Plainfield Asset Management is back in the news for their role in an alleged predatory lending scheme with a Colorado casino. I reported for Growth Capitalist this week investors in American Gaming Group sued the manager of Wildwood Casino for getting a sweet deal from hedge fund Plainfield to buy the millions in debt the fund held for a deep discounted price.
A breach of fiduciary duty claim was made because, Joe Canfora the casino manager hired by investors, allegedly bought the debt with equity warrants for himself with out telling the investors the opportunity was available. Canfora runs Merit Management and allegedly has a history of working with Plainfield and Innovation in the past. PFAM sale to Canfora put him in the lead as the top equity investor because of the warrants in the deal that enabled him to buy company stock for cheap. A move that shocked initial investors in the deal.
Growth Capitalist also highlighted the role of LA-Based Innovation Capital, run by Matt Sodl, who helped American Gaming Group raise over $50 million during the casino build out phase. One investor called the relationship between Innovation, Plainfield, and Canfora ‘the axis of evil’ because they felt the financial firms forced investors to put Canfora into the job who loaded it up with unnecessary debt and expenses. A move designed to make it a distressed company rip for a take over if you can buy the discount debt.
Plainfield, a once $5 billion fund run by Max Holmes, was forced to shut down and liquidate its investments early in the financial crisis. I previously reported for Greenwich Time and Dealflow Media that regulators and the Manhattan D.A. were investigating the fund for predatory lending along with securities violations. The fund managers have yet be charged with any wrong doing but did fight a bucket of civil lawsuits filed by small cap companies who borrowed money from them.
Canfora is believed to have not even put up the funds to buy the Plainfield debt. It’s difficult to pass the Colorado gaming board ownership standards and some investors have speculated if the true owner of Canfora’s equity stake is a member of one of the financial firms who did the original casino financing. PFAM had tried to make an equity investment in the casino during the build out phase but didn’t get pass the Colorado gaming board review.
The investor suit is currently in arbitration but Canfora hasn’t taken their claims lightly. He sued investor John Schaffer for defamation in Colorado state court after Schaffer spoke out during a public gaming board hearing last summer on Canfora’s questionable actions. The defamation suit was tossed out in December but Canfora still denies he has done anything to harm investors in his role as casino manager.
A wealthy Philly businessman recently hired Canfora to manage a new casino he won bidding rights on in the city of brotherly love. Canfora also up and quit the Colorado casino management job around the time the investor lawsuit was filed.