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September 18, 2019Cart

Business

by Westchester County Business Journal
by WCBJ

Investors in defunct casino project sue Louis Cappelli for $3M

Louis Cappelli

Resort Group Investors LLC is suing White Plains developer Louis R. Cappelli for $3 million, for refusing to buy back their interests in a casino project.

The group sued Cappelli and eight companies he controls on Aug. 3 in Westchester Supreme Court.

Resort Group Investors contends that Cappelli persuaded them in 1999 to sell their interests in 1,500 acres of land in Sullivan County. He promised them an interest in a casino project, according to the lawsuit, and the right to redeem that interest for $3 million when the casino got all state and federal gaming approvals.

The investors say they have demanded the $3 million buyback, but Cappelli has refused to redeem their interests.

Cappelli did not respond to a request for his side of the story.

The casino has its genesis in the Concord Resort Hotel, a part of the Borscht Belt resorts that catered to Jewish families for decades until they fell out of favor. The Concord filed for bankruptcy and closed in 1998.

Concord Associates LP, led by hotel developer Joseph M. Murphy, with Cappelli as a partner, bought the hotel for $10.25 million in a bankruptcy auction in 1999.

The plan then, according to news accounts, was to renovate the Concord and develop a resort and convention center.

Cappelli quickly gained control of the project.

His Concord Equities LLC bought out interests in the 1,500 acres around the Concord held by Russell Berrie of Englewood, New Jersey; JoAnn M. Murphy of Eastchester; Lake Shore Associates LLC of Eastchester; and Stephens Group Inc. of Little Rock, Arkansas.

Cappelli granted the sellers, now organized as Resort Group Investors, a “carry forward interest” on his project, contingent on government gaming approvals. The investors also negotiated the right to compel Cappelli to buy back their interests for $3 million, after final gaming approvals.

In 2005, Cappelli partnered with Empire Resorts Inc., the owner of a harness racetrack at nearby Monticello to develop a casino, hotel and resort on the Concord land.

Cappelli, the complaint states, acquired more than $24 million in Empire Resorts stock, from 2004 to 2012 and was named to the board of directors.

In 2008, the land was used as collateral for a $225 million loan from EPR Properties in Kansas City to finance the casino and resort.

In 2010, Cappelli, Empire and EPR partnered on a new casino development deal. Cappelli, the complaint states, was required to secure and personally guarantee $275 million in financing by the end of 2011.

He failed to get the financing.

By then, he had had a “falling out” with Empire Resorts, the complaint states, had left the board and was no longer part of the casino venture.

The New York State Gaming Commission granted a license to Empire Resorts in 2015 and an operation certificate this year.

In February, Empire Resorts opened the Resorts World Catskills casino and hotel in Kiamesha Lake.

The original obligations to the Resort Group, the investors claim, attach to any financial benefits that Cappelli and his companies had received over the years.

The investors are accusing Cappelli of breach of contract for failing to buy back their interests in the casino project, fraudulently evading the obligation and unjust enrichment.

Resort Group Investors is represented by William P. Harrington of Bleakley Platt & Schmidt LLP in White Plains.