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Published: Wednesday, 6/26/2002

Ex-partners sue developer over alleged resort fraud

A group of prominent Toledo-area businessmen is suing the former CEO of the defunct Cavista Corp., charging that he stole millions of dollars from a resort they jointly owned in Lexington, Ky.

The suit, filed by Cavgate LLC yesterday in Lucas County Common Pleas Court, claims Edwin Bergsmark improperly transferred about $2.1 million from Cavgate to other businesses he owned. In addition, the suit claims Mr. Bergsmark sold the partnership a parcel of Kentucky land for $3.5 million when it was worth considerably less.

Christopher Joseph, a Cavgate manager, declined to comment last night. The group's attorney, Cary Rodman Cooper, and Mr. Bergsmark could not be reached for comment.

In the lawsuit, Cavgate asks for the $2.1 million to be reimbursed and for that amount to be tripled if the court finds Mr. Bergsmark committed an act of theft, as state law dictates. It also asks that a promissory note from Cavgate to Mr. Bergsmark and his wife, Sally, for the $3.5 million be voided.

In 1998, about 15 prominent area investors who chipped in $5.5 million and Mr. Bergsmark bought the Marriot Griffin Gate resort in the heart of the thoroughbred breeding capital of the world for more than $50 million. Mr. Bergsmark became managing partner of the group, called Cavgate.

Among the investors were James White, Jr., a senior partner at Shumaker, Loop & Kendrick; Fredrick “Fritz” Rudolph, chairman of Rudolph/Libbe Cos., one of the nation's top 200 construction firms; Dave Boston, former Toledo city manager; Jeffrey Cooley, group president of Newton Rubbermaid; George and Oscar Joseph, Jr., supermarket pioneers who preside over one of the area's oldest commercial real estate companies; and John Garrity, a local marketing executive.

Mr. Bergsmark, a former banker who was barred from the profession in the late 1980s in the wake of the collapse of Trustcorp, had resurrected his career in the '90s when he built Cavista into the area's largest real estate, development, and financial services company.

But, unknown to his Cavgate partners at the time of the Kentucky deal, a number of his projects were floundering. In a short period he had acquired several expensive companies and brokered numerous deals, taking on debt totaling millions, according to court records.

Mr. Bergsmark has been sued by four area banks for more than $11 million in defaulted loans. One of them, filed by Sky Bank, claims Mr. Bergsmark unlawfully diverted $1.7 million from a revolving credit line to several of his struggling enterprises, including $74,000 to the Cavgate partnership.

In August, as Mr. Bergsmark's financial troubles mounted, he became the focus of an investigation by the Lucas County prosecutor over the failed Beacon Place condominium project in central Toledo that could cost the city $2.3 million.

About that time, Mr. Bergmark's Cavgate partners questioned him about the Marriott project. His unsatisfactory answers led the partners to have the company's accounts audited, during which they learned that Mr. Bergsmark had diverted about $2.1 million from Cavgate to his other businesses, several partners alleged in an earlier interview.



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