Sun Cruz Casinos Sale (2000) - Bankruptcy, Investigations and Indictments

Bankruptcy, Investigations and Indictments

SunCruz declared bankruptcy in June 2001, and was subsequently auctioned off to new management in a bankruptcy action brought by Foothill Capital. Abramoff and Ben Waldman signed their stake in SunCruz over to the Boulis family estate, and Kidan later turned over his stake for $200,000. Foothill settled with Abramoff for an undisclosed sum, and continued litigation against Kidan.

On December 15, 2005, Kidan entered a guilty plea in a Miami federal court to one count each of conspiracy and wire fraud, each of which carries a possible sentence of five years in prison. U.S. District Judge Paul Huck accepted the plea and set sentencing for March 1, 2006. The specific allegations were:

On September 27, 2000, Foothill Capital Corporation, along with Citadel Equity Fund, Ltd., funded approximately $60 million in loans toward the $147.5 million sale to a group of investors of SunCruz Casinos by Konstantinos (Gus) Boulis. The buyers were headed by defendants Adam R. Kidan and Jack A. Abramoff. According to the Indictment, as an express condition for providing the loan, the lenders required proof that Kidan and Abramoff had made a cash equity contribution toward the purchase price in an amount of at least $23 million. As proof that this condition had been met, the buyers, led by defendant Kidan, executed a closing statement, signed by Kidan, attesting that $23 million in funds had been transferred by the buyers to Gus Boulis towards the purchase price of SunCruz. Also, as part of the closing documents, Kidan and Abramoff signed “cash equity contribution” statements asserting that the buyers had contributed no less than $23 million in cash toward the purchase of SunCruz. In support of the above false statements, Kidan and Abramoff caused to be sent to the lenders a counterfeit copy of a wire funds transfer notification, reflecting that $23 million had been transferred from the account of Leak, Inc. at Chevy Chase Savings Bank, in Chevy Chase, Maryland, to the account of Gus Boulis at Ocean Bank, in Miami, Florida.

To further support the loan application, both Kidan and Abramoff provided personal financial statements. The lenders relied on both financial statements, and the counterfeit copy of the wire funds transfer, deciding to approve and fund the loan. Some of the proceeds of the loan were then wire-transferred to the account of Gus Boulis at Ocean Bank, in Miami, Florida. The copy of the wire funds transfer notification reflecting the transfer of $23 million from the buyers to the seller was fraudulent, as no such transfer of funds ever occurred, and the buyers had never made any cash contributions toward the purchase of SunCruz. Similarly, the personal financial statements provided by Kidan and Abramoff to Foothill contained false information concerning their respective assets and liabilities.

On January 4, 2006, Abramoff pleaded guilty to conspiring to commit wire fraud and mail fraud, and of a separate charge of wire fraud, relating to the SunCruz purchase. On March 29, 2006, Abramoff and Kidan were each sentenced to five years and ten months in prison -— the minimum allowed per the plea bargain -— and were ordered to pay restitution of more than $21 million for their involvement in the SunCruz casino deal.