Sleep with the Dogs, Wake with the Sleaze

HEADS U WIN, TAILS I LOSE: The down-and-dirty
showdown taking place at the bottom of State Street gives special
urgency to that age-old philosophical dilemma  —  would you rather
be eaten alive by a lion or a tiger? At issue are the 62 units of
muy yupscale timeshare condos flying under the
Ritz-Carlton banner slated to replace the once proudly destitute
Californian Hotel — where it wasn’t uncommon for guests to be given
bloodstained sheets — and the entire two blocks across from the
hotel. The man most responsible for bringing us this glitzy
dystopia is charming bad-boy wheeler-dealer Bill
, whose shenanigans throughout the years have kept
half the attorneys in town working overtime. It appears Levy has
finally been laid low by the laws of Karmic
 — just last week his hard-nosed bankers at
Mountain Funding all but put locks on Levy’s
doors. Mountain Funding filed uncontested legal papers, taking
possession of Levy’s adding machines, telephones, copiers, faxes,
and all the other accoutrements of commerce. In other words,
Mountain Funding tossed Levy and his longtime co-conspirator
Roy Millender overboard into the deep end of the
ocean. To avoid the taint of bad publicity that comes with putting
a borrower out of business, Mountain Funding generously offered
Levy and Millender a couple of waterlogged life preservers. But
even those will be repossessed on November 29 unless Levy can come
up with the $42 million he borrowed plus a $115 million
construction loan — neither of which exists within the realm of

For a lot of people — myself included — it’s inviting to stand
up and cheer Levy’s misfortune no matter how utterly unbecoming
such behavior is. Throughout the years, Levy has lived exceedingly
high on the hog thanks to investors who were promised the sun, the
moon, and the stars. But when these investors eventually asked for
the returns that Levy and Millender “personally
,” what they got were excuses, stalls, dodges,
arguments, and ultimately lengthy and expensive courthouse battles.
It didn’t help Bill’s reputation that throughout the years he
always seemed to emerge from various financial train
virtually unbruised, while his investors were
hauled off to the emergency room. According to Santa Barbara
business lore, Levy’s father was a small-town developer famous for
being a handshake kind of guy. For Jerome Levy, contracts were
superfluous and ridiculous, his word being his bond. But with Bill,
the acorn couldn’t have flown further from the tree; Bill’s
word — as many an investor learned too late — has been only as good
as one’s ability to finance protracted legal battles.

With all this in mind, it’s hard not to root for Mountain
Funding. But two thoughts confuse my sympathies. The first is that
when Mountain Funding finally takes control of the Ritz-Carlton
project, all of Levy’s investors will be left high and dry. We met
many of these investors when they testified — ad nauseum — before
the Planning Commission and City Council about eight years ago,
urging approval of Levy’s timeshare condo plan. Then, one by one,
we met them again, this time as they filed their lawsuits demanding
their money back. The other consideration is this: The longer Bill
and Roy are in the picture, the less likely the Ritz-Carlton
project will ever be built. That’s because Bill and Roy have
amassed so much debt on the property — estimated in the
neighborhood of $100 million — there’s no way the project can be
built and make money. I have no beef with Ritz-Carlton per se, but
I’d rather see them in other towns, like Carmel, than occupy such a
defining and conspicuous swath of our own downtown. Santa Barbara’s
already gotten way too snooty for our own good; we
don’t need any more help in that direction. Once the Ritz comes in,
it’ll be a matter of time before the City Council passes an
ordinance banning women from walking around Pueblo Viejo wearing
jeans costing less than $800. Personally, I’d prefer a combination
water park/putt-putt golf/go-cart racetrack down there. And if they
threw in a velodrome, I’d be in heaven.

Levy has now come within a whisker’s breadth of killing the
project he fought nearly 30 years to get built. Even though Levy
got the green light from City Hall seven years ago — after helping
many councilmembers get elected and donating generously to the
charities on whose boards they sat — his city permits will be dead
in the water if he doesn’t begin construction by this December 12.
Levy can’t get construction going because he couldn’t get a
traditional lender, and that’s because of the huge debt he larded
on the project by lavishly paying himself up front, rather than
waiting until the project was completed. Levy also sought to
mollify countless disgruntled investors from other projects by
giving them a piece of The Beach rather than pay
them what they were owed. When it came time for Levy to pull the
Ritz rabbit out of his hat, the rabbit proved too fat and the hat
too small. As a result, Levy was forced to go to Mountain Funding,
which specializes in high-interest, short-term loans to developers
in distress. Last year he borrowed about $30 million to secure the
land for the deal. But when the bill came due this year — a
whopping $42 million — Levy couldn’t pay. Mountain initiated
default procedures and has tried to sell the project to other
investors. But as long as Levy was in the picture, Mountain Funding
couldn’t find a willing buyer. Now that Levy has been effectively
exorcised from the deal he originated, nurtured, and perfected,
Mountain reportedly has at least three qualified buyers, all of
whom have allegedly done business with the Ritz in the past. And
construction has just gotten underway. Should the deal go
forward — and some still doubt that it will — it’s exceedingly
unlikely that any of Levy’s much-abused investors will ever see a
dime. If the Ritz really does get built, Levy’s investors will
still get screwed and the rest of us will get stuck with an
unwanted project sporting an outdated design. When that happens,
we’ll no longer be able to choose to be eaten by the lion or the
tiger. We’ll already have been devoured by both.

— Nick Welsh


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