Nearly 100 acres of vacant Crete land that has been fought over in bankruptcy court for four years and figures in a pending federal fraud indictment has a new owner under terms of a newly finalized settlement agreement.
But it remains to be seen whether the agreement will improve prospects for the languishing development near Illinois Highway 394 and Steger Road, or whether the previous owners will wage a new court battle over how the original investment was managed.
The vision for the property had been lofty when it was bought for $1.7 million in the late 1980s. Eighty people invested $10,000 to $50,000 each on the endeavor, hoping it would build quickly into a mix of residential and commercial development.
But the project never lived up to the plans, and many investors said they had little hope of getting any money back, even with the settlement, because of the sheer number of claims on the property.
The settlement, made final by U.S. Bankruptcy Court Judge Erwin Katz, ends a bitter feud among a camp of investors in the 394 Venture Limited Partnership, the previous owner; the bankruptcy estate trustee; and another camp of investors, Steger Development, which bought an outstanding mortgage on the property in 1995.
The parties had been squabbling over whether Steger Development had a rightful claim to the land.
Under the agreement, Steger Development agrees to pay $75,000 to the estate and $75,000 to seven investors who challenged Steger Development’s role as mortgage-holder.
In return, Steger Development gets ownership of the land, and the parties agree to stop fighting over it.
Steger Development attorney Paul McLennon said the settlement is good news for Crete.
“We’ve met with the village and the mayor to make sure the officials understand our intentions don’t conflict with what (vision) the village had 10 years ago,” McLennon said.
But Howard Adelman, the attorney for seven dissident investors who first challenged the management of the limited partnership in 1994, said the settlement “didn’t vindicate the way in which Steger got the mortgage.”
“This is by no means over,” Adelman said. “There are a lot of names that don’t appear in the settlement.”
The dissident seven investors had gotten the case converted from Chapter 11, a reorganization, to Chapter 7, a liquidation of the assets, after they alleged that the investment had been mismanaged by the partnership’s general partner, Connaught Corp.
Connaught is at the center of a February indictment charging World Music Theatre co-owner Michael Halikias and three suburban businessmen with fraud and perjury in connection with five land deals, including 394 Venture.
Also facing charges are David Wabick, former Connaught officer; David Heyes, a Wabick associate; and David Roth, former attorney for Connaught. Prosecutors say the corporation was used to make illegal profits on the sale of land developments by misleading investors about the true cost of the properties.
The dissident investors had alleged that Steger Development had ties to Connaught, and they, along with the bankruptcy trustee, argued that the land should be free and clear of Steger’s claim.
Steger Development denied any such tie and McLennon reiterated earlier statements that the land’s new owners had no relationship with Connaught, and that they were merely original investors who wanted to “save” the property from foreclosure.
According to McLennon, the Steger investors–Robert Leslie, Gene Gryzecki, Donald Kramlich, Jeff Schiethe and Brian Wegrzyn–had asked the other 394 investors if they wanted to pool additional money to buy the mortgage, but no one else came forward.
“We’re very open-minded about what to do with the property,” said McLennon, adding that Steger Development was named after the road near the property, not the village of Steger.
He said the new owners want to work with Crete and live up to past promises, including a park that was supposed to be built for a nearby residential development.
