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CBRE rigged bidding for a bank branch, fraud lawsuit alleges

Kenneth H. Thomas' suit says CBRE — which liquidates failed banks' assets for the FDIC — let Stonegate Bank buy a branch for less than Thomas bid. CBRE and Stonegate dispute accusations of wrongdoing.

September 01, 2012|By E. Scott Reckard, Los Angeles Times

A well-known banking consultant has taken a dispute with CBRE Group Inc. to court, saying the Los Angeles real estate giant and Florida's Stonegate Bank defrauded him by rigging the bidding for a bank branch in an upscale Miami suburb.

The case is a potential embarrassment for CBRE, the world's largest commercial real estate firm, and for the Federal Deposit Insurance Corp., which hired the company to sell off property it inherits from failed banks.

CBRE violated FDIC rules by letting Stonegate pay less for the branch than consultant Kenneth H. Thomas bid for it, according to Thomas' lawsuit, filed in Miami-Dade County Circuit Court.

CBRE had a "very close and special relationship" with Stonegate because one of the bank's founders and directors, Jeff Holding, is a senior CBRE vice president who had Stonegate as a client and was "intimately involved" in the purchase, according to the suit. Two other CBRE senior vice presidents, Jeffrey M. Kelly and Harry G. Tangalakis, were members of an advisory board at Stonegate, the suit said.

"The outcome of the sale in this case was predetermined before the first bid was cast," the suit said.

CBRE disputed the accusations, saying in a statement that Thomas is "a disgruntled losing bidder." Stonegate, a 10-office bank based in Fort Lauderdale, said it expects to prevail in court against the "baseless" allegations.

CBRE said Holding, Kelly and Tangalakis are sales professionals, not managers. "They were not involved in the sale process for this FDIC asset," the statement said, "and their association with the winning bidder is coincidental."

The dispute could prove sensitive for the FDIC, whose 2009 choice of CBRE to liquidate failed-bank assets touched off a controversy.

CBRE's chairman is Richard Blum, husband of Sen. Dianne Feinstein (D-Calif.), who had offered to secure federal bailout funds for an FDIC anti-foreclosure effort days before the agency awarded the contract to CBRE.

After news stories outlined a potential conflict of interest, Feinstein and CBRE denied there was any collusion or connection between the events.

An FDIC investigation found no evidence of improper contact or influence. The agency's inspector general said CBRE was selected because of its "exceptional technical capability" despite charging "near the high end" of all competing bidders.

The inspector general's office said the FDIC report justifying the selection understated CBRE's rates for services by 13%, apparently because of a miscalculation. It also said it found "limited documentation" explaining why the FDIC determined the rates to be reasonable in certain key areas, and suggested the agency should better document its decision-making.

An FDIC spokesman did not respond to a request for comment on the fraud and conspiracy lawsuit filed by Thomas, whose K.H. Thomas & Associates is based in Miami.

Thomas advises banks about office locations and, according to his website, has at times purchased branches on behalf of banks or to resell on his own. A lecturer at the University of Pennsylvania's Wharton School, where he earned a doctorate in finance, he provided widely quoted analysis of the junk-bond investments that toppled many savings and loans during the 1980s.

The branch at issue is in Doral, Fla., and belonged to the Bank of Miami, which failed in December 2010, with the FDIC appointed as receiver.

Informed by a CBRE employee, Charlie Manuel, that the branch would be listed at its appraised price of $2.6 million, Thomas repeatedly told Manuel he planned to pay at least that much in cash and up to $3 million, the lawsuit contends.

"In response, Manuel told Dr. Thomas that $3 million was much more than he needed to, or should, bid to obtain the property," the suit said. "Rather, Manuel told plaintiff that $2.5 million was not only a 'very, very strong' bid, but more than sufficient to be the highest bidder and therefore to secure the property."

Thomas said that based on Manuel's statements he made an all-cash offer of $2.5 million and was shocked when he was not the winning bidder. He said he had to file a Freedom of Information Act request with the FDIC to determine that Stonegate's winning bid was for $2.46 million.

The CBRE statement said: "Like any other seller, the FDIC selected the buyer for this asset based on the best overall offer, including price, terms and conditions of closing." It said the allegation that Thomas was coached into lowering his bid "is outrageous and false."

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