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Date of Issue: October 05, 2006

GSR creditors committee: Bon Eau deal criminal

The GSR unsecured creditors committee formed by the federal bankruptcy court filed a stinging rebuttal to GSR's emergency compromise motion (see separate story) to save its $6.5 million deal with Bon Eau Enterprises LLC of Sarasota, opposing the compromise and claiming that a crime has been committed.

Creditors committee attorney John Anthony alleged in his reply motion that Bon Eau's 2005 financial transaction with GSR on its Villa Rosa property in Anna Maria was "criminally usurious" and "clearly intended to effectuate a loan" that is usurious under Florida law. Bon Eau loaned GSR money in excess of the Florida maximum of 25 percent per annum on a loan exceeding $500,000, he claimed.

In addition, the transaction "effectuated a fraudulent transfer because GSR was insolvent at the time and Bon Eau was aware of this and the fact that the $6.5 million for Villa Rosa was "inappropriate" because it was "significantly less than its fair market value at the time," Anthony said.

Furthermore, added Anthony, Bon Eau's interest in the property is "unenforceable" because it is "predicated upon a disguised loan that is clearly usurious."

Bon Eau's "choice of documentation is consistent with deliberately concealing the usurious nature of the loan," he alleged.

Bon Eau has claimed that the money was not a loan to GSR but a purchase of the Villa Rosa property that included an "option' for GSR and partners Robert Byrne and Steve Noriega to buy back the property at a price that included interest.

Anthony also noted that if Bon Eau's claim that it's owed $7.68 million is correct, there is still $3.82 million in equity in the $11.5 million Villa Rosa property, that is if GSR can market and sell Villa Rosa at fair market value. That's a lot of money for the unsecured creditors, he observed.

The committee and Anthony also objected to the release of certain claims against Bon Eau in the emergency motion.

"The committee cannot support the compromise," concluded Anthony, because it would add further to the "improper conduct" that has already occurred in the GSR-Bon Eau deal.

To approve the compromise motion would "forgive Bon Eau's usurious conduct" and reward that conduct by requiring GSR to pay back $7.68 million.

Bon Eau should not be "excused from liability for having received a fraudulent transfer." The company is "liable to the estate" and should not be released or paid any money.

Accordingly, Anthony requested federal bankruptcy Judge Richard May to enter an order denying the compromise motion. Approval of the motion would be a "tremendous hardship" against the GSR estate and the unsecured creditors.

A hearing on the emergency motion is scheduled for Oct. 10, at the federal courthouse at 601 N. Florida Ave. in Tampa.

Gaspar no GSR savior

Jose Gaspar is no longer a knight in shining Spanish armor, at least not for financially troubled GSR Development LLC of Anna Maria.

Gaspar Properties Inc. has apparently declined to purchase GSR's Villa Rosa property in Anna Maria for $11.5 million, a move that would have put about $2 million into GSR's coffers after all secured creditors had been paid. But Gaspar is no longer interested, said GSR attorney Richard Prosser in an emergency compromise motion to the court Sept. 18.

According to the motion, Gaspar allowed the inspection period to purchase the property to expire and "elected not to purchase the property" under the terms and conditions in the purchase agreement.

That's too bad, because GSR was counting on Gaspar's $100,000 deposit to pay Bon Eau Enterprises LLC of Sarasota that same amount to extend GSR's option to take back title to Villa Rosa and repay Bon Eau $6.5 million plus interest.

As a result of Gaspar dropping out of the deal, GSR was "unable to pay the additional option fee" to Bon Eau that would have extended the option period to Feb. 2, 2007, said Prosser.

Bon Eau claims that it purchased Villa Rosa in 2005 for $6.5 million and gave GSR an "option" to repurchase the property. GSR minority partner Ed Furfey has filed a lawsuit against majority partners Richard Byrne and Steve Noriega along with Bon Eau, claiming the transaction was a usurious mortgage, not a purchase with option to rebuy.

Bon Eau has claimed that the option period has expired and GSR "has no further interest in the Villa Rosa property.
In other words, Bon Eau now owns Villa Rosa.

Not so fast, indicated Prosser on behalf of GSR to Judge May in GSR's emergency compromise motion.

GSR wants May to grant the company until Dec. 15, 2006, to exercise its option with Bon Eau to pay the $100,000 due Bon Eau to keep GSR's repurchase option alive, and give the company the same deadline to close a sale on the Villa Rosa property. Both would take place on or before Dec. 15, Prosser said.

Prosser said that if the $100,000 isn't paid by the Dec. 15 deadline, or if paid, but not all of the Villa Rosa property is purchased by that day, then all of GSR's interest and claims to any "unsold lots" in Villa Rosa "would be terminated and deemed null and void."

In plain English, if GSR can't come up with the $100,000 and close on a sale of Villa Rosa by the due date, GSR no longer has any claims on the property.

But if May denies the emergency motion, GSR said it would reserve all of its "claims, rights and remedies" on Villa Rosa.

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