- Zachary Davidson saga continues.
- Scathing and complex order by judge finds Tabor violation.
- Landmark condo owners were hoping for more.
The saga of Zack Davidson continues.
Davidson, the disgraced developer, killed himself in January, rather than face 20 felony counts in Arapahoe County for theft, forgery and embezzlement of public property for a portion of the Landmark development that never got off the ground in Greenwood Village.
Last Friday, an Arapahoe County District judge ordered a refund of $384,611 to condo owners in the Landmark and Meridian towers that Davidson entities developed, ruling that Davidson’s financing mechanism to fund infrastructure for the never-built European Village next to the Landmark, violated the Tabor Amendment.
That is less than one tenth of the almost $5 million the condo owners argued that they were entitled to because of sham transactions by a special taxing district created and controlled by Davidson.
The Marin Metropolitan District, created by Davidson to create the infrastructure for his planned luxury European Village community, must also pay the condo owners 10 percent interest per year on the $384,611.
Davis was the managing partner of a limited partnership called Everest Marin, which acquired the 11.1 acre parcel near Belleview Avenue, east of Interstate 25, where he proposed to develop the luxury European Village brownstone community.
In the complicated 28-page decision, following a bench trial in July, Senior District Court Judge Donald W. Marshall last Friday said the Landmark Towers Association, a home owner association that represents 271 residential units in the two towers, are entitled to the money under Colorado’s Tabor Amendment.
State and local governments cannot raise tax rates without voter approval, under Tabor.
The case revolved around $8 million in bond financing dispersed to the Marin district by UMB Bank, which was acting as the trustee for $30.485 million in general obligation bonds.
Colorado Bondshares had bought all $30.485 million in bonds, but not all of the money was immediately available to Marin.
Davidson had “unsupervised access” to the funds and UMB took his word the work had been accomplished and never tried to verify whether the $8 million was being allocated properly, according to the judge.
“This process led to enormous misuse of the bond proceeds,” Marshall wrote.
Davidson and associates “falsely represented” to Greenwood Village,that owners in the Landmark had been told about the creation of the Marin district and were in favor of it, according to the judge’s order.
In fact, the two towers were independent of the infrastructure needed for the European Village and did not benefit from the Marin District, the judge said.
Greenwood Village approved a Development Improvement Agreement that allowed Marin to issue the general obligation bonds, which under law can only be used for public improvements.
“Because the general obligation bonds were to be repaid using tax revenues, any illegal misuse of funds would violate Tabor,” Marshall wrote.
“The question of how much of the funds were misappropriated is a very difficult issue presented to this court.”
He said the petitioner, the Landmark HOA ,“made a compelling showing that some $4.957 million was misappropriated by Everest through Mr. Davidson’s actions.”
However, the respondents, which is composed of the Marin Metropolitan District, UMB Bank and Colorado Bankshares, when it completed its audited financial statements for 2009, put the amount being misappropriated at $384,611, which had been listed as a “developer receivable” by Marin.
In 2009, Marin hired expert Guy Ford to determine how much of the $8 million had been actually been spent on the European Village and had been properly allocated between private and public improvements.
“His report concluded that substantially less than four million dollars of the eight million dollars which had been drawn by Marin could be described as properly charged to public improvements,” according to the judge’s order.
The judge said he suspects far more than $384,611 was misappropriated, but he has to go with the amount the audited financial statement showed to be misappropriated.
“For the court to pick an amount between what is claimed by petitioner and what is admitted by Marin would result in speculation by the court. The court may not resort to such speculation and must make a finding on an amount proved with reasonable certainty by a preponderance of the evidence,” the judge wrote.
“While the court strongly suspects that it was a much greater amount, the court would be speculating to select any higher amount.”
Although the payments were dispersed to Marin, based on requests by Davidson in 2008, it was not an issue for Landmark condo owners for another two years.
“It was not until tax billing notices were received by the Landmark owners in 2010 for the tax year 2009 that they had any actual concern about the amount of taxes relating to Marin,” Marshall wrote in his order.
The judge entered a mandatory injunction requiring Marin to “develop a refund plan as provided by Tabor identifying how the refund and interest shall be paid to the affected taxpayers.”
Marshall also issued an injunction preventing Marin from “making any such assessment in the future.”
Interested in buying a home in the Landmark? Please visit COhomefinder.com.
Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.