A business and real estate empire and a place among the country’s richest people did not spare Gary Tharaldson from getting burned by the housing crash. He, along with a Bismarck financial firm, is now at the center of a legal dispute over millions of dollars in financing, including $15 million from the Bank of North Dakota, for a failed Las Vegas condominium complex.

In early 2008, Tharaldson and his financial adviser, Brad Scott, owner of Bismarck’s Scott Financial Services, were part of a financing deal that assembled 29 banks in North Dakota and other states to invest in an ambitious Nevada construction project. One year later, the unfinished project was halted with millions of dollars in liens filed against its developer.

A native of Dazey, Tharaldson built up a fortune by developing and managing motels. He later expanded into other large real estate investments and also has financed an ethanol plant near Casselton. In 1998, he was listed among the Forbes 400 richest Americans. Tharaldson Enterprises Inc. is based in Fargo, but he has been heavily involved in the Las Vegas real estate market. Locally, his philanthropy has benefited the University of Mary, which named its business school for him.

In January, Tharaldson filed suit in Nevada against Scott, alleging that he was being led into a role as guarantor of the loans under false pretenses and that he could not be held liable for the soured investments. In August, the Bank of Oklahoma, a lead investor, filed suit against Tharaldson’s company, Tharaldson Motels II Inc., to recoup its $20 million investment in the failed project, plus accrued interest.

Scott, the go-between in the condo financing arrangement, has been a close adviser to Tharaldson and is now accused of concealing details of the project that Tharaldson’s suit argues absolve him of responsibility for the $110 million pooled by the 29 lenders.

The ManhattanWest development was an ambitious, $350 million mixed-use project combining luxury condos, shopping and dining and office space in Las Vegas created by Alex Edelstein, a technology tycoon who turned to real estate.

Tharaldson and his companies had been involved in ManhattanWest and its developer’s earlier projects. According to the Las Vegas Review-Journal, ManhattanWest included 700 condo units, a nine-story tower and 200,000 square feet of office, retail and parking space, but was marred by construction problems and, eventually, the collapse of the real estate market last year. Construction was halted last December.

ManhattanWest’s failure leaves Tharaldson and his company Tharaldson Motels II Inc. liable for the $110 million in financing assembled by banks, according to a suit filed by the Bank of Oklahoma in the U.S. District Court of North Dakota. Another suit was filed by Tharaldson and his companies, Club Vista Financial Services and Tharaldson Motels II Inc., in Clark County, Nev., against Bank of Oklahoma and Scott Financial Co. alleging that they hid information about development that violated the requirements of him entering the deal as guarantor of the $110 million.

Judge Daniel J. Hovland of the federal court in Bismarck held a hearing on the case this week on whether to allow the North Dakota case to proceed while the Nevada case goes forward. According to John Clayman, attorney for the Bank of Oklahoma, the judge is expected to announce a decision in the coming weeks.

Eric Hardmeyer, president of the Bank of North Dakota, confirmed that the bank had lent $15 million in financing for the project, but said he was prohibited from saying more about the loan or the litigation surrounding the financing. Karlene Fine, director of the state Industrial Commission, said the Century Code only allows bank officials to disclose the amount of a loan and its recipient.

Martin Aronson, an Arizona attorney for Tharaldson and his entities, would only say: “We allow our court filings to speak for themselves.”

The Tribune made requests for response from Tharaldson through Tharaldson Enterprises Inc. in Fargo and through Aronson, but they were not returned.

Tharaldson’s suit against Scott Financial and the Bank of Oklahoma as lead lender hinges upon his allegations that the two groups withheld or misrepresented information about the project that violated conditions under which he and his companies would guarantee the loans. Among other issues, his suit alleges that minimum levels of occupancy and income from the project were not met as a condition of the guarantee. Also, the suit alleges that Scott took advantage of his close relationship with Tharaldson and his representation of him in previous deals to induce Tharaldson into participating in the $110 million financing package.

Scott, in a written statement, said he could not comment on the cases other that to say that “Scott Financial denies all allegations of wrongdoing.”

The Bank of Oklahoma, in a motion filed in its suit against Tharaldson’s company, dismisses the claim that Tharaldson was taken advantage of.

“Mr. Tharaldson is a sophisticated businessman who has engaged in numerous financial transactions,” the motion stated. “Mr. Tharaldson’s well-documented achievements in the financial world belie any efforts by the Plaintiff to feign to take any undue advantage over him.”

Clayman noted that Tharaldson was already invested in the project before the Bank of Oklahoma and the other banks became involved in its financing, at which point the developer had already defaulted on the original financing package.

The project itself was marred by construction problems and building code violations, according to the Las Vegas Review-Journal. At the same time, the real estate market crashed, hitting few places as hard as Las Vegas, which saw a major construction boom and bust. By March 2009, construction was halted and remains “pretty close to mothballed,” Clayman said.

Bank of Oklahoma’s suit, if successful, would recoup its share of the financing, but not that of the other lenders. The Bank of North Dakota could potentially collect on its loan if Tharaldson’s suit in Nevada is defeated and his guarantee is upheld.

Together, the suits reflect the aftermath of the expensive failure and the parties’ efforts to avoid taking a financial hit.

“This is the kind of thing that happens when people fight about money,” Clayman said.

(Reach reporter Christopher Bjorke at 250-8261 or chris.bjorke@bismarcktribune.com.)