AEA tries to recover lost funds in court
In an effort to recover some of the money AEA Federal Credit Union lost through various high-value loans that ended up in bankruptcy, the financial institution has been going to court to obtain the assets in those cases.
Most recently, the U.S. Bankruptcy Court ruled that AEA can proceed with steps to take control of the assets in three entities owned by Realtor Todd Burch, who filed for bankruptcy of the corporations in the spring of 2010.
The ruling allows AEA to protect the value of the assets while pursuing foreclosure. Once AEA has clear title of the property, it can be sold.
Meanwhile, a hearing has been scheduled for Dec. 16 in U.S. Bankruptcy Court on AEA's request that Frank Ruiz's petition for discharge of his debts be denied. Ruiz accrued millions of dollars of debt as the developer of Yuma Fun Factory and Top of the Kress. In June, he pleaded guilty to charges of transactional money laundering and misuse of credit union funds. He is still awaiting sentencing.
Michael King of Gammage and Burnham, the legal firm representing AEA in the court proceedings, said he could not comment on either case.
Burch's entities in the bankruptcy court ruling include Cactus West Developers LLC, Todd Burch Limited and Nflux LLC. The assets include the Tuscan Ranch subdivision on County 16th Street between Avenues 3E and 4E, the Reflections Town Homes at 3151 W. 28th Drive (some of which are used for assisted living residents), and some other property.
In his ruling, U.S. Bankruptcy Court Judge James M. Marlar ruled that AEA “is free to proceed with any and all of its rights and remedies under applicable non-bankruptcy law and pertinent contracts with respect to the property described above, including without limitation foreclosure of its deeds of trust or other security instruments.”
The bankruptcy court action followed shortly after Burch's filing in September of a $34 million lawsuit against AEA for alleged fraudulent misrepresentation, breach of contract and defamation. In his lawsuit, Burch asserts that AEA unfairly sued him for collection of his capitalized loan — reportedly worth $17 million — and cut off his line of credit, driving him into bankruptcy.
In the action involving Ruiz, AEA is seeking a summary judgment that because of his admission to defrauding the credit union, the businessman should not be relieved through bankruptcy of the debts he owes it, according to documents AEA's attorneys filed with the Bankruptcy Court.
One document reads: “Ruiz concocted and executed a scheme to obtain loans from AEA — under the guise of legitimate business purposes — and divert the funds for personal and other improper uses. The resulting debt is non-dischargeable under the exceptions for fraud and willful injury to property.”
Another document states that AEA and Ruiz want to engage in settlement negotiations, which would obviate the need for trial. But first, AEA needs to know the balance owed on its proof of claim.
The document states: “That balance will be determined over the following months as the court lifts the automatic stays in the related Chapter 11 bankruptcies and allows AEA to liquidate its collateral and calculate the remaining deficiency balance.”
According to an amended plan of reorganization filed in May by Ruiz, AEA was listed as holding a total of $17.9 million in unsecured claims against Ruiz and three companies he owned or had an interest in.
The debt has already gone down somewhat with AEA's recent sale of Yuma Fun Factory. According to the Yuma County Assessor's Office, Brice Hauling purchased the attraction's real estate and personal property for $3.5 million. While Ruiz had sold his interest in Yuma Fun Factory, he was still a guarantor on the debt.
Joyce Lobeck can be reached at jlobeck@yumasun.com or 539-6853.
