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5/7/2013 9:59:00 PM
PV Event Center: Lawsuit pits investors against town, developers
Courier fileA lawsuit currently in federal court may decide the question of who is responsible for the debt service on the Prescott Valley Convention and Event Center.
Courier file
A lawsuit currently in federal court may decide the question of who is responsible for the debt service on the Prescott Valley Convention and Event Center.
Cindy Barks
The Daily Courier

This is the fourth and final installment in a series on the financial status of the Prescott Valley Convention and Event Center.



PRESCOTT VALLEY - Throughout much of its existence, the Prescott Valley Convention and Event Center has been embroiled in a mammoth lawsuit that questions the basic premises of the financing for the center.

The suit, which has drawn in dozens of plaintiffs, defendants, counter defendants, third-party defendants, and cross-claimants, has generated nearly 800 filings in U.S. District Court to date.

At issue: Whether the developers of the Prescott Valley Events Center engaged in securities fraud by artificially inflating the center's revenue potential.

At stake: $27.4 million.



Allstate's complaint

The lawsuit's primary plaintiff, Allstate Life Insurance Company, maintained in its 2009 original claim that the Town of Prescott Valley, Global Entertainment, the Fain Signature Group and a number of other involved parties withheld important information about the $35 million bond sale that financed the construction of the Events Center.

The lawsuit states that the defendants "failed to disclose material factual information that indicated the Event Center could not generate sufficient operating revenues and sales tax revenues to make the project economically feasible."

The complaint goes on to contend that the center's developers knew they needed a bond rating to make the center financing viable, and accordingly tweaked projections on the number of events the center would attract, as well as the number of people who would attend.

"Allstate, reasonably believing it was buying investment grade securities, purchased the bonds in reliance upon false and misleading representations..." the complaint stated.

The company reportedly made three separate bond purchases, totaling $26.4 million. The initial claim lists $27.4 million as the demand from Allstate.

Throughout much of the complaint, Allstate compares the numbers from two feasibility reports that it claims were related - a 2001 analysis that was prepared when the City of Prescott was considering an event-center partnership with Global; and a 2005 feasibility analysis for the Prescott Valley Event Center.

Prescott ultimately opted out of the project. A March 2002 article in the Daily Courier reported that the Prescott City Council chose to indefinitely table a decision on whether to spend $15,000 to $20,000 on the next phase of the study.

In June 2006, as the Prescott Valley Event Center was preparing to open, Global President and CEO Rick Kozuback told the Daily Courier that Global chose Prescott Valley over Prescott because of increased political support. "The enthusiasm and the motivation versus 'wait-and-see,'" he said.

According to Allstate, the 2001 Prescott study covered virtually the same market area, but had much lower event and attendance projections.

As the costs for the Prescott Valley center escalated, the lawsuit claims, the center's developers fraudulently inflated revenue-potential projections to make the project pencil out.

While the Prescott report had predicted about 78 events per year, the "official statements" for the Prescott Valley facility bond projected about 133 events, according to Allstate's complaint.

But when the center began operating, the lawsuit claims that the revenue fell short.

"The Event Center failed to break even from an operational standpoint (much less generate $1.6 million in net revenue available to pay debt service), it failed to generate more than about 70 events per year, and it failed to obtain paying attendance remotely close to the inflated projections in the Official Statements," the lawsuit states.

In conclusion, Allstate claims: "The actual performance of the Event Center was actually close to the projections made for the city of Prescott in 2001. The Event Center was never worth anywhere close to $35 million and is expected to never generate any meaningful net operating revenues."

This past week, Michael Cillo, Allstate's outside attorney, said, "We stand behind the complaints, and the issues are before a judge."



Town's position

Throughout the legal dispute, the Town of Prescott Valley has been adamant on one point: It did not issue the bonds, and therefore is not responsible for anything beyond its limited sales tax support.

The town's attorneys have filed a motion requesting that Prescott Valley be released from the lawsuit.

"The town moves for summary judgment on all remaining claims of Allstate and Wells Fargo because the undisputed facts show no basis for liability against the town," the town's motion states, adding that the town was "not the 'maker' of the allegedly misleading representation in the Official Statements..."

The town motion adds that no factual or legal basis exists for Allstate's claim that the town is responsible "because of alleged misrepresentations to bond purchasers in an offering document in which the town had no role."

Town Manager Larry Tarkowski noted that the town initially rejected a traditional arena deal, in which the town would have issued municipal bonds. Instead, the town pledged limited sales tax revenue toward the project. Therefore, Tarkowski said, "Those bonds are not our debt."

Deputy Town Attorney Steven Zraick also emphasized that point this past week. "They're not municipal bonds." He added that the Prescott Valley bond arrangement is somewhat foreign, as compared to recent arena deals, such as the Jobing.com Arena in Glendale.

Officials also have stressed that both feasibility studies were public information, which Allstate could have accessed in its due diligence prior to the bond purchase.

The trustee for the bond, Wells Fargo Bank also is among the plaintiffs in the lawsuit. Prescott Valley regularly makes its payments of sales tax revenue to the bank, and Wells Fargo sends out regular statements. The latest statement that the town received in April indicated that the bond has nearly $3 million past due payments.

Prescott Valley's motion maintains that Wells Fargo's breach of contract claim is "meritless," because the town has regularly paid "in full" the sales tax amount due under the four-party development agreement that set the stage for the Prescott Valley Event Center.

A ruling on the town's motion for summary judgment is pending in U.S. District Court.



Global's response

In its initial answer to the Allstate lawsuit, Global made a general denial, which covered most of Allstate's claims.

For instance, the company's response denies that it made any misrepresentations or failed to disclose any material information, "including alleged factual information that indicated that the Event Center could not generate sufficient operating revenues to make the project economically feasible."

While Global's response admits that "net revenue from the Event Center, together with certain (sales tax), were sources for paying debt service on the bonds," it denies that the involved parties "fraudulently or otherwise inflated the projected number of events or attendance at events to be held at the Event Center in order to project revenues that could support an investment grade rating for the bonds, or for any other purpose."

This past week, Kozuback maintained that the comparisons that Allstate makes between the 2001 Prescott feasibility study and the 2005 Prescott Valley analysis were not valid.

"They were completely different buildings, different eras," Kozuback said of the two projects.

The proposed Prescott building was to be smaller and a "much cheaper building," he said, which would not have included a concessions area. "They're not comparable," Kozuback said.

He and other involved officials have attributed much of the revenue shortfall to the economy, which went into a recession soon after the Event Center opened.

Kozuback said Global continues its commitment to the Prescott Valley project. "We are a believer in that market." Although allowing that "it's been a struggle," Kozuback said, "We're committed and we keep working at it. Each year has gotten better for the past three years."



Fain stand

Like the Town of Prescott Valley, Brad Fain of the Fain Signature Group maintains that his company "had no involvement in the debt" for the Prescott Valley Events Center.

"The bond was totally outside of this office," Fain said.

He says the company has fulfilled all of its commitments in the center's development agreement.

"Do I think we did anything wrong in the entire deal? No," Fain said. "Not only did we fulfill all of our commitments, but we exceeded at some."

A decision on the lawsuit is pending. Until its resolution, the question of unpaid debt service remains unanswered.

Related Stories:
• CENTER OF ATTENTION: CFD is official owner of PV Events Center
• Prescott Valley Events Center seeks formula to increase profits
• Unpaid debt adds up for Prescott Valley Event Center


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Reader Comments

Posted: Thursday, May 09, 2013
Article comment by: Gracie Luv There is a greater Law then judges!

To :" Drinking The Allstate Kool-Aid" You enumerate a number of suits "The judge threw out" Who were these judges? What are their connections to the chosen elite in this area? Are they all members of the same lodge? or Church Cult? Someone or something has a death grip on the necks of the people and control them. Honesty and love of fellow man is sadly missing. remember Proverbs 22&23 Do not rob the poor because he is poor , or crush the afflicted at the gate for the Lord will plead their case and take the life of those who rob them.

Posted: Thursday, May 09, 2013
Article comment by: @ Mike Janischitski

Your ideas really do make sense. Better then trying to salvage an event center that lost money with a full house.

Plus it will offer a lot of jobs. Small jobs but the fun kind.

On the funny side "FAINtasy Land" is a good name for the town.


Posted: Thursday, May 09, 2013
Article comment by: Mike Janischitski

Seriously, why not convert Tim's Toyota Center into an indoor theme park/shopping mall? In Chicago some years ago they had an indoor amusement park/shopping mall called OLD CHICAGO. People loved it! Mom shopped while Dad and the kiddies rode the rides all afternoon. I'm sure tourists would flock to Prescott Valley to spend time at "FAINtasy Land"! The amusement park could have a western cowboy theme. The shopping mall, restaurants, and rides would be indoors, while outdoors they could have a mini ranch with pony rides, trail rides, and weekly rodeos. They might even add a small saloon for the grown-ups with a little casino and poker room. The Fains should not "look this gift horse in the mouth." This could be a real money-maker!

Posted: Thursday, May 09, 2013
Article comment by: @ Drinking The Allstate Kool-Aid

Maybe if you drank your Kool-Aid you would have won an election or two. How foolish you are.

Posted: Thursday, May 09, 2013
Article comment by: @All-state lKool-aid drinker

You stated you fear if Louie got elected, you should be afraid of who did get elected. Your man has a 20 year legacy of debt and financial ruin, or maybe you missed the last four installments. Wow you sound like you would believe anything. Town is broke, $94 million in bond debt, another $84 million in Arena debt. It is better to remain silent and have people think you are ignorant, than to speak and remove all doubt.

Posted: Thursday, May 09, 2013
Article comment by: Barbra Hurst

Hang on to your hats folks. Now that the Courier has exposed the truth about the finances and problems surrounding the Tim's Toyota Center Hockey Arena, the fangs will come out and the town supporters will be deflecting and redirecting blame and fault. These articles were quite clear what happened and why. It was a bad idea from from the start. It is a very poor tactic they are employing to protect their friends,and blame others. The educated people who aren't in the Prescott Valley "elite" circle will see right through this rubbish, and blame will be put on the correct culprits. Next will come the spelling and grammar comments. When all is said and done we are in the early stages of an expensive, protracted problem,which will hamstring this town for decades to come. That is the simple truth.

Posted: Thursday, May 09, 2013
Article comment by: @drinking the all-state Kool-aid

I agree with you 100%, This is all Mr. Lizza's fault. He should have never gotten involved and tried to tell us about the problems in this town. How dare him go against The Mayor and Council, Go against Larry Tarkowski and the town staff. How dare he point out the lawsuit and the problems with the Tim's Center, and especially talking about The FSG and Global entertainments involvement. But to get real for a second, don't you see how foolish you sound. It is so easy to comment when you assume another name. Mr Lizza has done the town proud, and he uses his real name to boot. Men and women of honor and integrity have no problem with that.

Paul Hamn
U.S. Navy (ret.)


Posted: Thursday, May 09, 2013
Article comment by: Facts Remain

I have read all the articles and comments , The lawsuit is not real the issue. The real issue is that global entertainment said in a nut shell,no matter what they try they lose money. That is the point here it was ill conceived, and will be a drain for years to come. I didn't read anywhere in Mr. Lizza's comment about the lawsuit, and during the campaign all he said was there was a lawsuit and it was costing us millions to defend. I agree with his point we should have never gotten involved in this mess in the first place. We can't do anything about the mess Mr. Scoog has us involved in, but I feel going forward there should be a different Mayor and Council.We already see the mess this current administration has caused. Enjoy your kool-aid P.V. supporters. the last four articles speak for themselves, and that is undeniable. To defend this undependable position is making you look stupid

Posted: Thursday, May 09, 2013
Article comment by: John De Broske

I HAVE THE SOLUTION TO THE EVENT CENTER:
JUST REFURBISH IT AS A PRISON. THE FAINS WILL VERY HAPPY AND THE TOWN IS OFF THE HOOK FOR THE 35MIL


Posted: Thursday, May 09, 2013
Article comment by: Drinking The Allstate Kool-Aid

Amazing that some PVers are drinking the Allstate Kool-Aid! From reading the newspapers, this is the 4th major lawsuit leveled against the town in the past several years.

Union suit - the union sued the town for letting walmart come, claiming all sorts of illegal activity. Result? A judge threw it out, said it was meritless and the town won. no appeal.

Unick suit - Unicks sued the town for millions, claiming all sorts of illegal activity, including racketeering, RICO, and other stuff. Result? A judge threw it out, said it was meritless and the town won. no appeal.

Wrongful death suit - a woman sued the town for millions for her husband's wrongful death. A jury of the people threw it out, said it was meritless and the town won. No appeal.

Now Allstate is suing the town and we're waiting for the result. the plaintiff in any case like this takes a mudslinging approach to see what sticks, so you never know what to believe. We'll see where this one ends up, but don't automatically drink the Allstate Kool-Aid!

One thing that frightens me is Lizza's response to this and makes me so glad he wasn't elected. He seems to think Allstate is right. Would he have just rolled over as mayor and paid them $27 million of our taxpayer dollars, saying yeah, we made a mistake and here's your money? Or would he have fought for the town? He says he has tears in his eyes. I heard him talk about this suit, but I never once heard him say what he would do about it as mayor. It's easy to be an armchair quarterback, but what would you have asked the city attorneys to do differently in this case than what their doing now? Again, roll over and pay the piper? I hpe not!


Posted: Thursday, May 09, 2013
Article comment by: PV ripe and ready for growth?

Some uneducated commenter stated here that Prescott Valley is "ripe & ready" for growth and should be growing in industry and high paying tech jobs. Also stated "industry jobs won't come to PV because of the current administration and good ole' boy network". This is complete hogwash and delusional as this person knows nothing of the county we live in.

Excuses (to attract additional industrial development) were made for every major city & town in Yavapai County while forgetting that Prescott Valley has the SAME water, SIMILAR infrastructure and IDENTICAL lesser desirable northern Arizona geographical location issues that complicate major industrial and high tech expansion there as well.

Obviously, the person is using this (Event Center) story above as a soapbox to state personal opinions WITHOUT factual proof to back them.


Posted: Thursday, May 09, 2013
Article comment by: Hugs Boson

Yavapai County's hope that it will become an industrial magnet is dashed by the fact that almost all industry is being established, because of our national policy of Free Trade Agreements (FTA's) , in other countries.

Do you remember "giant sucking sound", Ross Perot, that funny little guy with the pie charts, he recognized this problem back in 1992! *

That was when there were just a few of these trade agreements (i.e. NAFTA was just being hatched) it was just at the start of this debacle!

Now there are a mess of them.** All set up so that wealthy owners of these industries will not have to pay out money for safe working conditions, pollution control, living wages, health care, retirement, and etc. This means more money in their pockets! That along with tax sheltered (think tax evading) offshore banking
allow these folks (who in turn control our politicos) massive wealth! Massive wealth at the expense of all of the workers, here and abroad!

Don't hold out much hope for industry here in Yavapai County.

*http://www.youtube.com/watch?v=Rkgx1C_S6ls

**http://en.wikipedia.org/wiki/United_States_free_trade_agreements


Posted: Thursday, May 09, 2013
Article comment by: To @ Prescott Valley Resident

You say, "Prescott Valley is ripe and ready for growth." I say, "Hahahahahahahaahahahahahaha."
Where exactly is PV's mother lode of water located. Moreover, PV is the the land of special taxing districts, never a good thing for either residents, taxpayers, or anyone interested in a quality town in which to live or locate industry. Special tax districts to fund services serve the best interests only of housing tract developers. If PV were my only choice in which to live, I never would have moved to this area.


Posted: Thursday, May 09, 2013
Article comment by: Real American VET USN Retired GOOD CITIZEN

WHAT ABOUT A HOC'ROD STADIUM---HOCKEY and RODEO/// & INDIAN CASINO!!

MORE Rodeo's at Tim's Center would help a bunch!!

Rodeo Grounds in PRESCOTT should be condemned!! What do they spend there $100 a year for upkeep??!! just saying!!


Posted: Thursday, May 09, 2013
Article comment by: Not that it makes any difference but

Does anyone know, since it seems that this situation started in 2006, is this why Town employees have not had any kind of raise since 2006?

Or is it just coincidence?

Legitimate non political answers would be appreciated if possible.


Posted: Wednesday, May 08, 2013
Article comment by: Gary Keeper

Couple of things here. If this was about Prescott there would have been 200 additional bloggers. Not sure if PV dont care, or Prescott folks have nothing better to do than whine or complain. Also, thank goodness past Mayor Simmons and CM Norwood didnt sign on to this boondoggle but they will never get the credit, this whole events center just doesnt add up.

Posted: Wednesday, May 08, 2013
Article comment by: To @ Prescott Valley Resident

What you are failing to realize is Prescott wants no industry,Sedona has no room and puts too much restrictions,tourism is their bag, Chino valley has no infrastructure to speak of, Dewey has no water nor infrastructure, and cotton wood doesn't have the central location. Prescott Valley is ripe and ready for growth. Sure retail will come in to scoop our money from the minimum wage earners and retired residents, but no industry will come into this area as long as we have the good ole' boy network and the current administration. Now wise up and fact the facts. You can keep making excuses but it is truly time to face facts.

Posted: Wednesday, May 08, 2013
Article comment by: To @ Prescott Valley Resident

What you are failing to realize is Prescott wants no industry,Sedona has no room and puts too much restrictions,tourism is their bag, Chino valley has no infrastructure to speak of, Dewey has no water nor infrastructure, and cotton wood doesn't have the central location. Prescott Valley is ripe and ready for growth. Sure retail will come in to scoop our money from the minimum wage earners and retired residents, but no industry will come into this area as long as we have the good ole' boy network and the current administration. Now wise up and fact the facts. You can keep making excuses but it is truly time to face facts.

Posted: Wednesday, May 08, 2013
Article comment by: P.V. Gal

Harvey Skoog has been the Mayor of Prescott Valley for the last seventeen years, four years before that, and he has at least another four years to go. He has been silent through this whole mess. Bond debt, rusty libraries, failed arenas and fairgrounds. Is that the legacy Mayor Skoog has left us? These disasters have happened on his watch,I voted for him and now I am ashamed of my decision. The current state of affairs falls on the shoulders of the leader of this town and that leader is Mayor Harvey Skoog. He is and was in charge, he held the gavel, he is the person responsible for this financial mess we are in. Shame on you Harvey Skoog, you have put special interest groups ahead of the interests of the great people of the town of Prescott Valley. It is clear by these articles that you sold us out for your political supporters.

Posted: Wednesday, May 08, 2013
Article comment by: @ Prescott Valley Resident

So where are all of the high paying industry and manufacturing jobs in Prescott, Chino Valley, Dewey, Cottonwood and Sedona? Seems that you are singling out Prescott Valley when ALL of Yavapai County shares in the lack of attracting industry jobs.

However it seems that national retail & franchise giants have no fear in locating to Prescott Valley (Walmart, Tractor Supply, Dick's Sporting Goods, Culvers) to name a few.

Prescott Valley's event center woes has nothing to do with it.



Posted: Wednesday, May 08, 2013
Article comment by: Prescott Valley Resident

I can see why no meaningful investors care to invest a dime in this town, A Walmart here, a restaurant there. No industry or major manufactured with any good paying jobs would take a chance with this bunch in control. Failure to Perform said, they screwed up badly, Louie Lizza tried for a change, George Orlick said, they will not change. I think that about sums it up for the town of Prescott Valley. To bad for the good folks here. Remember Skoog is running again in four years get your votes for him in early.

Posted: Wednesday, May 08, 2013
Article comment by: Easy For You to Say

To: @ Alec Barry...First, the truth about the situation needs to be in the public eye. Stop with the funky optimistic fa la la. Your outlook would be different had you invested heavily in this disasterous project.

Second, millions of dollars were invested by unsuspecting people based on bond ratings. Do you think Allstate is stupid and doesn't thoroughly check out investments? The Convention Center bond issue was a total sham.

Someone must pay the bondholders...what bank or mortgage lender would stand for this fiasco? NONE!

When the investors are paid...then you can have your way and say...the hockey team...concerts, whatever.

How to pay bondholders and who is held accountable should be first and foremost in this issue.



Posted: Wednesday, May 08, 2013
Article comment by: Allstate = AIG

They made a bad investment and want others to bail them out. Learning from the big boys.

Posted: Wednesday, May 08, 2013
Article comment by: What a Mistake

Again Mr.Lizza has shown some class and was honest. At least he used his name, it is too bad now that all the cowards who spun lies about him will now do it again under assumed names. Hey people we are stuck with this Mayor and Council. Live with it and the million they are costing us. Funny we aren't even finished paying the bond for the fairgrounds, and we have this mess blowing up in our face. Same people, same rip off. When will we ever learn. The Fains will back out of this mess cleanly, They will continue to stack the Mayor and Council positions, and this will happen again. The Taxpayers will pay once more. Fairgrounds, Tim's Arena, I guess the third time will be a charm. Thank God we have Harvey to lead this rudderless ship.

Posted: Wednesday, May 08, 2013
Article comment by: George Orlik They'll never change..willingly

Brother Officer Louie Lizza: Sorry the Zombies didn 't hear the message and elect you. I fought against the prison twice and managed to get it it shelved for the time being. But remember you are living in a manipulated. small town with a pure Lapdog government that takes from the poor and gives to the rich ( The Federal money to the Phoenix developer and a flip of the bird to New Horizons and other charities) I really have to wonder about vote counts as Skoog keeps getting re elected and he seems so forgetful and lost without an underling whispering corrections or information ( Check the council meetings). Could it be there actually exists such a pool of ignorant sheeple in one place?
Anyways. Good Luck to you I left a few years ago after seeing the writing on the wall and the stress it was causing my family and my self. Prescott would have been a better choice by a long shot. So don't get yourself ill over this bunch they are not worth it. I also served and protected for 21 years in the 34th Precinct and know how one feels when injustice upon injustice is presented. I do hope the lawsuits will shed light and punishments on the "takers" and a barn cleaning of town hall will result.



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