When the mighty fall they sometimes take others down with them. When the Bernie Madoff Ponzi scheme tumbled down, many investors saw their retirement savings go down with it. The money was then gone, with little to be done to save it.
A similar situation occurred in Port St. Lucie recently. A luxury golf club owner continued to collect pricey payments from club members, but did not make payments on the $675 million loan used to create the massive property. The Tesoro Club owner filed for Chapter 7 bankruptcy in 2008. Some club members charged fraud and recently received notice of a $25 million payment that may be made to them by the bankruptcy trustee. The club members may get back 30 or 40 percent of the $100,000 each member is owed on average.
In the case of the Tesoro Club owner’s Chapter 7 bankruptcy, $322 million in membership payments were collected before the bankruptcy was filed, and not a penny was paid on the $675 million loan. Instead, the money went to the club executives and $147 million went into an investment fund. A forensic accountant had to ferret out the money in order to find and collect what remained. One year after the club owner filed for bankruptcy, the golf club was sold for just $10.99 million including 322 undeveloped lots, the club house, the golf course and other amenities.
This Chapter 7 bankruptcy may not be typical and it certainly does not compare favorably to the bankruptcies filed by those who have lost their jobs or become buried in medical bills due to an illness or accident.
A liquidation bankruptcy should be a viable option for those who need a fresh start, rather than for those who seek to defraud investors, or in this case, club members. There was no word on whether bankruptcy fraud charges would be filed against the club owner.
Source: TC Palm, “Bankruptcy court judge to decide Wednesday on $25 million Tesoro Club settlement,” Christin Erazo, Nov. 12, 2012