Boulis would stay as a consultant with a 10 percent stake in the company. As one of the four owners -- Kidan and Abramoff each had 40 percent, and Waldman had 10 percent -- Boulis thought he would also still have a say in how business was done.
The closing documents did not tell the whole story, however. What really happened that week is the subject of the federal bank fraud investigation.
Gus Boulis, left, had a tumultuous partnership with the majority owners of SunCruz Casinos, which he founded.
(Joe Rimkus Jr. -- Miami Herald)
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Kidan later acknowledged that he and Abramoff never made the $23 million cash payment to Boulis. Kidan testified in a court deposition that Boulis secretly agreed instead to accept two promissory notes totaling $20 million just before the closing when Kidan had threatened to walk away from the deal because he thought the price was too high.
"I told Mr. Boulis we would not be closing the deal," Kidan later said in a deposition. "He said under what terms would I do it? And I told him I would do it if the price was adjusted accordingly."
Kidan later testified in a deposition there was nothing in writing about the change, but he said that he, Abramoff and Boulis orally agreed to do it. "There was a discussion between myself and Mr. Boulis and Mr. Abramoff, and then Mr. Boulis went off to Greece" to attend his father's funeral, Kidan testified. Boulis left his subordinates to handle the closing.
In effect, Kidan and Abramoff were allowed to buy Gus Boulis's gambling company without putting in a cent of equity.
When Foothill Capital eventually sued to recover its loans, one of its lawyers said it would never have lent the $60 million if it had known about the secret promissory notes. The loan agreements with the banks required that Abramoff and Kidan have a cash stake in SunCruz, just as a bank usually requires a cash down payment before issuing a home mortgage. Foothill Capital has said it relied on the financial statements provided by Abramoff and Kidan in which they represented that they had the necessary means to put up $23 million in cash.
Foothill Capital also said that the buyers and sellers knew that the secret arrangement was fraudulent and tried to conceal it. Foothill Capital cited a fax to Kidan at his hotel from Joan Wagner, Boulis's chief financial officer and his representative at the closing. The fax included copies of the two promissory notes and the hand-scrawled instruction: "Please review and if 'ok' sign and give to Jimmy in a sealed envelope."
"Jimmy" was another Boulis lawyer, according to Foothill Capital. The lender said in a court filing "the clear implication of this directive was to hide the very existence of the substituted notes from the lenders."
Foothill Capital also said it has even stronger evidence of fraud.
The lender had asked for proof that the Kidan group had paid the $23 million to Boulis. In response, Kidan and Waldman each faxed copies of a purported wire-transfer document to Greg Walker on Sept. 27, the final day of closing. The document was a Sept. 22 notice of a wire transfer of $23 million "by order of Adam Kidan" from Chevy Chase Bank to Boulis's account at Ocean Bank. However, Kidan's account at Chevy Chase had been closed weeks earlier, according to court documents. Even when the account was active, there was never a transaction larger than $107,000, Chevy Chase told Foothill Capital.
Waldman did not respond to repeated requests seeking comment.
Kidan's lawyer has argued that Foothill Capital may not be an innocent victim. "Everyone needs to look at what knowledge the lender had," said Martin Jaffe of Hollywood, Fla., adding that he could not comment on the details of the case. "You can't be defrauded if you know what's going on and are a party to it."
Court records show that Foothill Capital did have a confidential side agreement with Kidan. Under the agreement, prepared just before the closing, Kidan promised to resolve the liabilities in his personal bankruptcy within 45 days.
At the top of a draft of the letter is a puzzled note from Citadel's lawyer: "Looks fine, but who are we hiding these items from & why?"
Lawyers for Foothill Capital did not respond to repeated requests for comment.
Boulis Was Incensed
When the deal was done, Kidan moved to Florida to run SunCruz. Abramoff stayed in D.C.
Abramoff and Kidan started paying themselves $500,000-a-year salaries. Among the first checks Kidan wrote were payments totaling $310,000 that he sent to Abramoff to help pay for the sports skyboxes at FedEx Field, MCI Center and Camden Yards.
Operating out of SunCruz's offices near Fort Lauderdale, Kidan moved into a $4,300-a-month luxury condo paid for by SunCruz and bought a 34-foot powerboat. He quickly put his mark on the business, firing SunCruz employees including several of Boulis's friends and relatives.
"We fired his friends, we fired his family and he wasn't happy with it," Kidan later told the Sun-Sentinel in Fort Lauderdale.
Kidan said that he found the ships were in disrepair and that there were overdue bills. He refused to make his loan payments to Boulis.
Boulis was incensed. In October 2000, he wrote letters to Kidan demanding payment, threatening to tell the lenders and Abramoff that Kidan was reneging.
Two former SunCruz insiders say that Boulis's truculence sent Abramoff and Kidan back to their friends on Capitol Hill. Scanlon, at the time a public relations consultant employed by SunCruz, once again asked Ney to place comments in the Congressional Record. Two days after Boulis's last letter, Ney did so. "I have come to learn that SunCruz Casino now finds itself under new ownership," Ney stated in the record. Kidan's "track record as a businessman and a citizen lead me to believe that he will easily transform SunCruz from a questionable enterprise to an upstanding establishment."
