Vanguard, AllianceBernstein sue over failed Sports Park

Municipal bond funds that lost more than $200 million after an Arizona sports complex collapsed have sued the investment bank that underwrote the project’s debt and the father-and-son team that developed and managed it.

Vanguard Group Inc., AllianceBernstein Holding LP and Macquarie Group’s Delaware Funds allege in a lawsuit filed earlier this month that they were defrauded by Chicago bond dealer BC Ziegler, the underwriter of $280 million in municipal bonds for the project , and by Randy. and Chad Miller.

The lawsuit in Arizona Superior Court in Maricopa County also named the law firm Gust Rosenfeld, which acted as counsel for the securities issued by the Arizona Industrial Development Authority in 2020 and 2021. The three asset management companies owned about 70 % of debt.

Bond offerings for the Phoenix-area complex, known as Legacy Park, were based on false financial projections and failed to inform investors that millions of dollars in bond proceeds were diverted to pay the Millers and support operations , support the funds.

contracts

At least seven organizations that the Millers said had been lined up to use the park, including English soccer giants Manchester United and a youth affiliate of Major League Soccer’s Real Salt Lake, said they had never signed “pre-contracts” or “cover letters” quoted. in the bond prospectus circulated among investors who purchased the bonds, Bloomberg previously reported.

“Defendants falsely inflated the purported application for Legacy Sports Park, evidenced by so-called cover letters, many of which turned out to be fabricated,” the funds said in the complaint. The mutual funds “relied on materially false and misleading information in the offering memorandum, including materially false financial projections and project risks.”

Michael Grimm, a spokesman for Ziegler, said the allegations in the lawsuit have no merit and that the investment bank plans to vigorously defend itself. Randy Miller declined to comment, as did his attorney. An attorney for Chad Miller did not respond to a request, and neither did Gust Rosenfeld.

Representatives for AllianceBernstein and Delaware Funds had no comment. A spokesman for Vanguard declined to comment.

Ziegler was paid about $5.7 million to underwrite the two bond offerings. Gust earned about $340,000. The lawsuit is the second filed by bondholders against Ziegler. An entity formed by Saybrook Fund Advisors, an investor in distressed municipal debt, sued the bank in November 2023.

Legacy Cares, a nonprofit set up by the Millers to own the 320-acre complex, filed for bankruptcy in May 2023, saying construction failures, labor shortages and supply chain delays amid the pandemic delayed the park’s opening, which which led to loss of income. The facility, with a set of fields and fields for football, soccer, baseball, basketball and other sports, was sold last October for $26 million. Bondholders received $2.4 million in cash and an 11 percent stake in the new owners.

While offering bond documents, he said the complex would bring in $100 million in its first year, when the park opened, it generated about $30 million and operated at a loss of $15 million.

Financial projections

In addition to basing their financial projections, in part, on allegedly fraudulent commitments to use Legacy Sports Park, the bond offering said Oak View Group, a firm hired to manage non-sports operations such as food and beverage and parking, would contribute $10. millions in development. OVG never made the investment, according to the suit.

“Defendants never updated the offering memorandum or otherwise informed investors of the material change in cash flows,” the lawsuit states.

Ziegler and the Millers also did not update their initial financial projections for a June 2021 bond sale, even as numerous teams canceled due to the Covid-19 pandemic.

The more than 1,000-page prospectus for the 2020 bond offering characterized Randy Miller, a former minor league baseball player, as a successful businessman with extensive ties to the sports industry, citing his associations with the Arizona Outlaws of the United States Football League. and the Phoenix Giants, who last played in the 1980s.

But it omitted the elder Miller’s three personal bankruptcy filings and ties to a Texas investment fraud involving a business entity he controlled. Miller was never charged in the Texas case.

Randy Miller was paid $1 million when the 2020 bond issue ended, and both he and Chad Miller received $40,000 a month as park operators, the funds’ lawsuit claimed. The Millers used more than $7 million in bond proceeds to pay “exorbitant” salaries to themselves, family and friends, the suit says. None of those payments were disclosed to bond investors, the complaint said.

Another $1.2 million in bond proceeds were used to settle a securities fraud lawsuit against the Millers.

“These omissions were extremely material given that they improperly misappropriated the proceeds of the bond offering and concealed facts impugning the Millers’ integrity and credibility,” the lawsuit states.

Top photo: Players participate in a Major League Pickleball tournament at Legacy Sports in Mesa, Arizona.

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