KC condo owners sue bank over property that is ‘exceptional only in its afflictions’
Several owners in a troubled condominium project near downtown Kansas City are suing a bank that loaned money to a developer that the lawsuit calls a “lifelong grifter.”
The lawsuit by condo owners at Park Reserve, filed last week in Jackson County Circuit Court, accuses Citizens Bank and Trust Company of entering into an “unconventional business arrangement” with developer Wayne Reeder, one that bears a closer resemblance to a joint venture or equity participation than a construction loan.
Reeder’s Park Reserve development was supposed to fix up the former Trinity Lutheran Hospital campus on 30th Street and Baltimore Avenue into luxury apartments.
But angry condo owners have sued Park Reserve this year in separate lawsuits. They say they were duped into buying luxury condos but instead are stuck with dwellings that leak water, grow mold and lack promised amenities. Or, as the latest lawsuit puts it, Park Reserve condo owners “received a property exceptional only in its afflictions.”
“We believe that the bank has responsibility with respect to the condo owners because of the representations that were being made by the developer,” said John M. Edgar, a lawyer with The Edgar Law Firm who is representing plaintiffs in the case along with Michael Owens. “And in making those representations and closing those transactions, the bank received the funds or a portion of the funds from those transactions.”
In a statement, Robert Wright, executive vice president at Citizens Bank & Trust, said the lawsuit makes false allegations against the bank.
“At this time, we cannot offer insight into the claims it makes,” Wright said in an emailed statement. “As the case is currently in litigation, we will not make further statements, and will refer any questions to our legal counsel.”
Citizens Bank & Trust’s attorney, Elizabeth Fast of the Spencer Fane law firm, did not return an email seeking comment.
Reached by phone, Reeder said he was aware of the lawsuit but hadn’t read it.
“It’s a joke,” Reeder said. “Just like everything else they (Park Reserve condo owners) do.”
The lawsuit calls Reeder a “career fraudster” to whom Citizens Bank & Trust either did no prior due diligence prior to loaning $20 million for the Park Reserve project, or disregarded what they would have learned from publicly available information.
Reeder was convicted in 1996 by a Rhode Island jury on several counts of wire fraud and interstate transportation of stolen property in connection to a case in which he was accused of looting assets of two insurance companies. He received a 46-month prison sentence and was ordered to pay $16.5 million in restitution. Reeder told The Star last month that he had not paid any of that restitution amount.
The lawsuit also says Reeder was involved in various other financial schemes, including defaulting on multi-million dollar loans and claims of fraud and misappropriation, citing news articles and court cases.
Despite these past issues, Reeder’s projects in Kansas City have been awarded tax abatements by the Planned Industrial Expansion Authority, a public agency tasked with giving tax breaks to developers who can clear blight, for three separate development projects in Kansas City, including Park Reserve.
The lawsuit said Citizens Bank & Trust’s loan lacks the hallmarks of a typical loan agreement, such as a true maturity date and payment schedule. The bank was also involved in exercising the rights typically carried out by a project owner, such as terms and prices of condo sales and the marketing of the development, according to the lawsuit.
“Specifically, Citizens Bank knew that Reeder did not have the competence, willingness, or financial capacity to complete the project or otherwise bring it in conformity with the representations described in this petition,” the lawsuit said.
The lawsuit seeks unspecified actual and punitive damages for the condo residents.
This story was originally published November 12, 2019 at 6:03 PM.
