MANATEE -- A former business partner is accusing bankrupt Bradenton businessman Paul Sharff of fraud and misrepresentation, court records show.
Graeme Edge contends Sharff misled him into investing more than $2 million in a real estate venture, then mismanaged the money, according to a recent filing in Sharff’s bankruptcy case. The filing seeks to block Sharff from discharging debts to Edge incurred through the joint venture, Edge Sharff Properties, from his Chapter 11 reorganization proceeding.
“Defendant took advantage of ESP’s finances and assets for his own personal benefit, caused ESP to invest in unsuitable properties, and caused ESP to take on substantial amounts of mortgage debt from banks that were involved in other real estate schemes with defendant,” the filing said.
Sharff has not yet directly responded in court, but said in a recent disclosure statement that he planned to countersue. “Mr. Sharff denies the allegations of fraud, negligence or any type of misconduct,” his attorney, Sacha Ross, said Monday.
John Power, a Chicago attorney for Edge, had no comment Monday.
Edge’s filing said Sharff first approached him and his then-wife about forming the venture in late 2003 or early 2004. Sharff cast himself as “a prominent businessman in the Bradenton area, and that he had substantial experience and expertise in buying and managing rental properties,” the filing said.
Edge, the drummer of The Moody Blues rock band, said he ultimately invested $2.25 million in Edge Sharff Properties after his wealth-management adviser researched Sharff.
But Sharff kept shoddy records, borrowed too much money and made poor investment decisions, Edge contends. For example, the venture bought a five-unit rental resort in Bradenton Beach that was not zoned for such use.
“Based on the prices paid for properties, the loan-to-value ratios of their mortgages, and their projected rental income, it should have been apparent that the properties were unlikely to be able to service their own debt, let alone turn a profit,” the filing said.
Edge said he did not discover that until later, when lenders began suing to foreclose on delinquent loans. Edge also contends he belatedly found out that Sharff:
n Had previously filed for bankruptcy in his native West Virginia.
n Collected, through another company he controlled, commissions for brokering some of the Edge Sharff Properties transactions.
n Allowed friends, family members and business and political associates to stay in Edge Sharff Properties’ rentals for free.
n Schemed with a now-defunct bank to loan him more money than federal regulations allowed.
n Spent lavishly, such as picking up the tab for a four-day Bahamian junket for former Gov. Charlie Crist’s 2006 campaign staff.
n Prevented a property-management company from making repairs to rentals, allowing them to fall into disrepair.
Edge already has used those arguments to get two foreclosure judgments against Edge Sharff Properties tossed, according to Manatee County Circuit Court records. Those judgments totaled more than $1.9 million.
In one of those cases, Edge contends his wealth-management adviser at Wachovia Bank either failed to discover or ignored Sharff’s West Virginia bankruptcy case.
Sharff filed his latest bankruptcy case in September, eight months after a federal judge dismissed a previous petition. He listed more than $27.5 million in liabilities but only $7.22 million in assets.
His proposed reorganization plan calls for forfeiting some properties and paying other creditors as little as 2 cents on the dollar over a 10-year period. Edge and several other creditors are objecting to the plan, which has not been confirmed, court records show.
Duane Marsteller, Herald staff writer, can be reached at 745-7080, ext. 2630.