Success, lawsuits mark developer's past
Rebeil plans condo-hotel in downtown San Diego
By Penni Crabtree
UNION-TRIBUNE STAFF WRITER
July 8, 2007
The Diegan, a 23-story downtown condominium-hotel slated for completion at the end of the year, is being marketed as the ultimate in “decadent opulence” with “over-the-top” residential units.
Yet for sheer color and verve, the luxury high-rise may be hard-pressed to top its Orange County developer, Steve Rebeil.
The 45-year-old entrepreneur made a fortune as a home builder and casino developer in Las Vegas. Yet his success is shadowed by a history of checkered real estate dealings, numerous lawsuits filed by former partners, contractors, shareholders and lovers, and a tax-related felony conviction.
Nevada regulators deemed Rebeil to “lack good character, honesty and integrity” when they denied him a gaming license in 1997.
Now Rebeil is concentrating on the steel-and-concrete shell on Fifth Avenue that is to be transformed into 185 condo-hotel residences. The project is reportedly to be renamed the Setai San Diego, after the New York-based Setai Group that is to operate it.
In a May 3 news release and interviews, Rebeil touted the project's planned “sleek, regal decor” and attributes that include eco-friendly “green” features. The units are being offered from the $400,000s to $3.8 million.
“The Diegan will raise the bar and set a new benchmark for the condo-hotel market nationwide," said Rebeil, a 75 percent stakeholder in 5th Avenue Partners, the company that is developing The Diegan and has a partnership interest in the nearby House of Blues entertainment complex.
Yet on June 19, Rebeil indicated that the status of the condo portion of the project is uncertain. At that time, he testified under oath at an Orange County Superior Court hearing that The Diegan will likely convert to traditional hotel use because the “condo market has tanked.”
He testified that about half of The Diegan units have been presold for condo use and about $3 million to $4 million in deposits collected, but he indicated that the deposits will probably be refunded.
Rebeil was testifying in a child support dispute with a former girlfriend who is the mother of his 6-year-old son. Rebeil, who lives in a multimillion-dollar home overlooking the ocean in Laguna Beach, maintains his $8,066 monthly child support is too high because he technically has no income, living instead on “cash flow” that circulates through his wife's bank account, various companies and trusts associated with Rebeil or family members.
Orange County officials maintain that Rebeil is not in compliance with a 2004 court order and owes more than $200,000 in back child support. An Orange County judge is expected to rule on the case this month.
Rebeil did not respond to a list of questions about his development projects, lawsuits, the felony conviction or child support case.
Derek Clark, a Rebeil partner and 7 percent stakeholder in 5th Avenue Partners, acknowledged that Rebeil is “controversial” but maintains he is also “above board” and “very forthcoming.”
“Steve is a guy . . . (to whom) 'no' does not mean no. . . . He made a lot of money as a young guy, got cocky and got spanked at the end of the day,” said Clark, an Orange County hedge fund manager. “But Steve has learned from his mistakes, and I think he is a different guy than he was 10 years ago.”
Some former partners have taken a less upbeat view of Rebeil. In 2005 Larry Job, Rebeil's partner in Crossroads Retail Center, sued Rebeil, alleging that he attempted to sell their Nevada property without Job's knowledge.
Job drove by the property on Feb. 11, 2005, and discovered it was listed, then called the real estate agent and learned it was in escrow at a sale price of $2.25 million, according to the lawsuit.
A Nevada judge granted Job's request for the appointment of a receiver for Crossroads and ordered Rebeil to turn over $150,000 he'd already received. Rebeil didn't comply, and on April 18, 2005, the judge found Rebeil in contempt and issued a warrant for his arrest.
The money was delivered the next day, and the warrant was quashed.
Rebeil countered that Job, who had a 26 percent stake in the property, failed to contribute funds to maintain it, so his interest was diluted or extinguished. The case was settled, with Job getting his 26 percent share of the proceeds, according to court records.
Stanley Hanson, an Orange County developer who was Rebeil's partner in five deals, including the House of Blues/The Diegan complex, also had a falling out with Rebeil, according to court documents. The partners reached a settlement in 2002, which included a buyout of Hanson's interest in The Diegan.
“According to terms of our settlement, I cannot make disparaging remarks about Mr. Rebeil,” Hanson said. He declined to comment further.
In an unrelated 2005 court case, in which Rebeil was a central figure but not a party, Hanson described Rebeil as an “out-of-control” partner who hired contractors without consulting with him, allowed liens to build up on the San Diego project, and threatened to “crush” him, according to the transcript of a hearing in the 4th District Court of Appeal.
In a counterclaim filed with the American Arbitration Association, Rebeil contended that Hanson refused to contribute his share of money to the project and aimed to take over Rebeil's interest at a depressed price.
Rebeil cut his entrepreneurial teeth in Las Vegas, where he operated a successful home-building business, Gem Homes, and branched into casino development.
Yet by 1995, numerous lawsuits had begun to bring Rebeil heightened scrutiny. The Las Vegas Business Press noted in a story that year that Rebeil or his associated companies had numerous active lawsuits against them, most from subcontractors who alleged he hadn't paid his bills. From January 1994 to May 1995, about 77 complaints against Gem Homes were also filed with the Nevada State Contractors Board, according to the newspaper.
Meanwhile, Rebeil was battling legal problems over his casino projects. In 1995, Bryan and Dawn Hafen sued Rebeil and his lawyer-partner, Dominic Magliarditi, over a venture to develop a casino in Mesquite, Nev.
Rebeil and the Hafens formed a company called Gem Mesquite to develop the casino on 45 acres of farmland owned by the Hafens. In exchange for the land, the Hafens received a 10 percent stake in Gem Mesquite; Rebeil, with a 90 percent stake, paid off debt and agreed to provide development funds.
Days before incorporating Gem Mesquite, Rebeil and Magliarditi created another company, Gem Gaming. Without the Hafens' knowledge, Rebeil, representing himself as sole owner of Gem Mesquite, negotiated a deal to sell the land to casino developer Players International, the lawsuit said.
Rebeil told the Hafens that Players purchased the land for 253,968 shares in stock, worth about $5 million at the time, according to the lawsuit. The Hafens, who had appraisals on their land as high as $6.7 million, received stock worth about $500,000, the lawsuit said.
The Hafens learned later that Rebeil's Gem Gaming kept an additional $5 million in cash, a note for $3.2 million and warrants to purchase more Players stock, according to the lawsuit.
In a 1997 affidavit, Rebeil argued that Gem Gaming earned the additional $8.2 million compensation from Players for “development activities” and supplying “data,” and characterized the Hafens' lawsuit as “sour grapes.”
Rebeil and Magliarditi settled the case in 1999, agreeing to pay $5.8 million, not including interest, to the Hafens, according to the Nevada court clerk's minutes, or notes, in the case.
Rebeil's other casino project, The Reserve, also became mired in legal squabbles. In 1996, Rebeil and Magliarditi sold Gem Gaming to publicly traded Ameristar Casinos in a deal valued at more than $100 million, according to a newspaper account.
In March 1997, Ameristar began arbitration proceedings, alleging breach of contract. The case was settled, with Rebeil and Magliarditi agreeing to give up Ameristar stock in return for about $33 million, according to Securities and Exchange Commission filings.
Rebeil's troubles didn't end there. In 1997, regulators rejected Rebeil's application for a gaming license after an investigation concluded that he'd orchestrated a credit “scheme” involving his Gem Homes business, according to a transcript of a meeting before the Nevada Gaming Control Board.
Testimony before the board indicated that Rebeil had contractors inflate their bills on various housing projects he was involved in, diverting hundreds of thousands of dollars that were used as “credits” to supply labor and materials to build his own Las Vegas home.
One of Rebeil's Nevada partners, Siefert Development, sued Rebeil, Magliarditi and Rebeil-associated limited liability companies for fraud, alleging that the credit scheme was a form of “sophisticated embezzlement” of projects jointly owned by Siefert and Rebeil. In 2001, the case was settled with an exchange of interests in properties and a minimum payment of $400,000 to Siefert, according to the court clerk's notes in the case.
In 2004, Rebeil pleaded guilty to one felony offense of filing a false income tax return for 1994. Federal prosecutors said Rebeil accrued up to $1,000 in credits on each house that subcontractors provided services, amounting to about $622,200 in unreported income. Rebeil was imprisoned for five months in 2005 for the offense, according to court records.
Jorge Burtin, an Orange County artist and neighbor of Rebeil's who became a partner in The Diegan development group, said of Rebeil's “challenges” in Las Vegas that he “took a fair stand.”
“Sometimes people are unreasonable and that's why we have a court system,” said Burtin, who has an 18 percent stake in 5th Avenue Partners.
By December 1998, Rebeil and Magliarditi had embarked on a new enterprise – the creation of 2TheMart.Com, an Irvine-based Internet company.
The company, which went public in January 1999, declared it would launch an auction Web site to compete with Internet giant eBay. Rebeil served as company chairman.
In a Jan. 19 news release, 2TheMart said the company's Web site was in “final development” and expected to be active by the second quarter of 1999. That statement helped propel 2TheMart's stock to a peak of $50 within days.
Yet 2TheMart had its skeptics. On Jan. 22, 1999, the Los Angeles Times published an article on 2TheMart's business plan; it consisted almost entirely of paragraphs that appeared word for word in filings that eBay submitted to regulators the previous year.
2TheMart's stock plunged as more disclosures emerged, including that the proposed auction Web site was not in final development, according to shareholder lawsuits and SEC filings. In June 1999, the company announced the Web site launch would be delayed, and in August the company's auditor warned its survival was in doubt.
By March 2000, 2TheMart had collapsed amid shareholder lawsuits alleging fraud. The company settled the securities litigation for $2.7 million in 2002; by then, Rebeil was involved in the House of Blues/The Diegan project.
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Penni Crabtree: (619) 293-1237; penni.crabtree@uniontrib.com |
