Arkansas Business

He said he based that understanding on the wording in the operating agreement.

Other investors with Smith on several of the projects were Canfield; Rhodes; Smith’s neighbor, John Mason; Dr. Mushtaque Juneja, a Louisville anesthesiologist; and G.J. Hart of Louisville. Hart was the CEO of the Texas Roadhouse restaurant chain (which, despite its name, is based in Louisville) until August 2011, when he became CEO of the California Pizza Kitchen.

Smith would also rely on the LLC’s operating agreement when it said that “no Interest Holder shall have personal liability for the obligations for the Company.”

Smith told the AP in July that he thought real estate development was a safe investment.

“You may not make money, but you won’t lose money,” he said.

Warning Signs

After losing his job at Michigan State, Smith continued his real estate investments with Canfield. But home sales in Jefferson County started to show signs of trouble, dipping almost 3 percent in 2007 to 14,748.

That statistic didn’t seem to bother Canfield or his investors. They pushed forward with additional projects.

In May 2007, Canfield announced a new development called Shakes Run, a 250-acre development that would include 460 single-family home sites, a 6,400-SF clubhouse with indoor and outdoor pools and more than 70 acres of green space, according to an article in the Louisville Business Journal. Homes in the subdivision started at $350,000.

Canfield told the business journal that there was “tremendous interest” in the property and that all 50 lots in the first phase had been sold.

Smith was an investor in Shakes Run as well as Canfield’s Poplar Woods, a 93-lot development on 203 acres, which was also getting off the ground in 2007. The Louisville Business Journal article said home prices there would start at $760,000.

Canfield said the Poplar Woods land cost $5 million and developing it would take another $7 million. And still Canfield was hunting for more projects.