Fraud alleged in huge SoCal land venture's funding

Building giant Lennar Corp. and a former subsidiary defrauded California's public pension fund and others during their partnership in a failed development venture that involved the last major tract of undeveloped land in Los Angeles County, according to a lawsuit filed in bankruptcy court. Lennar and the subsidiary LNR Property Corp. - at the expense of their creditors and partners in the venture - engineered a transaction to cash in on $1.4 billion of debt they knew they would never be able to repay, according to the lawsuit filed last month in Delaware. LNR "orchestrated a transaction in February 2007 that would and did allow it and its co-owner Lennar to leverage their controlling ownership interests for 'special' distributions of $700 million each to escape future losses and instead improperly realize a hefty payday," the complaint says. The lawsuit, which was filed on behalf of creditors of the venture known as LandSource Communities Development LLC, names LNR and two affiliates as defendants. It does not name Lennar, which was released from liability in claims concerning the LandSource deal as part of the venture's bankruptcy settlement.

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