Federal grand jury investigates GSR
The federal bankruptcy case of GSR Development LLC and former principals Robert Byrne and Steve Noriega has moved from bankruptcy court to criminal court with the announcement that a federal grand jury in Tampa subpoenaed records of the three island cities.
City clerks in Anna Maria, Holmes Beach and Bradenton Beach were subpoenaed to provide the grand jury with all documents and correspondence relating to Byrne or Noriega, or GSR permit applications, denials, site-plans and miscellaneous conversations.
The subpoenas had required that the city clerks appear in court, but Anna Maria city clerk Alice Baird said she was told by a Federal Bureau of Investigation agent that she was not needed to testify at this time, only to provide the requested documents.
The subpoenas were served by FBI special agent Leo Martinez of Sarasota. All questions to the FBI’s Sarasota office were referred to the U.S. Attorney’s office in Tampa.
U.S. Attorney spokesperson Steve Cole, however, could neither confirm nor deny the existence of any investigation. He cautioned that this is only a grand jury subpoena, although it does indicate the grand jury has an interest in the activities of Byrne and Noriega.
Confirmation of any investigation usually occurs when a party is arrested and charged by the U.S. attorney. Once a grand jury completes its investigation, its findings are forwarded to the U.S. Attorney’s office for a decision on whether or not the evidence warrants prosecution, Cole indicated.
GSR investors Mel and Carol Yudofsky of Holmes Beach and Kent Davis, also of Holmes Beach, said they have not been contacted to give testimony or provide documents.
“This is the first I’ve heard about it,” said Davis, who gave Byrne a personal loan of $600,000. The Yudofskys invested some $441,000 in the company.
Through a civil suit against Byrne, Davis recovered all but approximately $135,000 from Byrne, and he and other investors eventually forced Byrne into personal bankruptcy in an effort to recover additional money. Neither the GSR bankruptcy, nor Byrne’s personal bankruptcy, were discharged by the bankruptcy court.
Mel Yudofsky also said he has not been called to testify before the grand jury. “I would have a lot to say,” he added, noting that he looks forward to his day in court with Byrne and Noriega.
Efforts to reach former GSR employees Laura Delatorre and Debby Dorsey to determine if they have been subpoenaed were unsuccessful, as were efforts to contact Byrne or Noriega for comment.
A source close to the GSR bankruptcy case estimated the amount of money involved in the grand jury probe could be as high $11 million in unaccountable funds.
The glory years
From 2002 to 2006, Byrne and Noriega were the darlings of Island real estate development.
Noriega once appeared before the Anna Maria City Commission during GSR’s 2002 site-plan application for the Villa Rosa development on South Bay Boulevard and boasted confidently, “We are going to change the face of Island real estate.”
True to his word, Noriega, accompanied by Byrne, did as promised.
Collecting Island investors like jam attracts flies, including food server Cynthia Graeff, who invested $25,000, GSR purchased more than 20 properties on the Island during the Island’s real estate hey-days.
GSR claimed it would be developing these properties for the high-end real estate market and advertised Villa Rosa homes would cost between $1.5 million and $3 million, and maybe more. The company also announced plans for Rosa del Mar, a luxury condominium complex on the Gulf of Mexico in Bradenton Beach, and held a grand opening party, complete with elected officials and other dignitaries heaping praise on Byrne and Noriega.
Not a single slab of cement was ever poured at Rosa del Mar.
GSR officials took advantage of the apparent greed, or shortsightedness, of some banks that wanted to be involved in what was then a highly profitable real estate market.
Shortly after purchasing a property, GSR would obtain a new appraisal of the property that showed the value had jumped considerably from the purchase price. The company would then refinance the property for the maximum value. With Island real estate prices skyrocketing, banks and mortgage companies seemed to be lining the steps of GSR’s office on South Bay Boulevard daily, eager to cash in on the spoils.
Surprisingly, some banks failed to notice, or conveniently ignored, why all the GSR properties were suddenly at such a high value, why none of GSR’s grandiose projects were ever completed, or why the majority of new appraisals were performed by the same person.
Perhaps it was because Byrne and Noriega fit the profile of high-end Florida real estate developers.
Sharp dressers, they both drove new luxury cars, dined at the best restaurants, were known to leave $100 tips for a simple lunch, gave extravagant jewelry as gifts to friends, and entertained friends and potential investors by flying them on their private plane to the Bahamas, the Dominican Republic and other Caribbean destinations for weekend vacations.
GSR talked deals to anyone and was not shy about attracting investors who saw Island real estate values climbing by 20 to 30 percent annually. A $300,000 investment in 2003 or 2004 should have returned a nice profit in just one year, at least 10 percent, according to what one investor said he was told by Byrne.
In fact, the investment was so solid and safe that Byrne turned to giving a personal guarantee to many investors, including Davis, to induce them to hand him a check. Regretfully, some of these investments were retirement funds or college savings accounts.
But what could go wrong? Other Island developers were turning big profits quickly, buying properties, fixing them up and reselling them for 150 to 200 percent of the investment.
Island real estate was in demand, and GSR and its principals seemed to be the industry leaders. When they talked, people seemed to listen.
After all, Noriega claimed he had a net worth of $22 million, while Byrne forged ahead with a financial statement showing he was worth $33 million.
GSR even managed to attract National Basketball Association star Theo Ratliff to the fold. In April 2004, Ratliff, now with the world-champion Boston Celtics, made a $175,000 deposit on the model home at Villa Rosa, with the estimated $1.5 million balance due at closing.
But as with so many GSR projects, the model home was never completed and still remains vacant.
Ratliff has apparently given up on his deposit and his attorneys have declined to issue a statement. One contractor who worked on the house has estimated an additional $800,000 is needed to get the property ready for a certificate of occupancy.
As bills went unpaid and money seemed to disappear faster than an Olympic 100-meter dash, GSR turned to an outside investor, Bono Enterprises LLC of Sarasota, in a last-ditch effort to save its failing Villa Rosa project.
But even that effort turned sour and in July 2006, Byrne and Noriega placed the company in bankruptcy, claiming that one reason they were never able to build any project was because of the bureaucratic inefficiency on the part of each Island city.
The total bankruptcy was in excess of $44 million, while GSR claimed it had only $33 million in assets. The unsecured creditors portion of the bankruptcy was for $5.3 million
Bankruptcy court, however, was no salvation for the company or its investors.
With over-valued properties in a declining real estate market, GSR’s court-approved administrator, William Maloney of St. Petersburg, was unable to sell a single GSR-owned property. Subsequent efforts by a variety of local and mainland real estate companies to market the properties for sale also failed, as did a nationally advertised auction sale.
“The fact is that all of these properties were heavily mortgaged for more than their value, and none of the offers I heard about would even pay off the mortgage,” said Davis.
“It was just strange that, while everyone else was buying, building and selling, and making money, these guys couldn’t complete a single project during the boom,” he said.
Like many GSR investors, Davis wonders where the money went.
With bankruptcy a failed effort, Byrne and Noriega eventually gave up all interest in GSR, although Byrne did file an unsecured creditor claim for about $4 million against GSR, claiming his efforts were worth something if any of the properties sold.
The bankruptcy court disagreed and Byrne’s claim was disallowed.
Bankruptcy Judge K. Rodney May did allow adversarial claims against GSR, claims that could have gone to criminal court, but no money would have been available to the creditors.
May has also allowed adversarial claims against Byrne in his personal bankruptcy case. Those claims have not yet been heard by the court.
Bolstered by $750,000 from Bono Enterprises to release that company from any liability in its loan/purchase of Villa Rosa from GSR, those adversarial claims sailed through bankruptcy court, with lawyers, accountants and administrators all getting their share of the pie, but only a small percentage was left for the investors. Graeff, however, eventually received a $25,000 settlement.
Banks and mortgage companies have now repossessed all of GSR’s former properties, although one project in Bradenton Beach was eventually sold following a foreclosure action.
Byrne has since moved to Chicago, where he works as an independent consultant. He told the bankruptcy court earlier this year he had only $500 in his bank account.
Noriega still lives in Tampa and, reportedly, went to work as a consultant to a real estate development company after giving up all interest in GSR. The GSR bankruptcy is his third federal bankruptcy case. Two previous Noriega real estate ventures in the Tampa area also ended up in bankruptcy court.
The Yudofskys have long given up any hope of getting back any significant portion of their investment, as has former Holmes Beach resident Pat Hart, who had about $400,000 in the company.
Still, the investors would like to see Byrne and Noriega answer to any charges, although it may take some time and there is no guarantee the grand jury will find enough evidence for the U.S. Attorney to issue any charges against the two men.
As Yudofsky attorney Mel Stein once said, “These guys are con men.” It’s been a claim that neither Byrne nor Noriega have ever denied.
Efforts to reach Byrne or Noriega for comment have been consistently unsuccessful.