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Revitalize Alameda Point – SunCal Didn’t Have as Much Lehman Money as They Presented

Astute readers of Action Alameda News have pointed out that court filings, signed by SunCal’s chief legal counsel Bruce Cook, prove false SunCal’s statements in a 2007 RFP response to the City of Alameda that claimed that SunCal had a large, discretionary, pot of Lehman Brothers money at their disposal to fund projects.

In a July 28, 2009 filing with the United States Bankruptcy Court, Central District of California, Santa Ana Division, Mr. Cook declared that:

58. While Lehman ALI, OVC and Northlake Holdings left the Trustee Debtors no viable 4 alternative to bankruptcy with their refusals to fund, the Lehman Equity Members, for their part, sat by silently and did nothing to try to prevent the Lehman lenders from foreclosing: They did not contribute penny one. This is particularly galling as it relates to the Lehman SunCal Fund Projects, because under the parties’ operating agreement, the Lehman Equity Member on these Projects, LBREP II/SCLFM, had a capital commitment obligation for $600 million, which it never came close to satisfying. See Exhibit 1 to the Declaration of Bruce Elieff.

(Bolding and italics added.)

Our readers were responding to last week’s article, where we quoted statements made by SunCal in an RFP response to the City of Alameda:

SunCal and Lehman Brothers have an approximate $660 million equity fund that is fully discretionary. This fund was closed in 2006 and has substantial remaining capacity.

Mr. Cook’s statements made to the bankruptcy courts under penalty of perjury would seem to prove false SunCal’s claims of having a “fully discretionary” $660 million equity fund.

We think the City of Alameda needs to immediately start a thorough investigation into the nature of SunCal’s relationship with DE Shaw to determine if they really have the money from DE Shaw that they say they do.

5 comments to Revitalize Alameda Point – SunCal Didn’t Have as Much Lehman Money as They Presented

  • barb

    Didn’t the City Council agree to a secret “change of entity” in October 2008 at a closed session? There was supposed to be a pool of developments packaged together from which all the developments could draw resources as needed. SUNCAL said Alameda Point was one of the riskiest. Only way one can find out what resources were placed in the pool is to sue SUNCAL? Even the City Council is prohibited from divulging? Or do they even know? So much for due diligence.

    SUNCAL has switched from bankrupt Lehman, but hired the staff from Lehman that contributed to the bankruptcy. And it doesn’t want Alamedans to know how little (if any) reserves it actually has. Why not? If there is to be any meaningful dialogue, SUNCAL has to come forward with the truth for once. My goodness, SUNCAL is worse than Iran and nuclear enrichment programs.

  • At the time City Council approved adding DE Shaw to the agreement, Alameda City Council gave direction to city staffer Debbie Potter to perform a thorough due diligence check on the relationship between SunCal and DE Shaw. It was never done. Note that Ms. Potter’s work on the SunCal project is paid by SunCal.

    It’s likely that the funding commitment from DE Shaw now is just as vaporous as Lehman’s. And yes, it’s our understanding that Mark Walsh, who led Lehman down a path with SunCal, is now in a similar role over at DE Shaw.

  • Detailer

    Does Debbie Potter have a law degree? Does Debbie Potter have an MBA? Has Debbie Potter had any formal training about the business of “investment firms” like D.E. Shaw creating limited liability companies to raise funds from third party investors?

    If the City of Alameda had been serious about investigating D.E. Shaw to do it. For example, when the City of Santa Clarita was considering allowing a company called Cherokee to assume a development agreement for redevelopment of a 1000 acre munitions testing facility, that City hired the San Francisco office of Cox Castle & Nicholson, one of California’s most sophisticated real estate development law firms. The San Francisco office was used because of their expertise in toxic remediation. Unfortunately, the City of Alameda could not have used that firm, because they already represented SunCal in dealing with Lehman Brothers.

    However, the City of Alameda could have hired that law firm’s closest competition, Allen Matkins of Los Angeles. That’s exactly what the City of Palmdale did when they began to have problems with the 10,000 acre Ritter Ranch project.

    Alternatively, the City of Alameda could have hired the San Francisco firm of Howard Rice, one of the state’s pre-eminent development litigation law firms.

    My point is that it is the naivete, if not stupidity, of Alameda’s City Council and City Manager to delegate the task of reviewing D. E. Shaw’s bonafides to some low level flunky with a planning degree. Planners are simply not trained to have the unique analytical skills in the nature described in the first paragraph of this comment.

  • barb

    Add Richard McKinney from Lehman to Shaw.

    Alameda may have a conflict with Howard Rice. We now have a staff of 10 in the City Attorney office. None who of whom apparently has enough real legal experience to understand that they need serious help in this matter.

    I hardly think Debbie Potter is as qualified as her brother Harry to evaluate the dark side of SUNCAL in its new limited liability version. That’s why we’re not allowed to say its name out loud.

  • Stan

    Take a look at how they have acted in other cities in the last couple of years. Anaheim residents stood up and got an initiative on the ballot to overturn a city council vote to change zoning for them so that they could build condos with a density of close to 96 per acre. We stood up to them and the council was forced to reverse their decision. You can do the same in Alameda!