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Jane Ann Morrison
Rhodes leaves trail of disappointed business partners
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Commissioner needs to choose his battles wisely
Updated: Jun. 29, 2010 | 9:32 a.m.
Las Vegas developer Jim Rhodes, back in the headlines with his plan to develop housing on a 1,700-acre mesa overlooking Red Rock Canyon, is no johnny-come-lately to controversy.
Rhodes has been involved in at least 53 state civil lawsuits, just in Clark County.
A case filed in 1995 and decided by an arbitrator in 2000 was a brutal revelation of Rhodes' business practices. The findings of arbitrator James Armstrong listed 20 instances in which Rhodes' actions were detrimental to Marshall and Louis Goldman.
The Goldman brothers were his partners in a housing development, Palm Gardens. They brought to the partnership 135 acres appraised at $4.5 million. Rhodes brought his skills as a developer.
The plan was to put 600 homes on the acreage near Sam Boyd Stadium.
Rhodes estimated in 1993 he and Marshall Goldman would split $8.9 million in profits. The homes sold briskly in 1995, 1996 and 1997, yet Rhodes told the brothers the project might lose money.
Goldman's ownership interest was reduced to 30 percent and earned him and his brother Louis a scant $209,000.
Rhodes started the legal action, suing the Goldmans for not telling him about a $750,000 bank credit negotiated earlier. The arbitrator agreed he should have been told, but awarded him no money.
The arbitrator was blunt about why the project didn't make a profit.
"The decline in profits was due primarily to Rhodes' mismanagement and negligent cost projections," Armstrong wrote. "His breach of the (partnership) agreement, his breach of his fiduciary duties and his mis-apportion of profits to his various related entities and partners in other developments were contributing causes."
Armstrong cited specific examples.
Rhodes allowed the partnership to pay his company Rhodes Design and Development Corp. more than $1 million in excess supervision fees. The partnership paid excessive fees to his framing company. Rhodes didn't put the partnership money in interest-bearing accounts. He failed to ask the brothers' permission before transactions with 16 of his companies. He loaned money from their partnership to his other companies, without telling the Goldmans. He "loaned" money to the partnership and charged excessive fees, again without telling the Goldmans.
Based on expert testimony, the partnership should have earned more than $4 million. Instead, it lost more than $3.5 million, Armstrong wrote.
The arbitrator concluded Rhodes should pay the brothers nearly $1.3 million. With costs and interest, the award crept up to about $2.1 million, according to the Goldmans' attorney, Al Marquis. After unsuccessful appeals, Rhodes paid the judgment.
But wait. There's more. A second case involved similar allegations of siphoning profits to his other companies to the detriment of another partner, this time John Midby and Rainbow Development Corp. That case was sealed so neither Midby nor his attorneys, Randall Jones and Bill Coulthard, are allowed to comment on it. Let's just say, Rhodes wouldn't have liked that arbitration decision either.
Marquis was one of three arbitrators in the Midby case, which was resolved in 2007. He said the two cases demonstrate a pattern by Rhodes.
"The pattern is that he doesn't keep his word, even if it's in writing, even if there's a contract. He's still going to screw over his own partners."
Rhodes placed at least 14 of his businesses into Chapter 11 bankruptcy in 2009, declaring about $400 million in liabilities. He did not file personal bankruptcy.
Does Rhodes have the financial wherewithal to build that Red Rock project? Would he have trouble getting investors?
"He doesn't need investors," said his spokeswoman Terry Murphy. The site is owned entirely by a family trust and is debt-free.
Based on the experience of the Goldmans and Midby, Rhodes not needing investors is a good thing -- for investors.
Jane Ann Morrison's column appears Monday, Thursday and Saturday. E-mail her at Jane@reviewjournal.com or call (702) 383-0275. She also blogs at lvrj.com/blogs/morrison.
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"Rhodes paid his company Rhodes Design and Development Corp. more than $1 million in excess supervision...and excessive fees to his framing company." Greedy republican Rhodes was hiring illegal immigrants (all home builders / developers do after driving living-wage workers out of the trade), paid the poor illegals 'piece work' wages (i.e. about $5.50/hr if you hustle) and then used the obscene profits to buy a new Bentley for his mistress, among many other luxurious items
I don't understand were the local government is coming from in allowing Rhodes to build next to a pristine area as Red Rock. The area has a surplus of housing now. There is no need for more. If this is the way Rhodes treats his business associates just think what he thinks of his customers.
Rhodes has been a crook for years in this town. I unfortunately did work for him. When we were done, he said "I'll pay you ten cents on the dollar." I told him, my hard costs were sixty cents on the dollar, and the difference made up profit (15%) and some additional costs. He said well I'm only going to pay you the 10 cents on the dollar of your total invoice, and if you don't like it you can sue me. Then in five years we'll settle in arbitration. But you'll have a lot of attorneys fees by then. I was flabbergasted. Truly amazing. But its politicians like the former commissioner Erin Kenney who had her house at Rhodes Ranch finished before any other home was close to being done. She wanted it done for Thanksgiving that year and Rhodes did it. Some sort of pay back arrangement for her vote to get Rhodes Ranch, and other projects, approved. Rhodes is an absolute crook who just keeps re-inventing himself so he can stay one step ahead. He's opened countless businesses and they all get in trouble so he opens up a new one each time. There's no way the local governments should allow him to do business here!
So we're to understand a guy can file a nearly half-Billion Dollar Chapter 11 and go right back out and run his business as usual-- because it's "his Personal Money"?
Where are the bankruptcy trustees overseeing all this?
Keep digging Jane.
Between the County Commission's recent voting to let Rhodes proceed and the BoE's 75% reduction of his property tax on Red Rock, Rhodes appears to have astonishing...what can one call it? ... Powers of Persuasion with some of our Public Servants. His not needing investors may be good for Rhodes, but it could be very bad for this town.
We may wake up one morning to find he holds the title to Mt. Charleston.
Keep the spotlight on Rhodes, Jane.
And this is the guy that they will let ruin Red Rock. Wonderful. We need a hundred more just like him. This is pathetic.
Would you want to do business with Jim Rhodes
Not me
Jim Rhoades should never be allowed to do business (of any sort) in Nevada.
Hope he has enjoyed his life......because no doubt the next one is going to be horrible.......
Karma.....
Hey, Jane Ann, thanks for the nod to our men and women in uniform, and their families, this Memorial Day. This story on Rhoades is pedestrian, at best. Can't wait to hear you gush over Michelle Obama's expensive photo op at Red Rock tomorrow. And how effective her posing with Harry, Rory, Shelley, Dina, Ross, Sheila..etc, will impact children getting fit.
Ask Larry Brown and others who voted to approve of this assault on such a prestine and natural beauty. They did the same assault on our once 'and the only rural preservation area' of Las Vegas. It's a shame the county is so desperate for 'revenue'.