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| The Falls Event Center Logo Above the Evergreen Museum in McMinnville OR |
The bankruptcy situation at The Falls Event Center (TFEC) is now getting much more complicated. First, there is the renewed threat of foreclosure by Meilin Lu of the McMinnville site (includes Aviation building, Lodge, Wings and Waves Water Park, Hotel Site and all the surrounding farmland). Second, there is the U.S. Bankruptcy Court’s appointment of a tough new trustee, who has hired new lawyers with experience in going after Ponzi Schemes, securities fraud, managing the coming lawsuits and going after all those that assisted with this massive criminal fraud (claw backs). The expected legal actions will tie up the Evergreen site for years, and I do not think anyone can secure the survival of the Evergreen Aviation & Space Museum under such circumstances (the full gravity of their situation seem not to have sunk in yet with the Museum Board). The Museum appears to have secured short term funding, but that will not solve the long term issues. My gut tells me that the museum will be gone long term.
Meilin Liu, who first sought foreclosure of the McMinnville properties before the bankruptcy was filed this July, has filed a motion asked for relief to proceed with the foreclosure for the approximately $3.5 million she is owed as a secured investor. Just last week after the new court-appointed Trustee was installed, the Unsecured Creditor Committee got the new Trustee to put off the sale of the entire McMinnville site despite no reorganization plan while TFEC is still losing massive amounts of money. Previously, another TFEC mortgage holder was successful in repossessing The Falls Event Center (Elk Grove), so this motion could get things moving and pushes TFEC’s case closer to a conversion to a full liquidation Chapter 7.
What’s interesting is that in Liu’s motion she recognizes that while mortgages and property taxes are likely more than $13 million on the all property owned by the Falls at the McMinnville site, it only has a market value of $9.8 million. This means there is no equity for her given she is behind the 1st mortgages, property taxes and several other mortgages. Remember that Steve Down, along with the written support of our local paper the News-Register, stated that this portion of the site was worth at more than 11 times reasonable market value at $114 million - as we know that was a lie leveraged against how much Del Smith originally spent to develop the property. Adding to this deficit, secured mortgages with property taxes owed may actually be closer to $20 million, giving a negative equity of over $10 million before Meilin Liu could possibly collect anything. It is unclear why she is pursuing foreclosure at this time despite this lack of equity, but my own speculation is that she realizes that any potentially recoverable assets will only degrade further the longer this process drags on, and does not want others including the courts to waste away whatever might be left in spite of how unlikely it is she will share in the liquidation of these assets. However, Liu does also make a point in the motion that Steve Down agreed in writing that her note was secured by all income at the McMinnville site, which would include the Wings & Waves Waterpark. What she may not realize is that Down also promised this same revenue as security for the Museum’s monthly donations, though by my estimation neither stands a chance of actually collecting on this revenue.
Lastly and more fundamental to the case is the court appointment of Michael Thomson as Chapter 11 trustee and the employment of Dorsey and Whitney as counsel for the new Trustee. This marks the total loss of control by the original TFEC management over the bankruptcy. To make things even more difficult in the face of Steve Down and his management’s fraud, Dorsey seems to have been appointed not only because of their extensive experience in Bankruptcy law, but also “extensive experience and knowledge in other areas of the law which are likely to be involved in the case.” Dorsey has extensive experience in several major Ponzi cases and managing dozens of related lawsuits. Such investigations and ensuing lawsuits would keep the property tied up for years, and could even implicate the Museum management and any others who could be said to have assisted the Ponzi. In the meantime the Museum has no alternative funding sources of consequence without the Water Park, meaning they are quite probably looking down the barrel of a slow and painful final decline, and the senior managers will have no one but themselves to blame.
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