United States District Court, D. Nevada
ORDER FINDINGS OF FACT AND CONCLUSIONS OF LAW AFTER
RICHARD F. BOULWARE, II, UNITED STATES DISTRICT JUDGE
case is a veil-piercing action in which Plaintiffs seeks to
enforce a judgment against Defendants that was entered
against Seven Circle Gaming Corporation on December 18, 2003
in the United States District Court for the Southern District
of New York. The Court held an eight-day bench trial in this
case from April 30, 2018 through May 10, 2018. The Court
rules in favor of Plaintiffs and against Defendant Hans
Jacklin based on the following findings of fact and
conclusions of law.
filed the original Complaint on November 29, 2005. ECF No. 1.
Plaintiffs asserted three counts: (1) Declaratory Judgment of
Alter Ego Liability Against All Defendants, (2) Declaratory
Judgment of Agency Liability Against Defendants Swiss
Parents, and (3) Fraudulent Conveyance Against All
Defendants. Id. The case was reassigned to this
Court on October 20, 2016. ECF No. 431.
March 31, 2017, the Court denied Plaintiffs' motion for
summary judgment. ECF No. 443. The Court granted in part and
denied in part Defendants' motion for summary judgment.
Id. The Court dismissed two fraudulent transfer
claims against Defendants Hans Jecklin and Christine Jecklin;
all fraudulent transfer claims against Defendant John Tipton
except the two transfers dated March 8, 2002 and July 16,
2002; and all fraudulent transfer claims against Defendant
George Haeberling. ECF No. 545. Plaintiffs proceeded on the
remaining fraudulent transfer claims as well as their
theories of alter ego and agency liability. Id.
the bench trial that took place from April 30, 2018 to May
10, 2018, the Court took the matter under submission.
JURISDICTION AND VENUE
Court has diversity jurisdiction pursuant to 28 U.S.C. §
1332, as the parties are citizens of different states and the
amount in controversy exceeds $75, 000. Venue is proper
because the incident from which this dispute arose occurred
within Clark County, Nevada.
FINDINGS OF FACT
Rule of Civil Procedure 52(a)(1) requires the Court to
“find the facts specially and state its conclusions of
law separately.” Fed.R.Civ.P. 52(a)(1). The court must
make findings sufficient to indicate the factual basis for
its ultimate conclusion. Kelley v. Everglades Drainage
District, 319 U.S. 415, 422 (1943). The findings must be
“explicit enough to give the appellate court a clear
understanding of the basis of the trial court's decision,
and to enable it to determine the ground on which the trial
court reached its decision.” United States v.
Alpine Land & Reservoir Co., 697 F.2d 851, 856 (9th
Cir.), cert. denied, 464 U.S. 863 (1983) (citations
following the bench trial and having reviewed all of the
evidence and observed all of the witnesses, the Court makes
the following findings of fact in this case.
Plaintiff Morgan Stanley High Yield Securities Inc.
(“MSHYS”) was, during the relevant time period, a
corporation organized under the laws of Maryland.
other six Plaintiffs-Morgan Stanley High Income Advantage
Trust (“HIAT”), Morgan Stanley High Income
Advantage Trust II (“HIAT II”), Morgan Stanley
High Income Advantage Trust III (“HIAT III”),
Morgan Stanley Diversified Income Trust, Morgan Stanley
Variable Investment Series (“MSVIS”), and Morgan
Stanley Select Dimensions Investment Series
(“MSSDIS”) (collectively with MSHYS, the
“Plaintiff Funds” or “Funds”)-were
unincorporated business trusts organized under the laws of
all relevant times, the Plaintiff Funds were all investment
funds owned by members of the investing public.
Defendant JPC Holding AG, formerly known as Tivolino Holding
AG, (“JPC”) is a Swiss corporation with its
principal place of business located at Bahnhofstrasse 1, 8808
Pfäffikon, Zurich, Switzerland.
Defendant Swiss Leisure Group AG, formerly known as Swiss
Casinos Holding AG, (“SLG”) is a Swiss
corporation with its principal place of business located at
Bahnhofstrasse 1, 8808 Pfäffikon, Zurich, Switzerland.
Defendants Hans Jecklin and Christiane Jecklin are Swiss
citizens, residing at Lindenstrasse 6, 8832 Wollerau,
Defendant George Haeberling is a Swiss citizen, residing in
6300 Zug, Switzerland.
Defendant John Tipton is a United States citizen, residing at
11633 La Mirago Place, Las Vegas, Nevada 89138.
The Relationships Between Defendants and the Various
was formed in 1975. Hans and Christiane Jecklin own 75% and
25% of JPC, respectively. Hans Jecklin was a director and
board president between 1975 and 2009. Christiane Jecklin was
a director between 1980 and 2009. Haeberling was a director
between 1992 and 2002.
is a holding company for JPC's gaming activities. Until
2001, JPC owned 100% of SLG. Hans Jecklin was a director
between 1997 and 2002 and board president between 1998 and
2002. Christiane Jecklin was a director between 1998 and
2002. Haeberling was a director between 1998 and 2002.
Seven Circle Gaming Company (“SCGC”) is not a
party to this case but is a judgment debtor to Plaintiffs.
SCGC was formed in 1988 in Delaware and its principal place
of business was in Delaware. It was formerly known as Swiss
Casinos of America, Inc., and before that as Tivolino Holding
(US), Inc. From 1997, SCGC operated in Las Vegas, Nevada.
SCGC was majority-owned by Defendant SLG. SLG's ownership
of SCGC ranged from 82% in February 1997 to 98.8% in
September 2001. Haeberling was a 1% shareholder at all
relevant times. Tipton was a 3% shareholder between 1994 and
2000. The Jecklins did not own any shares of SCGC
individually, but together owned 100% of JPC, which owned
100% of SLG, which owned a majority of SCGC.
following Defendants were board members or officers of SCGC
at some point. Hans Jecklin was a director from 1988 to 2006
and was the president, secretary, and treasurer from 2004 to
2006. Hans Jecklin was SCGC's sole officer from 2004
onwards. Christiane Jecklin was a director from 2000 to 2004.
Haeberling was a director from 2000 to 2001. Tipton was a
director from 1994 to 2004, president from 1999 to 2004, CEO
from 2001 to 2002, CFO from 1994 to 2000, secretary and
treasurer from 2000 to 2001, and general counsel from 1994 to
SCGC owned The Resort at Summerlin, Inc. (“RAS
Inc.”), The Resort at Summerlin, L.P.
(“RAS”), Seven Circle Resorts Inc.
(“SCR”), Seven Circle Real Estate Company
(“SCRE”), and twelve other wholly-owned
subsidiaries. Hans Jecklin, Christiane Jecklin, Haeberling,
and Tipton served as board members and officers of these
subsidiaries at different points during the relevant time
period as well. These positions will be described in more
detail as necessary.
SCGC's Formation and Operations
Hans Jecklin founded JPC in 1975. SLG became the holding
company for all of JPC's gaming activities. By the early
2000s, SLG was Switzerland's largest casino operator.
During the 1980s and 1990s, SLG invested in other gaming
activities in Europe, including in the Netherlands and Great
With the intention of investing in gaming activities in the
United States, SLG created SCGC and incorporated it under the
laws of Delaware in November 1988.
initially owned 82% of SCGC and various minority shareholders
owned the other 18%.
fund SCGC, SLG contributed $50, 000 in equity and loaned SCGC
an additional $200, 000.
Hans Jecklin then applied for and was granted a visa from the
Immigration and Naturalization Services (“INS”)
to work in Maryland and reside there with Christiane Jecklin
and their children.
1992, SCGC formed a wholly-owned subsidiary, Seven Circle
Resorts, Inc. (“SCR”), which focused its efforts
on developing and managing a casino in Colorado, managing a
handful of casinos on Native American reservations, and
pursuing possible gaming opportunities in Texas and
1994, SCGC's board of directors elected Tipton, who was
already a director of SCGC, as its Vice President, Chief
Financial Officer, and General Counsel.
Tipton held positions as President, CEO, CFO, Secretary,
Treasurer, and General Counsel of SCR, and was an officer of
SCR from 2000 through 2002.
SCGC also adopted expanded by-laws in 1993, which, inter
alia, provided for the following:
Number of Directors. “The
board of directors, by resolution, may increase or decrease
the number of directors from time to time. * * * [E]ach
director shall be elected at each annual meeting of
stockholders and shall hold such office until the next annual
meeting of stockholders and until his successor shall be
elected and shall qualify. No. decrease in the number of
directors shall have the effect of shortening the term of any
incumbent director.” (Article III § 1.)
Place of Board of Meetings.
“The regular or special meetings of the board of
directors or any committee designated by the board shall be
held at the principal office of [SCGC] or at any other place
* * * that a majority of the board of directors * * * may
designate from time to time by resolution.” (Article IV
Notice of Special Board Meetings.
“[W]ritten notice of each special meeting of the board
of directors * * * shall be given to each director * * * not
less than one (1) day prior to the time fixed for the
meeting. Notice of special meetings may be either given
personally, personally by telephone, or by sending a copy of
the notice through the United States mail or by telegram,
telex or telecopy, charges prepaid, to the address of each
director appearing on the books of the Corporation. * * *
Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the board of directors need
be specified in the notice or waiver of notice of such
meeting.” (Article IV § 4.)
Informal Action by Directors.
“[A]ny action required * * * to be taken at any meeting
of the board of directors * * * may be taken without a
meeting if all members of the board * * * consent to the
action in writing, and the written consents are filed with
the minutes of proceedings of the board[.]” (Article IV
Compensation of Officers.
“The compensation of * * * employees of [SCGC] may be
fixed by the board of directors * * * or by an officer to
whom that function has been delegated by the board.”
(Article V § 4.)
President. “The president
shall be the chief executive officer of [SCGC] and shall have
general supervision of the business of [SCGC].”
(Article V § 7.)
Delegation of Officers' Duties.
“Whenever an officer is absent, or whenever, for any
reason, the board of directors may deem it desirable, the
board may delegate the powers and duties of an officer to any
other officer or officers or to any director or
directors.” (Article V § 11.)
board members and officers of SCGC were familiar with these
Development of the Resort at Summerlin
1996, SCGC began the development of the Resort at Summerlin,
a luxury spa resort and casino in Las Vegas, Nevada.
1996, SCGC formed The Resort at Summerlin, Inc.
(“RASI”), a wholly-owned subsidiary of SCGC,
which was the General Partner of The Resort at Summerlin,
L.P. (“RASLP”) (together with RASI,
“RAS”), the entity responsible for the
construction and management of the Las Vegas resort and
casino that would be known as The Resort at Summerlin, and
later the Regent Las Vegas (the “Resort”).
Beginning at latest in June 1999 and continuing through at
least May 2000, Hans Jecklin was a Director and Chairman of
Tipton was an officer and Director at RASI from the late
1990s until the fall of 2000.
Resort at Summerlin was constructed in Summerlin, a
master-planned community development just outside of Las
Howard Hughes Company (“Howard Hughes”) owned six
parcels that were zoned for gaming in Summerlin (the
Gaming Parcels were among the few remaining pieces of
property exempted from legislation passed by the Nevada
legislature to restrict the development of local resort
August 1996, SCGC's subsidiary, RASLP, purchased one (1)
of the six (6) Gaming Parcels, a fifty-five acre property
known as “RAS1” with funds from SCGC.
the same day, RASLP and Howard Hughes entered into a royalty
agreement, whereby RASLP agreed to pay Howard Hughes an
annual royalty fee of $1, 000, 000 in exchange for, inter
alia, the right to purchase the remaining five Gaming
Parcels in the event that Howard Hughes determined to make
the Gaming Parcels available for development (“Rights
of First Offer”).
Once RASLP had purchased RAS1, RAS raised $200 million in
capital through a public offering, in addition to $144
million in funding from SCGC to fund construction of the
Specifically, in December 1997, after obtaining the requisite
gaming licenses from the Nevada Gaming Commission, RAS raised
$200 million by, inter alia, issuing $100 million in
unsecured senior subordinated notes (“Senior
early 1998, Plaintiffs purchased approximately $40 million of
the Senior Subordinated Notes, which later became the subject
of the August 2000 Note Purchase Agreement.
Specifically, with respect to the Senior Subordinated Notes,
HIAT purchased $1, 200, 255, HIAT II purchased $1, 801, 980,
HIAT III purchased $599, 595, Morgan Stanley Flexible Income
Trust purchased $3, 904, 290, MSVIS purchased $7, 210, 050,
Morgan Stanley Select Dimension Investment Series purchased
$299, 265, and Morgan Stanley High Yield Services Inc.
purchased $24, 035, 920.
addition to the public debt financing, RAS also received
investments through SCGC totaling approximately $144 million,
which SCGC funded by borrowing $150 million from SLG.
SCGC borrowed money from SLG to fund investments in RAS
because SCGC generated no significant revenue of its own.
classified its investment in SCGC as a series of loans.
SCGC made some initial interest payments, but stopped paying
interest to SLG in May 1999 because it did not have the funds
to continue making interest payments.
of March 31, 2000, SCGC's Consolidating Balance Sheet
showed that its assets were approximately $44.7 million and