May 07, 2013 | 03:20 PMMembers of the condominium owners board of directors at Bella Vista Suites and the owner of the commercial space in the hotel deny accusations that they have misapplied or misued hotel funds and claim they have conducted board business openly and with the consent of the condominium owners.
In March, several members of the Bella Vista Suites on the Shores of Lake Geneva hotel condominium association took their board of directors and several current and former board members to court, accusing them of fraud, misapplication of funds and breach of fiduciary duty.
Attorney Randall Leece of Elkhorn, representing Bella Vista's board and former commercial unit owner Luke Castrogiovanni, replied that those accusations are false and harmful to the hotel.
Leece filed his response in Walworth County Circuit Court on April 26.
In an affirmative defense, Leece's claims that all condominium owners at Bella Vista were notified of all actions taken by the board of directors of the condominium association.
The reply affirms that Bella Vista bought the commercial unit from Castrogiovanni for less than its appraised value and that the purchase was necessary to the continued success of the hotel.
Leece also claims that the plaintiffs who filed the lawsuit "are not representative of the members of the Bella Vista Suites unit owners" and that the lawsuit is not in the best interest of the hotel and its unit owners.
Leece further states that the members of the Bella Vista Suites unit owners board of directors "have at all times acted in good faith and within their fiduciary obligations to the unit owners of the Bella Vista Suites."
The 39-room hotel is at 327 Wrigley Dr., Lake Geneva,
In February 2010, the Bella Vista Suites condominium association's board of directors bought the hotel's 5,000-square-foot commercial unit from Castrogiovanni, a former president of the board of directors.
The commercial unit contains a bar and banquet room and five smaller rooms.
On March 7, Polo Park LLC, 415 S. Wells St., 107, Lake Geneva; Joseph Bartosek of Lisle, Ill.; and David Pack of Darien, Ill., filed a civil action in Walworth County Court claiming that the commercial unit was purchased for more than its appraised value.
The plaintiffs are represented by attorney Richard Torhorst of Lake Geneva.
Castrogiovanni is also manager of a company called La Terrazza, Oak Lawn, Ill. Castrogiovanni and La Terrazza are named as defendants, as are individual members of the board of directors along with Signature Leasing LLC, DeKalb, Ill.; hotel management company Hostmark Wisconsin of Madison and Cincinnati Insurance Co., which provides errors and omissions coverage for the condo association's board of directors.
The plaintiffs claim the action was fraudulent and that it depreciated the value of Bella Vista and adversely affected its financial well-being.
According to Bill Tauber, owner of Polo Park, Castrogiovanni is no longer on the board or a part of the condominium association.
However, Tauber claims that Castrogiovanni still owns the commercial space and the business in it. He said the property was bought by Bella Vista on a land contract.
Although Bella Vista bought the space, it won't take ownership of it until it makes the last payment on the contract, Tauber alleges.
Other allegations by the plaintiffs are that hotel management firm Hostmark used Bella Vista funds to make payments on La Terrazza's mortgage to Southport Bank, holder of the mortgage, without authority from the Bella Vista board of directors, and that Hostmark was paying bills without authorization by the condominium association.
The plaintiffs also claim that on or about Oct. 1, 2011, La Terrazza transferred to Signature Leasing a portion of Bella Vista's purported debt.
Signature Leasing is owned by Pat Giersch of DeKalb, Ill., a member of the Bella Vista's condominium owners board of directors.
The plaintiffs accuse Giersch and other board members of conspiring to specially assess the members of Bella Vista for payment of that portion of the obligation transferred to Signature Leasing.
Plaintiffs also claim that the Henri J.M. Lorenzi Trust bought from Southport Bank a note from La Terrazza that was secured by a mortgage in the commercial unit for a discounted item "unknown to the plaintiffs." The suit identifies board member Charles Lorenzi as the chief officer of the trust. They accuse the board of then imposing a special assessment on Bella Vista condo owners to pay for the note to the trust.
The three plaintiffs are calling on the court to declare the special assessment, $245,000 total, to be null and void.
The plaintiffs, through Torhorst, also claim Cincinnati Insurance is liable to Bella Vista for damages the hotel sustained by the alleged breach of fiduciary duty committed by the board of directors and officers, by virtue of the liability insurance coverage issued by Cincinnati Insurance.
Plaintiffs are asking the court set aside the sale of the commercial unit to Bella Vista, to find against the board for breach of fiduciary duty along with judgments against Hostmark and Cincinatti Insurance, damages to be determined by the court.
Leece and the defendants are calling on the court to dismiss all charges brought by the plaintiffs, to find against them for costs and fees and for further relief the court deems necessary.