Thursday, July 14, 2005
Downtown Investor Is Sued
By Diane Velasco
Journal Staff Writer
Alvaro Gallegos, founder of Z-CoiL Footwear, has filed suit against commercial real estate investor Vincent Garcia alleging securities fraud, breach of contract and other charges.
The lawsuit states that in October 2002, Garcia gave Gallegos a tour of his Downtown real estate holdings and said Garcia's company, Prinova Capital Group, needed an infusion of cash to expand into other markets.
At the time, Garcia had an ownership interest in the former First National Bank building, the Acropolis parking garage, and La Posada de Albuquerque through holding company Renaissance Holdings LLC.
"He showed me all the things he was doing Downtown," Gallegos told the Journal.
The lawsuit states that Gallegos assigned two mortgages on his Santa Fe County real estate, valued at more than $500,000, to Garcia to serve as collateral for a $350,000 bank loan for Prinova. The real estate was netting Gallegos $3,500 in monthly income.
In exchange, Garcia issued Gallegos 12,000 shares of common stock, 952 shares of preferred stock, guaranteed monthly income from the real estate of $4,760 and assignment of Garcia's $550,000 life insurance policy.
Garcia's company ran into financial trouble and sold the real estate, and Gallegos lost his investment.
"After I did the deal with him, all this stuff blew up," Gallegos said of Garcia's Downtown investments.
The lawsuit alleges Garcia not only failed to make promised payments to Gallegos, but also "consistently misrepresented the financial condition" of his companies.
Garcia declined to comment on the lawsuit and referred calls to his attorney, Robert Singer.
Singer said Gallegos received what he was promised under the agreement and that he had agreed to risk losing the real estate by giving Garcia the right to assign it to a third party. Singer disputed there was a securities transaction between the two.
"Mr. Gallegos loaned the company some mortgages that they could use as collateral to get a loan from a bank," Singer said. "In return, he was to get the mortgages back after the loans were paid off. He got some stock, but that wasn't the nature of the deal."
He acknowledged Gallegos did not get the mortgages back.
"The company had economic difficulties and wasn't able to repay those loans, I guess," he said.
In 2000, Garcia had purchased the First National Bank building, bought La Posada de Albuquerque out of bankruptcy, and won approval for city backing on a $7.2 million parking garage to serve the hotels, according to published reports.
Garcia said last year that he was the single largest equity holder in Renaissance Holdings LLC, a holding company formed with several other local investors to own the Downtown properties.
But by 2003, Renaissance, unable to get adequate financing, abandoned its redevelopment plans for the bank building and sold it, lost La Posada in bankruptcy, and defaulted on its payments to the city for the parking garage, according to published reports.
By April 2004, the partnership of Renaissance Holdings itself had disintegrated. Garcia filed a civil lawsuit against manager Mark DePree and several DePree family members alleging racketeering, intentional misrepresentation and other charges.
Gallegos' lawsuit states that it wasn't until December 2004 that Garcia showed him financial statements and collection letters from the IRS, indicating the true financial problems Garcia was having.