Fri, May 24, 11:13am by Kevin Pitstock
A Las Vegas judicial committee’s recent ruling forces James Packer and Crown Limited to face a lawsuit in Las Vegas. The lawsuit stems from a land development which went bad in 2009. Packer’s business may now have to wage a long court battle over a land deal which cost the company $250 million initially.
James Packer’s decided to expand Las Vegas casino industry, which was natural given the Australian billionaire wants to build a worldwide gambling empire. The development ran into problems when developers faced cost overruns. The financial meltdown of late 2008 and 2009 caused the project collapse.
James Packer inherited the Packer family’s media empire and casino holdings in late 2005 when his father, Kerry Packer, died. Packer decided to focus on building a casino empire instead of focusing on the family’s traditional media interests.
Since that time, James Packer has developed plans for casinos in Sydney, Sri Lanka, and Las Vegas. In 2009, Crown Limited lost US$250 million in investments in the Fontainebleau Resorts in Las Vegas. Crown Ltd also bought a $242 million stake in the Station Casinos, which also faced financial troubles.
The downturn of the world economy was a major factor in the failure of these ventures. Last year, investors in the Fontainebleau Resorts brought a lawsuit against the directors of that project. Crown Limited and James Packer were named in the suit. The case is listed as Brigade Leveraged Capital Structures Fund Ltd. v. Fontainebleau Resorts LLC.
Investors like Brigade Leveraged Capital Structures Fund Ltd. and Caspian Capital Partners LP lent $700,000,000 of a potential $2 billion development. Their suit claims Packer and his company helped developers hide cost overruns from the investment group. “When funding failed to materialize and the defendants could no longer conceal the cost overruns from the lenders, the project collapsed, and the plaintiffs’ loans became substantially worthless,” said the lenders in a filing.
Packer and the Crown Limited team have made an energetic defense. Their legal staff made a motion before a three-judge panel in Las Vegas for Crown Ltd and James Packer to be removed from the suit. Legal briefs stated neither party was in a controlling position, so they were not in a position to keep financial information from other investors and have no legal responsibility for the project’s failure.
The panel of judges ruled on May 17, declining Packer’s request to be removed from the lawsuit. The ruling forces Packer and Crown Ltd to answer these charges in a Las Vegas courtroom.
Still, Packer is moving forward with plans for new casinos in Sri Lanka and Sydney, along with major developments in other countries. Though Packer’s wealth fell from an estimated $7 billion to $3 billion from 2005 to 2009, those fortunes have recovered since. While the totals declined during a period when the financial crisis destroyed a big percentage of the world’s richest people, the Packer fortune has now risen to $4.5 billion again.