Foreign bank accuses Jacobs of fraud

December 01, 1992|By Mark Hyman | Mark Hyman,Staff Writer

(TC The legal woes of Eli S. Jacobs grew more complicated yesterday when a foreign bank sued the Orioles owner, charging that he defrauded the company of $10.7 million.

In papers filed yesterday in U.S. District Court in New York, Banca Commerciale Italiana (Suisse) asked the court to enforce a judgment against Mr. Jacobs for that amount. The creditor, which won the judgment last May, claimed that Mr. Jacobs stripped the assets from a New York investment partnership he controls, leaving it unable to pay the bank.

Counting BCI, four banks have taken legal action against Mr. Jacobs this year.

In all, he is accused of defaulting on $42 million in loans and personal guarantees to the banks and a group of private investors.

In its suit, BCI said Mr. Jacobs manipulated Park Partners L.P. for years, authorizing low- and no-interest loans to himself and using the partnership's money to fund his own projects in a scheme that ultimately left the company insolvent.

Mr. Jacobs has been sole general partner of Park Partners since 1986, according to the lawsuit.

The bank also alleged that Mr. Jacobs used that partnership's assets to fund expenses of his other enterprises, removed investments that had good growth potential and effectively operated the Park Partners' affairs as "an extension and alter ego of himself."

The Swiss bank, a subsidiary of Banca Commerciale Italiana in Milan, lent the partnership $10 million in November 1984 in exchange for a note.

That note was to be repaid this year, according to the suit.

The loan agreement excluded Mr. Jacobs and other general partners for personal liability for the debt. But in its suit, BCI says that Mr. Jacobs' actions were "fraudulent," deceiving the bank and other creditors.

Jeffrey Z. Taufield, a spokesman for Mr. Jacobs in New York, denounced the BCI lawsuit as "outrageous" and "without merit."

Mr. Taufield acknowledged that many of the partnership's investments were "not successful," but said Mr. Jacobs has poured $20 million of his own money into the enterprise "to keep it afloat" and permit it to pay back BCI.

He said the lender had been kept fully abreast of the partnership's tenuous finances, including regularly receiving audited financial statements.

Though Mr. Jacobs stopped making interest payments to BCI some time ago, the bank only now is questioning transactions that occurred years ago, Mr. Taufield said.

"Mr. Jacobs is confident he will prevail in this litigation and demonstrate that he has met more than any obligations he had to BCI," the spokesman said.

Michael C. Lambert, a lawyer for BCI in New York, declined to discuss the bank's lawsuit against Mr. Jacobs, except to say the allegations are "long, detailed and very complex."

The bank's suit charged Mr. Jacobs with fraud, breach of contract and fiduciary obligations, and unjust enrichment, among other things.

It is seeking the full repayment of the note and asking that he be prohibited from "interfering in the property of the partnership."

Mr. Jacobs, a New York financier with holdings in diverse businesses, has been restructuring his financial empire this year.

In July, he notified some lenders that he would not make interest payments on his debts.

Seeking to collect unpaid loans, Mercantile-Safe Deposit and Trust Co. in Baltimore and two New York banks -- Manufacturers & Traders Trust Co. and the Berkshire Bank -- sued him earlier this year.

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