Lawsuit Says Hot Springs Developer Hid Funds from Bankruptcy

The redone 14-floor hotel is getting a new spa.

The developer of the Hotel Hot Springs & Spa has been accused of improperly transferring millions of dollars to his wife or into a trust before filing bankruptcy to avoid paying creditors.

Developer Gary R. Gibbs of Niceville, Florida, made the transfers “with actual intent to hinder, delay, or defraud” his creditors, according to a suit by the Chapter 7 trustee in Gibbs’ bankruptcy case, Richard L. Cox of Hot Springs.

If you recall, Gibbs, who also developed the Delta Resort & Spa in Desha County, was pushed into Chapter 7 bankruptcy in December 2018 and listed total debts of $171.1 million.

Cox recently filed the lawsuit against Gibbs’ wife, Shareen Gibbs, Newave Equity II Trust and James M. Carroll, the trustee of the trust, to recover a total of $2.1 million.

Cox said in the filing that Gibbs, individually and through the various entities and trusts that he controlled, transferred a total of $2.1 million to his wife and the Newave Equity II Trust in a series of transactions two years before the bankruptcy was filed.

Cox cites several examples in the filing of Gibbs transferring money to his wife or Newave Equity.

Cox said the investigation into Gibbs is ongoing. Cox added that he might amend the complaint “to include additional assets, transfers, concealments, or liabilities that have not been discovered to date.”

Cox is being represented in the lawsuit by attorney James E. Smith of the Little Rock law firm Williams & Anderson.

Shareen Gibbs could not be reached for comment.

The foreclosure sale of the 200-room Hotel Hot Springs & Spa is still on for Wednesday at 11 a.m. The public auction will be held in the foyer of the Garland County Courthouse in Hot Springs. The proceeds from the sale will help pay a $128.9 million judgment handed down against the hotel’s owner back in June.

Gibbs agreed to the judgment and the foreclosure for his limited liability company that owned the downtown hotel, GRGCBHS LLC.

The consent judgment, one of the largest in Arkansas, was not against Gibbs personally since he is in Chapter 7 bankruptcy. Instead, it was against his LLC.