A Hinsdale CPA who paid $3 million for farmland believed to be ripe for development near Minooka in 2005 has sued the directors of a defunct bank for allegedly defrauding him by loaning him money to buy the land, even as one of the bank’s directors flipped the land to him at a nearly 100 percent profit.
John L. Beata, a certified public accountant, filed a fraud complaint in Cook County Circuit Court earlier this month aimed at the directors of the former New City Bank.
Beata bought the plot of land in question in Will County for $3 million. After the fact, he learned the plot was sold earlier the same day to a New City Bank director for just $1.7 million. In the course of financing Beata’s purchase, he said the bank cited an appraised land value of $2,865,000, and extended Beata a loan for $1,859,000.
Beata paid off the loan in full, along with fees and property taxes, and now accuses the former bank’s directors of fraud for allegedly telling him the loan they approved represented just 65 percent of the property’s value, even though it exceeded what their own director, developer Jack Zausa, had just paid for it.
Named defendants, all former New City Bank directors who live in Cook and DuPage counties, are Albert C. Baldermann, Peter J. Bilzanzic, Vincent Cainkar, Merri Ehrenwerth, Ronald Fisher, Donald Hartz, Burton Odelson, Thomas V. Powell Sr., Gary Wapinski and Raymond Lazzarra.
Beata’s complaint originates with his accounting client, Jack Zausa, a New City director who also ran Zausa Development Corporation, a Cook County real estate firm that assembled large tracts of land for residential development out of smaller pieces of farmland.
In 2005, Zausa was assembling parcels near Minooka in plans of selling one large property. After the firm reached its borrowing limits, Zausa approach Beata to propose he buy 37.2 acres for $3 million. After a sale to an end buyer in three or four months, Beata believed he would yield a $25,000 profit.
According to the complaint, Zausa told Beata he would use his role as a bank director to make sure the bank loaned him 65 percent of the purchase price, meaning Beata would not have to use any of his own money to complete the sale. Further, the corporation was to fund the difference with an undocumented transaction and pay all transaction costs. However, Zausa did not tell Beata he didn’t yet own the land, allegedly concealing he had a contract to acquire it for $1.7 million.
At the time, the bank’s policies required the board to approve all loans exceeding $150,000. Zausa recused himself from the vote. Before that vote, Beata alleges, Zausa met with several directors to reveal his plan to “flip the land to Beata for a nearly 100 percent profit. … each of them agreed to participate in Zausa’s plan to defraud Beata and approve the loan.”
Fitzgibbons & Associates, a Chicago real estate appraisal firm New City hired for the transaction then generated the $2,865,000 appraisal that led Beata to accept the $3 million price tag. The Fitzgibbons firm has settled a separate claim Beata brought against them.
Beata’s new claim against the New City directors recounts the words of director Hartz, who was president of his own residential home construction firm: “Hartz told Zausa on the day the loan was approved, upon seeing the appraisal, in an emotional and agitated voice, ‘What are you trying to do, take down this bank?!’ Despite recognizing the problems with the loan, the directors approved it and, based upon their representations, Beata accepted it.”
The Federal Deposit Insurance Corporation closed New City Bank in March 2012; it has no assets remaining.
Beata is seeking compensatory and punitive damages. He is represented by attorney Howard L. Teplinksy, of Beermann Pritikin Mirabelli Swerdlove, of Chicago, and attorney Kelli Dudley, also of Chicago.