Reed Skatkin, Bon Carre investor

07 Dec 2001

Investor bankruptcy cited in Bon Carre woes

The Baton Rouge Advocate
6.6.2001

BY CHAD CALDER

Bon Carre's recent financial troubles stem from the personal bankruptcy of co-owner Reed Slatkin, the EarthLink Inc. founder who has been under federal investigation for allegedly bilking investors out of more than $500 million, a spokesman for the development's ownership group claims.

Mark O'Donnell, brother of Bon Carre investor Kevin O'Donnell, said that while Slatkin never took any money from the Florida Boulevard development, his bankruptcy killed a financing package that the four owners were about to get in the spring from a syndicate of area banks for continuing construction at Bon Carre.

"The loan package was complete," O'Donnell said. "It was done. They were ready to sign the documents. And the day before they were going to sign the documents, Reed filed for bankruptcy and it all unraveled."

O'Donnell, who would not disclose the banks preparing the loans, said he does not know how much Slatkin was worth on paper, but said that he was "by far the largest guarantor" of the prospective Bon Carre loan.

"All of his net worth was potentially fictitious," O'Donnell said. "It pulled the rug out from under our ability to get financing," he said.

"There are no allegations that Reed misappropriated any funds from any of the projects," O'Donnell said of Bon Carre and two other redevelopment projects the group has in the Southeast. "They're really separate matters," he said.

Bon Carre is the former Bon Marche mall on Florida Boulevard. It was purchased in 1998 by the four-member group, led by California developer Norie Harrower.

Harrower's group originally envisioned a mixed-use development of office, retail and residential tenants. But its focus changed when it landed Houston-based Solid Systems Inc. in 2000 to build a commercial data center in Bon Carre. The ownership group also inked a deal with the taxpayer-funded Research Park Corp. to open a business incubator there to help grow high-tech companies.

These two components were dubbed the Louisiana Technology Park and were hailed as a way to nurture a local high-tech industry. The state also pledged $37 million to the project over the next eight years.

The project's financial troubles and a bid by Research Park Corp. to buy the development were disclosed Friday.

Top state officials and a group of Research Park board members have since said they'd rather the taxpayer-funded body not acquire Bon Carre, while O'Donnell has said the Research Park Corp. offer is too low, anyway.

The development's future remains uncertain, with a Tennessee bank's foreclosure looming on the ownership group's initial $36 million construction loan unless a buyer is found.

O'Donnell said Slatkin's bankruptcy was poorly timed in relation to Bon Carre's continued development.

Slatkin's alleged misdeeds - which have been widely reported in the news media and cited in an Esquire magazine article as perhaps the largest investment scam in U.S. history - include running an unregistered investment club in which Slatkin allegedly took money from as many as 800 investors.

Slatkin has not been charged but has been investigated by the Federal Bureau of Investigation and the Securities and Exchange Commission for running a so-called Ponzi scheme, in which earlier investors are paid off with money belonging to more recent participants.

One report from The Associated Press said Slatkin settled with the SEC in June without admitting to or denying any wrongdoing.

Some high-profile names reported to have given Slatkin money to invest include CNN anchor Greta Van Susteren, movie producer Armyan Bernstein, actor Giovanni Ribisi and EarthLink Chief Executive Officer Sky Dayton, according to the trade journal Bankruptcy Court Decision Weekly News & Comment.

Slatkin declared bankruptcy shortly after some investors sued him and the SEC found out that a Swiss account in which Slatkin claimed to have $400 million did not exist, according to Esquire's story.

He has since resigned from EarthLink's board of directors.

Slatkin's attorney, Brian Sun, could not be reached for comment.

O'Donnell said that while his brother, Kevin O'Donnell, has lost money to Slatkin, he does not know if the same can be said for Harrower or Van Council, Bon Carre's fourth investor.

Harrower has not returned calls for comment.

Slatkin's bankruptcy has caused problems in other businesses, notably the Bon Carre group's similar mixed-use development in Chattanooga, Tenn., called Eastgate Town Center.

Eastgate was temporarily saved from foreclosure Friday when the ownership group struck a deal with a different lender to extend negotiations with an unnamed buyer.

And Beacon Pictures, in which Kevin O'Donnell and Slatkin have a 20 percent ownership stake, has struggled as well, according to a report in Daily Variety. Beacon had a hand in producing hit movies including "Bring It On" and "Air Force One."

But O'Donnell said the Bon Carre ownership group's third project, the former Orange Blossom Mall in Fort Pierce, Fla., has been unaffected by the Slatkin bankruptcy. That mall is now home to Convergys Corp., a call center operator that also set up shop at Bon Carre.

O'Donnell said Slatkin's alleged financial problems were a surprise to Harrower and the rest of Bon Carre's owners.

"None of these guys knew the problems with Slatkin until he filed for bankruptcy," O'Donnell said.