|By Richard Metcalf, Albuquerque Journal,
N.M.McClatchy-Tribune Regional News
June 28, 2010--Albuquerque real estate developer Vincent J. Garcia, who faces a federal indictment on bank fraud and money-laundering charges, is no stranger to the court battles over money.
Over the past decade, he's been involved in more than 20 civil disputes in Bernalillo County District Court, typically as a defendant through one of his companies. The disputes often have centered around breach of contract issues for money owed and foreclosures on his properties.
Garcia has also figured prominently in two cases in U.S. Bankruptcy Court, both of which involved ownership of the former La Posada de Albuquerque, the historic 10-story hotel in Downtown.
He's been sued by investors and business partners and, in one of the bankruptcy cases, never paid his lawyer for extensive legal work. In another civil case involving a city parking structure, he left the taxpayers on the hook for close to $500,000 in unpaid rent.
Now the Albuquerque native, along with his son David Garcia and business associate Derek Barnhill, face criminal charges involving the alleged misuse of more than $1 million in bank loans between December 2006 and May 2008.
Garcia did not respond to a Journal phone message requesting comment.
Diverting funds, forged invoices
According to the six-page indictment, the three men withdrew money from construction accounts for three legitimate development projects, sometimes using forged invoices, and diverted it to pay for unauthorized expenses such as construction of David Garcia's personal residence and Vincent Garcia's buying a stake in a gambling casino.
One of Garcia's projects -- the five-story atrium office building formerly called Copper Square at 500 Copper NW -- has been repossessed by the lender, First Federal Credit Union, and is currently on the market for $5,675,000. First Federal is one of the two banks alleging misuse of its loans in the criminal indictment.
Garcia's other major project -- the nine-story mixed-use Anasazi Downtown building at the southeast corner of Sixth and Central -- has been at a standstill since the Federal Deposit Insurance Corp. took over the project's lender, Columbia Bank and Trust Co. of Topeka, Kan., in August 2009. Columbia Bank is also alleging misuse of its loans.
There are similarities between the recent criminal indictment and the City of Albuquerque's 2004 civil complaint against Garcia and several of his companies over $483,270 in delinquent rent for use of the parking structure at 220 Copper NW.
A side issue in the civil complaint was the size of the parking garage, which Garcia built and then sold to the city for $6.8 million in a prearranged deal. The project was financed using city revenue bonds in an amount calculated to pay for 464 parking spaces.
When the city took over the parking structure, it was found to contain only around 364 spaces -- not the 464 spaces that were planned, financed and then sold to the city. The shortfall of spaces led to the allegation of fraud and misrepresentation against Garcia in the civil complaint.
The city's complaint basically died in July 2005 when one of Garcia's companies named in the parking structure deal went bankrupt. The city never got its back rent. No explanation was ever forthcoming on where the financing for the roughly 100 unbuilt parking spaces went. No criminal charges were ever pursued.
The La Posada case
Garcia was point man for an undercapitalized investment group that acquired what was then La Posada -- now known as Hotel Andaluz at 125 2nd NW -- through a bitterly disputed liquidation sale in bankruptcy court that took more than two years to settle in 2003.
The investment group turned around and lost the hotel in 2005 through an asset sale in its own bankruptcy case.
The original deal called for Garcia's group to buy the hotel for about $5 million to pay off the creditors of owner La Posada Investors Limited Partnership, which had filed for bankruptcy court protection in mid-1999. According to bankruptcy court documents, Garcia switched the buying entity from Prinova Investments to Escala LLC early in the process.
The trouble started when Escala couldn't come up with the full amount at closing. Disputes arose over Escala paying the bills for some of La Posada Investors' overhead costs, particularly legal fees, and other issues. Escala and La Posada Investors wound up suing each other in bankruptcy court.
Accusations began to fly.
Escala accused La Posada Investors for breach of contract and dealing in bad faith, with particularly harsh criticism directed at the latter's legal counsel, the now-dissolved Albuquerque law firm of Puccini & Meagle.
La Posada Investors fired back a broadside claiming breach of contract, dealing in bad faith, and violations of both the New Mexico Unfair Trade Practices Act and New Mexico Securities Act. Garcia was singled out for making "fraudulent misrepresentations" to La Posada Investors.
The suits were combined into one case and scheduled for what promised to be a nasty adversarial hearing in March 2003. Two days before the hearing, Escala and La Posada Investors agreed to a settlement and La Posada's bankruptcy case was closed.
Bankruptcies and bills
There was one loose end: Garcia and Escala never paid their attorney, Bill Davis of Albuquerque, for more than two years of legal work. The nonpayment of about $200,000 in legal fees would come back to bite them.
Escala failed to pay off its about $4 million loan from Bank First to buy the hotel on its due date in May 2003, then repeatedly failed to make the payment through a series of extensions that carried the loan to the end of the year. Escala stalled a foreclosure by committing to sell the hotel by the end of September 2004.
When Escala failed to sell it by the deadline, the hotel immediately went into foreclosure. About a week later in October 2004, Davis filed a petition to put Escala into an involuntary bankruptcy in an effort to get his legal bill paid.
La Posada de Albuquerque was sold through bankruptcy court for $4 million to Albuquerque developer Gary Goodman, who did an extensive green renovation of the 71-year-old building and turned it into the stylish boutique hotel it is today.
One more falling out
Garcia had a major falling out in 2003 with Albuquerque resident Mark DePree, one of his partners in both the La Posada and parking structure deals.
At the heart of the falling out was a promissory note that Garcia gave to DePree in exchange for a $415,000 loan in 2002. DePree sued first in district court after Garcia stopped making the required monthly interest payments on the note. Garcia counter-sued.
The back-and-forth allegations included breach of contract, bad faith and "unclean hands." The court filings on both sides were numerous and contentious as the suits dragged on into 2005, making it possible that their combined legal fees exceeded the amount of the original $415,000 loan.
Garcia and DePree reached an out-of-court settlement in November 2005. Garcia agreed to pay $100,000 on the promissory note to DePree in exchange for dropping all other claims. The suits were dismissed.
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