LINCOLN — After 13 years of court action, Omaha businessmen Robert C. Schropp and Leo E. Dahlke may finally recover some of the money they lost when their partnership with real estate developer James V. McCart imploded in 2000.
The Nebraska Supreme Court on Friday upheld a multimillion-dollar judgment in favor of Brook Valley Limited Partnership and Brook Valley II Ltd., two partnerships that had worked with McCart's company, Prime Realty Inc., to develop real estate in the Omaha area.
The dispute outlived McCart, who died in 2006 while awaiting sentencing on a federal charge of kiting more than $2.7 million in checks. He was 75.
Schropp, who had been McCart's childhood friend and classmate, and Dahlke are now in their early 80s and long-since retired. Schropp said they've kept the businesses alive — though with no assets — in hopes of some day recovering some funds. Schropp still lives in Omaha, but Dahlke now lives in Phoenix.
The bank involved in the case — Nebraska State Bank of Omaha — no longer exists, having been merged into Mutual of Omaha Bank, which became the defendant in the lawsuit.
The case is not quite over. In its ruling, the Supreme Court sent the matter back to the Sarpy County District Court for a final calculation of the judgment amount, and a decision on how to distribute the money.
Last year, the lower court ordered Mutual of Omaha Bank to pay the two partnerships more than $5 million, including $2.8 million in interest. The bank appealed that decision.
In Friday's ruling, the high court ruled in favor of the partners who lost money, but it said the judgment amount should be reduced.
The key issue in the case was whether the bank had the right to sell 18 lots owned by Brook Valley II to repay loans taken out by Prime Realty Inc., including one used to compensate the bank for a $2.7 million overdraft resulting from kited checks.
The high court said Prime Realty took out those loans without the knowledge of its partners and submitted forged consent forms for the lots to be used as collateral.
Beginning in the late 1980s, Schropp, Dahlke and McCart bought and sold land and buildings in Douglas and Sarpy Counties.
Their projects included a commercial building in the Spring Valley Industrial Park at 60th and F Streets, the Brook Valley Amoco at 108th and Harrison Streets, the Brook Valley II Business Park near 120th Street and Giles Road and Valley Ridge Business Park near Interstate 80 and Nebraska Highway 50.
Prime Realty, with McCart as president, served as general partner, managing operations for 20 limited partnerships that involved Schropp, Dahlke and other investors.
It began to fall apart in 2000, when, unknown to the other partners, McCart and Prime Realty took out two loans totaling more than $3.7 million.
The first loan, in July 2000, was for a little more than $1 million and used to consolidate previous loans held by the developers and for additional capital.
The second loan, in October 2000, was in the exact amount — $2,721,328.47 — of the overdraft that resulted from McCart's check kiting.
Check kiting is when an insufficient funds check is written on one account to deposit in a second account, from which another check is written to deposit in the first account.
The “float” — the time it takes the deposit checks to clear — artificially inflates the balance of both accounts, allowing the account holder to spend funds that don't belong to him.
Bank officials had confronted McCart after becoming suspicious and agreed to his proposal for the “loan” to cover the overdraft.
He was indicted in federal court for the scheme in 2004 and pleaded guilty in 2005. His sentencing was delayed because of illness, and he died of complications arising from a stroke the following year.
The same 18 lots, owned by Brook Valley II, were used as collateral for both loans. The Supreme Court opinion written by Judge William Connolly said it was “readily apparent” that the consent forms purportedly signed by the partners were forged.
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