Freestyle Music Park creditors cry fraud, fight back

Several creditors of Freestyle Music Park allege the park's owners are attempting to defraud them of money they are owed through legal posturing in a foreclosure suit, a claim Freestyle's lawyer denies.

Five companies filed answers last week to a foreclosure suit brought by FPI US, the mortgage holder, against FPI MB Entertainment, the park's owner, in Horry County court. Four of those suits claim that FPI US and FPI MBE are essentially the same company, involve the same people and structured the mortgage deal to unrightfully deny creditors money they are owed.

Nate Fata, FPI MBE's lawyer, denies the claim that they are the same company but said he would not offer an opinion on the proceedings beyond what appears in court documents.

"The answer is obviously no ... they're not the same entity," said Fata, who has previously represented his opposition, FPI US, in other lawsuits.

David Slough, attorney for FPI US, could not be reached Friday for comment.

Audra Byrd, an attorney with law firm Turner Padget Graham & Laney, said her firm has tried similar cases before, but this case goes beyond the usual and constitutes a fraud. Byrd is representing Brandon Advertising Inc. in Myrtle Beach, one of the companies that contests the foreclosure suit and alleges that FPI MBE and FPI US are essentially the same company.

"We think that there was an element of fraud involved in establishing the mortgage in the first place. We think it was created to shield the company from having to pay its creditors," Byrd said. "The mortgage and notes were created for the purpose of doing what they are trying to do: to foreclose on the property and walk away with that asset - the property - lien free."

The foreclosure suit seeks to go to the front of the line of creditors, alleging that other claims are junior and inferior. The suit listed at least 20 creditors as codefendants, but so far only five - Brandon Advertising Inc., VenCore Solutions LLC, Sheriar Press Inc., Data Sales Co. Inc. and M.B. Kahn Construction Co. Inc. - have responded. Only Sheriar Press does not claim that the companies are the same, although it does dispute that FPI US should be paid first.

Brandon Advertising wants the mortgage to be declared as ordinary investment capital, Byrd said, which would not put it first in line to be paid.

VenCore alleges in its answer to the foreclosure that "the same officers and/or owners of the Plaintiff (FPI US) directly or indirectly control FPI-MBE."

M.B. Kahn's answer states that FPI US perpetrated a fraud by intentionally misleading creditors and claiming it had the money to pay outstanding bills. The filing calls FPI US a "mere alter ego of Defendant FPI MBE," a characterization also used by Data Sales Co.

The foreclosure suit is a self-serving move by FPI MBE to prevent Data Sales from repossessing property it leased to the park, according to court filings on behalf of Data Sales.

FPI MBE's board of directors resigned following the foreclosure suit, former president and board member Steven Baker said in August. A sole member remains on the board, and she had been appointed by Russian investors also involved in FPI US, he said. Baker said he could not confirm the identity of the remaining board member with FPI MBE.

An Aug. 22 report by The Sun News found that FPI US and FPI MBE have close links including:

The companies share the same address in Uniform Commercial Code filings

Alexey Sidnev - often also spelled Alexei in court filings - signed the mortgage papers for FPI US and also sat on the FPI MBE board of directors

FPI MBE is a joint venture between FPI US, an offshore division of Russian investment firm MT Development, and MB Entertainment, a venture formed by U.S. parties with interests in the park, according to a suit brought by consultants Roundbox Advisors LLC. Sidnev responded to that suit saying he lacked sufficient information on the structure of the companies and therefore denied the claims.

MT Development, parent company to FPI US, also planned to develop a Freestyle brand park in Russia

Lawyers for FPI MBE and FPI US switched sides in July. Fata was removed as lawyer of FPI US and replaced by Slough, according to court documents. The same day, Fata took over Slough's representation of FPI MBE.

FPI MBE will respond to the allegations in its own court filing, if it chooses to respond at all, Fata said.