. The case was filed in the 19th Judicial District Court of Dallas; the trial date is Oct. 18.

The six businessmen have been embroiled in legal battles since 1999 when Maxim’s prior owner, Premier Interval Resorts, filed Chapter 11 in a finger-pointing bankruptcy. Five years into the battle, Meyers, Saunders and Russell said they learned during depositions a year ago that now-established facts differed widely from what they were told in the past, William A. Brewer III, partner in Dallas-based Bickel & Brewer, tells GlobeSt.com. “It was pure happenstance that my guys found this out,” he says.

Brewer is seeking to reclaim business losses even though the Maxim has traded twice, the most recent sale in 2002 for $38 million to Cincinnati-based Columbia Sussex Corp., which has since completed a hefty renovation and opened doors as a franchised Westin at 160 E. Flamingo Road. Before the redevelopment, the twin-tower hotel held 795 rooms and a 40,000-sf casino.

“They are entitled to full equity value. It will be a $200-million plus win,” says Brewer, known for tackling complicated commercial real estate disputes. The battle lines over the Maxim involve allegations of “a fraudulent and unlawful mergers and reverse stock split.”

Jenkins’ attorney, Alex Chae of Gardere Wynn Sewell in Houston, did not return telephone calls and the Kornmans’ attorney, Jeffrey M. Tillotson, a partner in Lynn Tillotson & Pinker in Dallas, was unavailable for comment prior to publication time.

Meyers and Saunders allegedly question the terms under which they relinquished their controlling interest in Premier Interval Resorts, a business they formed with Russell in 1998 to pursue timeshare opportunities in Nevada, in exchange for a $42-million loan and $25 million in equity to leverage the hotel purchase and redevelopment. Russell refused to turn over his 1%, but the Chapter 11 made it a moot point.

Meyers, Saunders and Russell were holding a contract to buy the Maxim from West Coast Mortgage by May 17, 1999, when they took Gary Kornman into the circle, giving him a 24.5% stake. The lawsuit alleges Gary Kornman scuttled all financing efforts so he could get Jenkins to the table as an alternative lender.

In a convoluted chain of events, Premier bought the Maxim with the stakes changing to 15% for Meyers, 37% for Saunders, 1% for Russell and 47% for Gary Kornman through his wholly owned and controlled AE Marketing in Dallas. Not only did the stakes change, but so did the financing. The case alleges Gary Kornman, unbeknownst to his partners, quietly loaned $26 million to the alternative lender, Meralex, a Jenkins-controlled company, which then loaned $42 million to Premier to close on the hotel.

Four months later, the loan was in arrears; Jenkins allegedly never fulfilled the $25-million equity pledge; and Premier was on the road to bankruptcy. The final blow came in 2000 when Meralex, through its subsidiary Revanche, foreclosed on the Maxim, taking Premier’s only asset and selling it two years later to Sussex.