Back in January of this year, the bankruptcy trustee assigned to colorful imploded homebuilder Royce Homes obtained a $9.3 settlement from Amegy Bank for the bank’s role in what attorneys called a $39 million conspiracy — to swindle creditors by draining the collapsed builder’s bank accounts shortly before Royce shut down and was declared bankrupt, in 2008. A separate settlement with Royce Builders’ founder, Michael Manners, was reached in March. And earlier this month, a jury in federal court returned a $27 million verdict against Royce’s former CEO, John Speer, for his role in the escapade. (Back in March, an earlier jury had ended up deadlocked on a number of charges.)
According to reporting by Law360’s Jeremy Heallen, the charges stemmed from what the attorneys claimed amounted to an off-the-books leveraged buyout of Royce Homes. In 2006, Speer bought Manner’s 50 percent stake in the Royce Homes for $33 million, to give himself complete ownership of the homebuilder. Though the funds used to finance the purchase (including a $20 million personal loan from Amegy Bank) were borrowed in Speer’s own name, Speers, Manners, and Amegy came to an understanding that Royce Homes would ultimately be responsible for paying them off, the suit claimed. The purpose of the scheme, according to the claims, was to keep the loans off of Royce Homes’s financial statements, because doing so would have “wiped out most of the homebuilder’s equity and caused lenders to shut down vital credit lines,” Heallen reports.
***
If that was the scheme, though, it didn’t work, exactly: With the crash of the subprime housing market, the bankruptcy trustee alleged, Royce encountered major financial difficulties after spending millions to pay down Speer’s buyout debts. (Speer’s singular Cypress estate, which was listed for sale for $9.8 million until 2010, was featured on Swamplot in 2008)
“That’s when Speer, Manners and Royce Homes executive George Kopecky allegedly began distributing $39 million from the company’s accounts to themselves and family members,” Heallen’s Law360 report explains, “leaving Royce Homes in ruins and creditors who were owed some $41 million empty-handed.”
“We made Exhibit One in the case an email from the CFO saying we need to pay the CEO — take the money from loans,” T. Michael Dortch, the trustee’s attorney, tells Texas Lawyer.
“Undeterred by failure,” Heallen continues, “Speer and Amegy forged ahead with a new venture, using the ill-gotten gains, according to the suit.” The trustee is now seeking an additional $8.5 million to cover interest and attorney fees.
- Defunct Builder’s CEO Slammed With $27M Fraud Verdict and Jury Deadlocks In Fraud Suit Against Defunct Builder’s CEO [Law360]
- Ex-CEO at Royce Homes liable for $20 million, jury decides [Houston Chronicle ($)]
- Dallas Lawyer Discusses How a Few Choice Emails Sorted From Thousands Lead to $20 Million Verdict [Texas Lawyer]
- Royce Builders coverage [Swamplot]
Image: Royce Builders
It took al long time but I finally got to see Manners get what is coming to him and as for Speer, he is so sleazy that a person could drown from the oil that drips from him, if they got too close.
Shady, but hardly surprising. Desperation leads to unintended consequences every time.
Good to see these parasites getting what was coming to them!
A $9.3 settlement for a $39 million conspiracy? That’s an amazing deal!
Wonder if this is the same Mike Manners. If so I would probably avoid this property company:
https://www.linkedin.com/pub/mike-manners/17/b11/594
Yes. It is the same Mike Manners. He got to keep enough of his ill gotten gains that he will be messing with Houston for a long time. I wonder if England wants him back?
I have tried to get in touch with someone from Royse for some years. My house was built in 2005 and when I first walked my house it was incomplete showing the start of a half bathroom down stairs
When I returned to the house in 27th my son moved me in due to a broken right shoulder and arm. I didn’t check what I thought was a half bath for maybe 2 years due to my serious injury I have no half bath completed. Who can I talk to about this?
Bought a Royce home in 2006.
On 11/9/2017, my husband and I had an almost deadly house fire that took out our entire 2nd floor and severely damaged the first. The cause, an electrical fire that started in our Master bedroom closet. A house also built by Royce, two blocks over had an electrical fire that also started in the Master bedroom closet. Our fires were one year apart and in both cases the newly hired electricians stated the wireing was extremely faulty and duck tape was used. If anyone knows how I can get in touch with any of the builders/Owners from Royce please let me know. wagodsheart@yahoo.com. Thanks!