Gary Combs Sues Bank of the Ozarks for $108 Million

by Worth Sparkman  on Monday, May. 4, 2009 1:41 pm  

Gary Combs showed off the Waterford Estates clubhouse in the spring of 2006.

Northwest Arkansas developer Gary Combs, along with six businesses of which Combs is either the sole member or a partner, is suing Little Rock-chartered Bank of the Ozarks, its CEO, George Gleason, and its Northwest Arkansas division president, J. Shannon White.

A complaint, filed late Friday in the Washington County Circuit Court, is seeking $8 million for "for injuries suffered as a result of Defendants' Deceptive Trade Practices" and $100 million for damages due to "bait and switch" tactics. The plaintiffs are The Club at Waterford LLC, Waterford Commercial Park LLC, Waterford Estates Development Inc., Sundowner Ranch LLC, Gary Combs, Gary Combs LLC and Goshen Land Co. LLC.

Bank of the Ozarks holds the notes for many of Combs' projects, including Sundowner Ranch, a subdivision in Prairie Grove and the Waterford Estates developments, of which Combs is a one-third partner. The Ronnie J. Hissom Trust is a two-thirds owner of all Waterford entities. Waterford Estates is a single-family development between the cities of Goshen and Fayetteville, with lots for sale in the $70,000 range.

According to the complaint, BOZ loaned Combs and the Hissom Trust $1.16 million to build a clubhouse and $737,500 for the commercial park, both in August 2005. The bank refinanced a note of $13.43 million in September 2005 for the subdivision part of Waterford Estates, taking the loan from Community Bank of North Arkansas (currently known as Chambers Bank). According to the complaint, White had solicited the business from Combs because the two had prior banking relationships at Community Bank.

According to the document, on about March 1, 2007, the Hissom Trust notified BOZ that it would not be able to maintain interest payments. The trustee at the time was Gary Head, CEO of White River Bancshares Inc., but Head has since turned the trust over to Hissom's children.  

In the complaint, Combs alleges that Bank of the Ozarks used deceptive practices to obtain his signature on a second mortgage for Waterford Commercial Park LLC.

Combs also alleges that in March 2007, Bank of the Ozarks, knowing that the Hissom Trust was running short on liquidity, set up short term renewals on Waterford entities and the Sundowner Ranch loans (there were two valued at $4.84 million and $9.85 million) to "force Combs to make arrangements to assume the indebtedness of the [Hissom] Trust." Combs was unable to find alternative financing because of the short renewal notice, the documents say.

As a result, and under duress, the documents say, Combs assumed all indebtedness for the Combs/Hissom entities on June 22, 2007 and was charged a combined $94,806 in renewal rates for two of the Waterford loans and two Sundowner loans.

On April 30, 2009, the document states, White informed the plantiffs' chief financial officer that BOZ was lowering the value of real property by $16 million on the Sundowner Ranch development and that it had "deemed the Sundowner Ranch development a non-performing asset notwithstanding the recent sale by Sundowner of 50 lots."

"Plaintiff allege that the arrangement wherein [Bank of the Ozarks] used economic duress to force Combs to assume indebtedness he had not previously guaranteed was the consummation of bait and switch tactics by [BOZ] in violation of the Deceptive Trade Practices Act and as a result the Plantiffs have suffered direct injury in that Plantiffs have been forced to assume the payment of the Hissom entities two-thirds (2/3) interest payments and has had to procure additional credit from [BOZ] of approximately $8 million."

Combs seeks damages related to "economic injury equaling $100.47 million as a result of all Defendants' violations of the Deceptive Trade Practices Act plus reasonable attorney's fees."

Combs called the series of events "outright extortion" and said he "just wants to get in front of a jury."

A spokeswoman for Bank of the Ozarks had not yet prepared a statement about the complaint.

Previously
Bank of the Ozarks Earns Record $9.3 Million in 1Q
Lotta Lots? Expensive Lots May Have Reached Saturation
Hissom, Combs Plan Homes on the Range

 

 

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