Lawyer claims GSR principals are con men
Attorney Joe Fritz of Tampa, who represents Island residents Mel and Carole Yudofsky as unsecured creditors in the GSR bankruptcy case, is hopping mad and he thinks he’s got some good reasons.
The GSR bankruptcy is a fraud that should be investigated by federal authorities, and GSR principals Robert Byrne and Steve Noriega are nothing more than "confidence men" who have preyed upon Islanders and area residents, he said, befriending people in order to take their money for development projects that never materialized or were never completed.
And Fritz should know something about bankruptcy laws and fraud.
He was one of the original U.S. Bankruptcy Court trustees when the system was introduced in the 1980s and he trained a number of trustees before entering private practice.
Fritz can’t understand why the Federal Bureau of Investigation isn’t looking into the GSR case for fraud.
U.S. Bankruptcy Court trustee Theresa Boatner is assigned to the GSR case and said in the initial bankruptcy hearing that she couldn’t account for about $4 million of GSR money after examining the company’s financial statements. Byrne and Noriega at that time said they would account for all the money.
"They’re full of crap," said Fritz, who said Boatner should have had the FBI looking into bankruptcy fraud from the beginning.
"This is clearly fraud, and as far as I know, there is no FBI investigation and there damn well should be."
Fritz explained that part of the fraudulent methods of operation perpetrated by Byrne and Noriega involved befriending affluent Island residents such as the Yudofskys and Kent Davis. They would borrow as much money as they could from their "friends," then purchase properties for development, promising huge returns on the investments.
Instead of developing the properties, however, the "fraud" was that the two would get loans against the property, then claim they didn’t owe the money because the loan was usurious and violated Florida statutes. Where the money went from these loans is supposedly found in GSR’s financial statements, but a large portion apparently never went back to the investors. GSR has approximately $6 million in claims from unsecured creditors.
Usury is exactly the complaint filed by attorney John Anthony on behalf of the unsecured creditors committee in the GSR-Bon Eau Enterprises "mortgage" of $6.65 million for GSR’s Villa Rosa property in Anna Maria.
Anthony has claimed the "mortgage" is actually a disguised loan and that makes it usurious under Florida law. But he’s gone one step further with the bankruptcy court, claiming that because of usury, Bon Eau isn’t entitled to either the property or any money and neither is GSR.
Anthony and the committee want the property sold in individual lots to the highest bidder with any proceeds remaining after paying off the mortgages going to the unsecured creditors, which includes the Yudofskys and Davis.
The unsecured creditors of GSR, however, are not confined to the rich and famous of Anna Maria Island. It would appear Byrne and Noriega found it difficult to resist any offer of money, no matter how small.
Island resident Cynthia Graeff worked on the Island as a food server and house cleaner for more than 10 years, carefully and diligently saving $25,000 during that time for her son’s college education.
She invested that money with Byrne and Noriega after receiving personal guarantees her money would be safe.
Unfortunately, the money wasn’t safe and the personal guarantees of Byrne and Noriega proved worthless, despite a claim by Byrne that he has a net worth of $33 million, while Noriega has shown lenders documents alleging he is worth $22 million.
While these self-proclaimed millionaires were driving around Anna Maria Island in late-model luxury cars, buying their girlfriends $60,000 jewelry items and renting apartments for them, along with flying their Piper Cheyenne II eight-seat airplane to such exotic locations as the Bahamas, Fort Lauderdale and the Dominican Republic, the two men told Graeff they were broke and unable to repay her $25,000.
After repeated demands for money, Byrne finally gave her $2,000, but claimed he couldn’t afford the remainder.
Graeff eventually won a court order for the $25,000 plus interest and expenses, but to date has not been able to file that judgment against any Byrne or Noriega assets.
In addition to Graeff’s money, GSR owes the Yudofskys $441,000, while Davis has a $600,000 unsecured claim against the company. The total amount of claims by unsecured creditors is approximately $6 million.
Fritz alleges, however, that there appears to be more to many GSR loans than just usury.
He noted that Noriega had a condominium he owned valued at $1 million, then got a loan from a bank against the property for $980,000. No bank in America has a loan-to-value ratio of 98 percent on a condominium, Fritz contended.
"I smell a rat" on the inside, he added. "I’ve seen hundreds of these type loans and never ever seen one where these guys didn’t have an insider at the bank."
Despite his experience with bankruptcy fraud, however, no one at the state attorney’s office or with the U.S. Department of Justice has contacted Fritz and asked him "What do you know?"
What he does know, he said, is that Byrne claimed the Yudofsky property had no liens on it when he got a loan from a California bank, despite the Yudofsky’s first mortgage.
"That’s fraud and a crime against the elderly," alleged Fritz, but still, no one seems to be investigating.
"I’d like to know if Boatner ever contacted the FBI with her information. I can’t get an answer," he said. Both Boatner and the FBI work for the Department of Justice, Fritz observed.
The Yudofskys have filed a civil suit in the Manatee County Circuit Court against Byrne and his estranged wife, Arlene, for "unjust enrichment," but Fritz said that’s small potatoes compared to what the FBI could bring to the court.
Several creditors claim to have talked to justice department lawyers about their financial transactions with Byrne and Noriega, but the U.S. Middle District of Florida Federal Court has declined to comment on whether or not there is any on-going criminal investigation into the activities of GSR and its principals.