Gressett and Bradley both defaulted on loans they secured in 1985 from First Gibraltar's predecessor, Gibraltar Savings Association, the biggest savings and loan in Texas to collapse in the S&L crisis. The partners had personally guaranteed 20% on loans of more than $100 million -- funding intended to underwrite the development of Circle C Ranch, at the time only a vast, open spread of land southwest of downtown and atop the Edwards Aquifer. (Austin taxpayers had already pledged $40 million in bonds for the project's water and sewer services.) The two men also borrowed from Gibraltar Savings an additional $15 million personal loan. That money they quickly spent: Along with a third partner, Ira Yates, they bought a ranch in Alpine, and Gressett and Bradley bought hotels in Vail, Colo., and Santa Barbara. By the time Gibraltar Savings folded, Bradley and Gressett had missed two payments on their personal loan.
In December 1988, Gibraltar Savings was declared insolvent and First Gibraltar assumed Bradley and Gressett's corporate and personal loans. First Gibraltar's involvement in Circle C immediately set off all the elements of a long and complicated chase scene. The abbreviated version played out this way: Bradley and Gressett stopped making payments on the Circle C loans, while First Gibraltar -- responding to the government's attempt to clean up after the S&L debacle -- refused to release additional funding for the project. That refusal still leaves Bradley fuming, and he cites news reports that First Gibraltar and other financial institutions profited more from the government in management fees and tax breaks by sitting on their assets -- a portfolio of unfinished development projects -- than by funding their completion and marketing them for sale. A July 1991 Wall Street Journal article quoted an estimate that First Gibraltar had collected $73 million in payments on Circle C alone -- a revenue stream that might explain why in May 1990, First Gibraltar turned down an offer by outside investors to buy Circle C for over $32 million.
In September of 1990, the bank sued Bradley and Gressett for overdue payments on their personal loan, and their 20% guaranty on the Circle C loan, and in October, the bank moved to foreclose on Circle C. Circle C Land Corp. responded by filing for Chapter 11 bankruptcy protection.
Gressett's personal bankruptcy came four years later. In early 1995, with claims still pending on its federal lawsuit against Bradley and Gressett, First Gibraltar took on Gressett in his bankruptcy proceeding, trying to prevent the dismissal of his $50 million debt to the bank. In that claim, First Gibraltar laid out a series of allegations that accused Gressett, "in conjunction with Bradley," (though Bradley wasn't a party in the case), of committing acts of fraud and misrepresentation in connection with the loans.
In May of 1995, in the lawsuit against both partners, a federal judge ruled in First Gibraltar's favor and stuck Bradley with a $53 million tab. Bradley appealed all the way to the U.S. Supreme Court -- which declined without comment to hear the case, leaving Bradley with the big-ticket item on his debt, since ballooned to $73.5 million. The following year, Gressett and First Gibraltar settled out of court for considerably less than $50 million. The rumor was that First Gibralter settled with Gressett because it was more interested in eventually collecting from the bigger fish -- Bradley.
Austin lawyer Eric Taube, who had represented First Gibraltar in both the lawsuit and Gressett's bankruptcy, argued in court that Bradley and Gressett were "playing a lot of shell games," according to news reports. But in an ironic turnabout, Taube is now representing the Lazarus Exempt Trust, the primary target of creditors in Bradley's bankruptcy, and itself widely rumored to be a shell -- with Bradley accused of hiding the pea.
From the other side of the courtroom, Taube has changed his position on the original allegations he made against Gressett, in which he also specifically named Bradley -- although not as a defendant in the case. First Gibraltar's fraud claims, Taube now says, wouldn't have held up in federal bankruptcy court. "We had made allegations that, as we got into discovery, First Gibraltar decided it wasn't worth it to prosecute," Taube said. Asked if the bank acted on his counsel, he responded, "mine and a lot of other people."
In the Gressett bankruptcy case, First Gibraltar attorney Taube had initially laid out several allegations of fraud and misrepresentation against Gressett. Today, Lazarus Trust attorney Taube says that the inclusion of Bradley's name in the allegations had no legal standing then, nor has one now. "There was never an allegation of fraudulent representation against Gary. He was not a party to the suit."
Despite Taube's current disclaimer, charges in the 1994 Gressett bankruptcy documents include:
In assembling its case, First Gibraltar apparently culled information from Yates' lawsuit against Bradley and Gressett, for which Yates eventually accepted a $2.5 million settlement. (By all accounts, Yates and Bradley remain bitter enemies. "To say that there's bad blood between them is the understatement of the day," said Taube.)
With all the publicity bearing on this high-profile case, and at least some specific interest expressed by Austin U.S. Rep. Lloyd Doggett, the FDIC might feel compelled to resume a fight with Bradley that the bank essentially forfeited years ago. But given First Gibraltar's eventual decision to withdraw its own allegations of fraud against Gressett, the FDIC may decline to go to battle bearing only those same weapons. And if it hasn't any others in reserve, it is likely that Gary Bradley won't have to pay the piper, and Lazarus (or somebody) will be picking up his bills.
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