It was recently reported that a dispute on the verge of a court date has been settled between lenders and a group of greenhouse operations, Color Star Growers. Not long after the company received a commercial loan in Texas, Color Star Growers shortly filed for bankruptcy, causing tensions between lenders and the company to rise.

Law 360 in Dallas reported the vague details regarding a fraud dispute totaling around $66 millions dollars. In a statement that was released by Regions Bank, who specializes in commercial loans in Texas, the banks say that they resolved all pending claims, even including counterclaims, with MCG Capital Corporation. A separate federal case between Regions Bank and Comerica Bank was also recently resolved, but details from that case was not reported.

The dispute between lenders and Color Star Growers stems from a federal and state litigation that totaled around $66 million in loans. Color Star Growers obtained a commercial loan in Texas, but just a short year later, they ended up filing for bankruptcy. This then led to accusations of Color Star Growers committing fraud.

Color Star Growers were accused by lenders of committing fraud by hiding their terrible financial woes. This of course then caused a claim to be issued between lenders and others, stating that Regions Bank actually knew about all of Color Star Growers’ financial inaccuracies, but didn’t end up informing the lenders of any of the financial issues.

Regions Bank denies complaints from lenders who issues commercial loans in Texas to Color Star Growers

Even though the lenders claim that Regions Bank actually had the knowledge of Color Star Growers’ financial issues, Regions Bank continuously denies that they knew anything about the financial issues and troubles that Color Star Growers were experiencing. Regions Bank also made sure that they stated that they did not see any documents that showed any financial issues to back up the claim that they were aware.

A little over a year after Color Star Growers received a commercial loan in Texas, the company went and filed for bankruptcy.

In 2012, Color Star Growers received a commercial loan in Texas from lenders and then was forced to file for bankruptcy at the end of the 2013 year. Lenders claim that Color Star Growers made an “enormous” overstatement of its actual inventory, which led to “fictitious” profits. The lenders stated that Color Star Growers had less than $7 million dollars in inventory, when they claimed that they had $17 million in inventory. The exact terms of the settlement were not disclosed in court documents.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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