Wednesday, December 09, 2009

Bankruptcy filing may send fate of Brauss' real estate empire to federal court

The fate of much of Eric and Christine Brauss' real estate empire could be headed to federal bankruptcy court because one of her companies filed for Chapter 11 reorganization last weekend.

However, investors who have sued the Brausses in state District Court in Dallas, alleging the diversion of millions of dollars, are fighting the transfer of the case to federal court. A federal hearing is scheduled Dec. 29.

Stefani Eisenstat, an attorney for the investors, said Brauss and his wife have both taken the Fifth Amendment, which protects against self-incrimination, in the civil case.

"That is completely inconsistent with seeking relief," Eisenstat said of the weekend bankruptcy filing involving Buckingham Financial LLC. Buckingham is one of the defendants in the civil case.

Last week, The Dallas Morning News reported that Brauss' Today Realty Advisors Inc., which has invested in hundreds of millions of dollars worth of projects, had closed its Far North Dallas headquarters and that Brauss was nowhere to be found. Brauss and his wife are also prominent patrons of the Dallas arts.

Larry Friedman, an attorney for Eric Brauss, acknowledged that his client took the Fifth but, Friedman said, only because investors said they had complained to the U.S. attorney. Eisenstat said neither her firm nor her clients had gone to the U.S. attorney.

Eisenstat said many of the 39 investment partnerships involved in the investor suit have no debt. "Our goal is to get a receiver appointed immediately," she said. The receiver's job would be to rehabilitate the partnerships, not liquidate them.

Eisenstat represents eight investors who together have invested between $5 million and $10 million. Altogether, hundreds of investors have about $130 million of equity in the 39 partnership entities.

Friedman said his client is a "stand-up guy" with a good investment record who was derailed by the worldwide downturn in real estate. He said Brauss wants a receiver who looks after the interests of all the investors and not just those involved in the civil suit.

Friedman said he communicates with his client regularly, but he doesn't know where he is.

Court documents indicate he may be in South America.

One filing in State District Court quotes a Nov. 17 e-mail from Brauss saying he was on a "very primitive tour in the Amazon rainforest."

A Nov. 20 e-mail from Brauss to one of his investors said:

"Sorry I did not get back to you until now, but needed to wait for my lawyers directions. ... Until we come to an agreement with you ... I need to stay here in South America."

In other Brauss developments:

• On Nov. 6, Christine Brauss filed for divorce from Eric Brauss in Collin County. The filing says they were married in 1986 and haven't lived together for nearly two years.

• On Nov. 18, Wachovia Bank was awarded a $5.2 million default judgment in Lee County, Fla., against Eric Brauss, Today Realty Advisors and FM Riverwalk LP. Eisenstat said that judgment is not related to the 39 partnerships.

Research librarian Molly Motley contributed to this report.