This is a chilling tale of corporate fraud and deceit. Lennar Corporation is a publicly traded homebuilder that was founded in 1954. Today, Lennar is really two companies: a homebuilding company engaged primarily in developing entry level and mid-market communities in various markets across the country, and a “company-within-a-company” that exists primarily to enrich Stuart Miller, CEO and son of the founder, a few key executives, and Mr. Millers’ investor-friends.
In 2007, at the onset of what soon developed into an historical economic downturn, Lennar Corporation faced an existential crisis. Under the leadership of CEO Stuart Miller, the company and its shareholders had exposure to hundreds of hidden off-balance sheet entities that saddled the company with enormous obligations, including billions of dollars of undisclosed debt. Just like Enron’s catastrophic off-balance sheet chicanery a few years earlier.
Desperate for cash, Lennar, at the direction of Miller and his key lieutenant Jon Jaffe, executed a sophisticated swindle involving a Lennar-controlled venture, LandSource LLC, and the California Employees Retirement System (Calpers) and Barclay’s Bank. As a direct result of this scheme Calpers – and by extension 1.6 million current and prospective retirees – lost nearly one billion dollars, and investors in a Barclays Bank loan syndicate also lost hundreds of millions of dollars. All of the duplicitously obtained money ended up in the pockets of Lennar and its sister company LNR.
As recently discovered documents indicate, this illicit conduct was and still is a pattern and practice of Lennar, and similar stories were playing out across the country at the same time Calpers was defrauded. Lennar’s business practices included submission of fraudulent appraisals and fabricated cash flows, employing fictitious straw buyers, falsifying government-required forms, devious hidden agendas, hiding funds in off shore accounts, bribery of government officials, extortion of subcontractors and suppliers, and gross abuse of the legal process. These practices were and are a recurring theme in case after case. The actions of the company and its key executives perfectly fit the quintessential definition of racketeering, which is use of an organization to engage in systematic illegal activity.
And equally damning, documents obtained from Lennar Corporation and other sources showed that corporate assets were squandered when millions of dollars of the company’s resources were siphoned away and given to personal friends of Stuart Miller. All at the expense of unwitting shareholders.
Lennar simply does not honor its agreements. And, in case after case, the company uses and abuses the litigation process as a tool to evade or dishonor contractual obligations. Abuse of process and malicious prosecution is the norm, not the exception. Their lawyers are among the most dishonest in our country. For example, in a recent breach of contract and fraud case in Maryland, on January 22, 2015 a Federal judge ordered Lennar to pay $250,000,000 to a plaintiff, found Lennar to have concealed key and incriminating documents, and to have hired and scripted “expert” witnesses and paid them to lie in court. And the court found that this detestable conduct was specifically orchestrated at the direction of Stuart Miller. And in this Maryland case Lennar funded three law firms and delayed the proceedings for almost seven years in a failed attempt to outspend and outwait the plaintiffs. And guess what happened when they lost: Lennar brought in even more lawyers to file frivolous motions to delay the inevitable day of reckoning and to try again to overwhelm, mislead, and fool the astute federal judge on the case.
Our own experience mirrors that of many others. When we confronted Lennar over hundreds of millions of dollars of alleged “losses” in a lucrative development partnership, they hired a scorched-earth litigation team to divert attention from their own actions and conceal the evidence. And their choice of lawyers spoke volumes. Lennar hired the entire legal team that had just concluded an extraordinarily expensive but failed defense of Jeffrey Skilling, CEO of Enron. In our case, Lennar dishonored every single provision of our written agreements, co-opted judges, engaged in a resource exhaustion strategy, and even lied to U.S. Attorneys to draw attention away from their own unlawful and unethical activities.
Court records show that these schemes were invariably planned and executed by the top officers in the company and their lawyers, not some low or mid-level rogue employees. And even though they have left a swath of fraud and financial destruction in their wake, Lennars’ top executives continue to live lavishly at the expense of their victims, operating as if they all have get-out-of-jail-free cards in their pockets.
This is a compelling story that chronicles how, with enough money, the legal system can be undermined and manipulated to further enrich companies like Lennar and executives like Miller and Jaffe, and we have incontrovertible proof of each and every deceitful and unlawful business practice discussed in the book.
Lennar’s lead lawyer, Daniel Petrocelli, in closing arguments in the Jeffrey Skilling trial, described Enron as a “Wonderful Company” and a “Shining Star”, and his client a paragon of virtue. A jury disagreed, sentencing Mr. Skilling to 25 years in prison. And Mr. Petrocelli describes his current clients, Lennar Corporation, CEO Stuart Miller, and COO Jon Jaffe in the same glowing terms. As you read this narrative, determine for yourself if Lennar Corporation is the new “Wonderful Company” and “Shining Star” destined to fill the celestial void created by the implosion of Enron.