September 20 , 2002
by David Roeder
Business Reporter

Developers of a stalled mixed-use complex in Streeterville have aimed an explosive charge at LaSalle Bank, saying its top officers concocted an illegal conspiracy to pressure them into putting $5 million in additional equity into the deal.

Using terms such as "shake down'' and "extorting money,'' lawyers for the developers of the Grand Pier project charged that LaSalle President Norman Bobins directed the scheme. Bobins, one of Chicago's most respected and influential business leaders, "was the mastermind behind LaSalle's decision'' to file a foreclosure lawsuit based on fallacious cost overruns in the project, according to a motion filed in Cook County Circuit Court.

The tart language is unusual for a foreclosure case. When they involve commercial property, such suits usually are part of a negotiating strategy over a deal gone sour. It remains unclear how LaSalle's behavior was different from that of other banks protecting their interests, especially where developers without a successful track record are concerned.

But the Grand Pier developers will get every opportunity to prove their case. Wednesday, Circuit Court Judge Robert Quinn granted their motion to force LaSalle to produce documents and e-mails authored by senior officers, including Bobins, that apply to the case. LaSalle has until Oct. 2 to comply.

The motion alleged that the foreclosure "was a sham, filed solely for the purpose of extorting money from Grand Pier.'' LaSalle is the primary lender in the proposed amalgam of a hotel, grocery store, parking garage and condominium high-rise on the block bounded by Grand, Illinois, Fairbanks and St. Clair.

LaSalle spokesman Shawn Platt declined to comment on the case, which involves entrepreneurs in their first stab at a complex development taking on the bank with the biggest local profile in commercial real-estate lending. The lead developer of Grand Pier is Ray Chin, a construction contractor at O'Hare Airport. His partners include Food Fare Inc. owner Sue Ling Gin and Linval Chung, who runs a construction company.

Representing them is the firm Novack and Macey, a small firm known for a bulldog manner in litigation. Through his attorneys, Chin declined to discuss the case or when construction might be resumed.

Documents the firm has obtained so far include memos among bank officials, some to Bobins, that report a desire to "pressure'' Chin to provide additional equity. The developers' lawyer, P. Andrew Fleming, said Chin and his partners invested $11 million in the project and weren't legally required to provide more.

Meanwhile, LaSalle seized upon cost overruns originally claimed by the project's general contractor, AMEC Construction Management Inc., as a pretext for claiming Chin was violating loan covenants, Fleming said. The motion said AMEC originally claimed $14 million in overruns, but that LaSalle's own investigation showed only $2 million of that to be legitimate.

In addition, Fleming has argued that LaSalle refused to factor in partnership agreements to develop parts of the block and enhance its value. The loan was never in default, and the partnerships elevated the land value to $115 million, well in excess of the $49.5 million loan commitment, Fleming said.

No documents have surfaced showing Bobins directed the foreclosure. Fleming said the evidence "must exist'' because important communications were directed to Bobins.

He also said LaSalle released only $20 million of the promised $49.5 million, leading to a work stoppage on the site when the contractors couldn't be paid. LaSalle agreed to fund the loan with U.S. Bank and Charter One Bank.

Central to the case is an e-mail to Bobins dated April 25, 2001, from Trish Kelly, a LaSalle senior vice president. In it, she advises that LaSalle hired consultants to review the cost overruns. But the next day, before the consultants completed any work, LaSalle issued a letter to Chin claiming he was in default.

Fleming said the timing indicates Bobins' personal involvement. "She [Kelly] is reporting to him. The e-mails tell the story,'' Fleming said.

Kelly also wrote to Bobins and other bank officers on June 7, suggesting that Chin be given extra time to raise money and negotiate with subcontractors who have filed liens on the site. Her e-mail included the comment, "I realize you want to commence a foreclosure to heighten the pressure on Chin ..."