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Davidson's lawyer, accountant and broker sued

Landmark Tower condo, retail project in Greenwood Village

Landmark Tower project in Greenwood Village

Highlights:

  • Financial woes follow project even after developer’s suicide.
  • Lawsuit targets Zack Davidson’s former lawyer, accountant  and broker.
  • Davidson used some of money for project to settle sexual harassment lawsuit.

Disgraced developer Zack Davidson committed suicide in January, but the legal battle continues regarding his high-profile, but financially troubled Landmark development in Greenwood Village

Last Friday, the Marin Metropolitan District sued Davidson’s former lawyer, accountant and real estate broker in Arapahoe County District Court on fraud charges surrounding the planned development next to the Landmark and Marin condominium towers, near East Belleview Avenue and Interstate 25.

The district is seeking to collect damages to be “proven at trial,” according to the 14-page complaint. The district is seeking a jury trial.

Before Davidson took his own life by hanging himself in a forest outside of Tampa, Fla., he had been indicted of stealing or misdirecting more than $3.1 million from the Marin Metropolitan District between July 2008 and April 2010. A warrant had been issued for his arrest.

The most recent complaint charges Davidson was paid $5.23 million from the district, without the full knowledge of the district’s board. In total, the district paid Davidson more than $8 million, according to the complaint. The district is being represented by Anthony L. Leffert of Robinson Waters &  O’Dorisio.

Leffert, on Tuesday, said that he is limited to what is in the complaint, as far as any comments, he can make.

He said, however, that the district will aggressively attempt to recover any money that was “fraudulently” taken from the district. He said the money they hope to recover “for the benefit of taxpayers” will be used to pay back debt on bonds issued by the district and will be “something north of $3.2 million.”

The money was to be used for a planned European Village at the Landmark, but funds were only spent to demolish an office building and to pay for some grading on the site. Davidson had planed to develop 160 manor homes and 60 brownstones in the village.

Instead, Davidson, 45 at the time of his death, used the money for a number of things that did not benefit the district’s mission to create infrastructure for the next phase of the development,  according to the lawsuit.

Among other things, Davidson used some of the money to settle a sexual harassment lawsuit, according to the lawsuit.

The lawsuit also says district funds were used to pay Davidson about $34,200 a month.

Defendants in the lawsuit are:

  • Paul R. Cockrel, of Collins, Cockrel & Cole, P.C., who was Davidson’s lawyer on the project.
  • Leann M. Jones, Davidson’s certified public accountant.
  • Rike Palese, who was appointed to the district’s board by Davidson and also was a listing broker for the Landmark and Marin towers.

“I will say this is not true,” said Palese, a longtime, well-respected and successful broker, known for selling luxury homes.

Palese said he was aware the lawsuit might be filed, but has not seen it.

“I’m sure my lawyer would not want me to comment, so I have no comment,” he said.

Jones, reached in her office in Texas, said she has no comment. Cockrel did not return a call.

According to the lawsuit, “the investigation has revealed that Davidson, with the advice and participation of Defendants Cockrel, Jones and Palese, abused his position as president of the Board of the District improperly diverted monies by wrongfully requisitioning and approving payments by the District to the developer entities.

“At the direction of Davidson, and with the knowledge and participation of Defendants Cockrel, Jones and Palese, the District caused $8 million to be paid to reimburse sums for District expenses when in fact many of those funds were for matters which were not used for District improvements.”

The investigation followed a criminal indictment filed by the Arapahoe County District Attorney’s office on Dec. 27, 2012, charging Davidson with 20 counts of theft, forgery, embezzlement and fraud. A few days later, Davidson killed himself.

The latest civil lawsuit goes on to say that the funds were “spent for illegal private purposes of the developers and Davidson including such things as payments to settle a sexual harassment lawsuit against a developer; salaries of a developer and sales employees; settlement of threatened litigation by a contractor in the Landmark building; payment for engineering services which were not intended for public infrastructure; and other funds disbursed to the developers for subcontractor invoices that were never paid.”

The lawsuit does not identify the developer who had filed a sexual harassment lawsuit against Davidson.

The lawsuit also said there are no “invoices or backup documentation for the ledger” for more than $5.23 million paid to Davidson on July 14, 2008.

The allegations were first brought to the attention of authorities by former district board member Chad Cox.

The lawsuit claimed the three defendants, “aided, abetted, assisted, and advised Davidson in a fraudulent scheme to misrepresent and misstate requisitions of alleged District expenses to Davidson and his development entities. Each of these Defendants participated in this scheme knowing that the requisitions and certain amounts paid to the developers were fraudulent and that the monies paid to the developers were not used for the expenses of constructing District facilities.”

The lawsuit said the three defendants “gained substantial financials benefit in their roles as counsel for the District, accountant for the District, Director and exclusive real estate broker for the Landmark and Meridian condominium buildings.”

It went on to say that Cockrel and his firm were “negligent and fell below the standard of care… as to the lawful, proper, and non-fraudulent course of action which the District should have pursued in reimbursing Davidson and the developer entities for legitimate District expenses.”

It also said Cockrel “fell below the standard of care of a reasonably competent special district attorney in reviewing the Requisitions and properly advising the District and its Board as to what should be properly reimbursed.”

Similar language was used to describe Jones as far as accounting.

The lawsuit said that Palese “breached his fiduciary duty to the District and to the Board of Directors in failing to insure that the disbursement of District funds were legitimate and proper and that any Requisitions were accurate and proper expenses of the District.

“Defendant Palese further owed a fiduciary duty not to engage in fraud; not to engage in fraudulent concealment; and to properly disclose and advise the District and the Board on the lawful and legitimate course of its business and functions. Defendant Palese’s participation in the fraud and the fraudulent concealment was done intentionally, recklessly, and wantonly.”

Have a story idea or real estate tip? Contact John Rebchook at  JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.