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The Colorado lawsuit describes a convoluted scheme starting with the Altus group approaching owners of several thousand acres of prime Colorado resort area (general area of Steamboat Springs) property seeking a partnership arrangement. The two property owner partners entered the partnership with the understanding they would only deed property to the partnership and the Altus Group would in turn provide funding needed to cover operating expenses, infrastructure construction, manage and market the lots. The Altus Group used the fact they were owned by a federally regulated bank holding company, FSB Bancorp, as qualifications to provide safe financial management and accounting and produce their share of funding.
Between the time a memorandum of agreement was finalized the Altus Group wanted to make two significant changes. For tax purposes, replace Altus Ventures with Oasis Development, a sister affiliate with the same ownership. And, bring in a fourth partner Robinson Construction who would perform infrastructure at a reduce price and make its credit line available.
It is key to note the two land owner partners 4S Development (46.7% interest) and Grassy Creek Holding (14.3% interest)together constituted majority ownership.
See how the partnership was
Once the partnership agreement was finalized in May 2006, the two land owner partners contributed land worth more than $21.5 million to the partnership. From then until the majority partners demanded an independent audit in August 2007, most changes were undertaken without the full knowledge and consent of the majority partners. Rather than cooperating with an auditor, the Altus Group chose to resign. At the time of this writing, December 2008, the partners still haven't been provided a full accounting, in spite of a court order for the Altus
Group to do so.
That was just the beginning of what was soon to be learned.
The bottom line is the Altus Group and friends, without expending one dime of their own money, had skimmed large unearned profits from the partnership. If the other partners had not acted quickly they would have lost ownership control of $millions in prime resort area property.
Upon resigning the Altus Group hurriedly cleaned out the offices they were using in Colorado.
In haste they apparently attempted to erase the hard drives on computers left behind, but lack of knowledge prevented them from taking all the
necessary steps to prevent recovery by experts. The majority owners were able to bring in experts and recover all the hard disk data revealing financial transactions, email correspondence, etc. Soon learning of activities finance managers failed to reveal.
- had rather than providing funding as agreed, borrowed funds for operating expenses by mortgaging property the majority owners had deeded to the partnership as their contribution.
- had been working with a total of $27 million from loans and in property sales.
- had been failed to account for $13,577,000 in property sales.
- had been failed to account for disbursement of loan proceeds and payment of expenses.
- had been paying themselves and staff exorbitant salaries and bonuses.
- had spent extravagantly for their own personal benefits including ??????????
- had paid excessive office support costs.
- had been operating a kickback scheme using the partnership money to repay down payments to select buyers.
- had hired as president David Brueni who had recently, while employed at Vectra Bank arranged a $3,225,000 loan.
- had given the consultant 10% of the partnership
- had paid that consultant $100,000 signing bonus and $105,000 in wages
- had devised an "Executive Bonus Plan" to distribute 10% of MAPI pre-tax dollars to mainly those affiliated with the Altus Group.
- had paid $322,985 in consulting fees to Altus Ventures for January thru June 30, 2007, although Altus Ventures had stepped aside in early 2006.
Note: Partners had learned a consultant had been hired but were not informed of the financial arrangements.
Then what happened? More
Disclaimer. This is the writers best interpretative reconstruction of the events based on information gleamed from the Colorado lawsuit and other available sources. The fact that the Altus Group, in spite of a court order, has yet to provide a full accounting to the other partners leaves some information incomplete and best good faith estimate.