Charlotte Observer: New EpiCentre Lender Sues Project's Developers

The EpiCentre's new lender has sued the project's developers, accusing them of wrongfully diverting money from the troubled entertainment complex before filing for bankruptcy protection. Blue Air 2010 filed a lawsuit Sunday in federal bankruptcy court claiming Afshin Ghazi, George Cornelson III and others "manipulated and falsified" bookkeeping records and transferred assets to "various insider companies" before the project filed for Chapter 11 last year. The lawsuit also claims the debtors made "numerous false statements" in their pleadings and court filings. Blue Air is arguing that Ghazi and Cornelson are responsible for returning the EpiCentre's assets, according to court documents. Ghazi did not immediately respond to requests for comment. The popular uptown entertainment complex has been mired in court battles since the original lender, Regions Bank, started foreclosure proceedings in July 2010 after the loan came due. And it's not the first court filing to allege self-dealing by Ghazi and Cornelson. Shortly after Regions started to foreclose on the property, the two limited liability companies that own the EpiCentre, Pacific Avenue and Pacific Avenue II, filed for bankruptcy protection, stalling the foreclosure. Regions Bank then filed documents questioning how Ghazi and Cornelson spent their loan money and kept records. "The integrity of the Debtors' financial records, and the earning power of the EpiCentre itself, must be established," Regions Bank wrote. Ghazi and Cornelson denied claims of self-dealing. That case was dropped after Regions in November sold the $93.9 million construction note to Blue Air, a limited liability company. Since then, a new company has been hired to manage and operate the 302,000-square-foot entertainment complex at Trade and College streets. Ghazi has agreed to transfer assets owned by the EpiCentre to Blue Air. Among other claims, Blue Air has accused the defendants of changing or backdating leases to eliminate obligations owed by affiliated companies. Blue Air, for example, says in its filing the defendants wrongly removed from the books $800,000 in back rent owed by Ghazi-controlled EpiCentre Theaters Partners LLC. Blue Air also claims valuable contracts were transferred to a Ghazi-affiliated company on the eve of the bankruptcy filing. The complaint names as defendants five employees of The Ghazi Co.: Mark Hanna, Jason Hood, Emily Hudgens, Ali Lopex and B. Scott Cook. Cook, a former Regions official, worked on the EpiCentre loan while at the bank. Also at issue are the air rights over the complex. In November, a Ghazi-affiliated company, 210 Trade Investments LLC, paid $6 million at foreclosure auction for the rights. Original plans called for a condo tower to be built there, but construction stopped in 2008 because of problems with the city's code enforcement department over the air rights arrangement. Blue Air names 210 Trade Investments as a defendant, along with EpiCentre Theater Partners, EpiCentre Preferred Parking, Sunset Management Group and The Ghazi Co. "The charges are really quite serious," said attorney Dennis O'Dea, who oversees the committee of unsecured creditors. O'Dea said the new lender and the creditors had been on track to approve the EpiCentre's reorganization plan at the end of this month, releasing the EpiCentre from bankruptcy protection. The latest court filings, however, have "put the confirmation of the (reorganization) plan and what the future of the EpiCentre is in question," he said. Copyright 2011 The Charlotte Observer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.