Full opinion text
FINDINGS OF FACT AND CONCLUSIONS OF LAW REGARDING THE PLAINTIFF’S APPLICATION FOR A PERMANENT INJUNCTION BREYER, District Judge. Now before the Court is the plaintiffs application for a permanent injunction. Pursuant to Federal Rule of Civil Procedure 52(a), the Court hereby issues the following Findings of Fact and Conclusions of Law. The plaintiffs request for a permanent injunction is hereby GRANTED. I.FINDINGS OF FACT A. Introduction 1. This litigation involves a land development project known as the Rancho Lu-cerne Master Planned Community (“the project,” “the development,” or “Rancho Lucerne”) located in San Bernardino County, California. The project envisions a community with up to 4,257 single family homes on 1,375 acres, a twenty-seven-hole “replica” public golf course, and thirty acres of commercial property. The developer of the project is Pacific Golf Community Development LLC (“Pacific Golf’ or “the developer”), a California limited liability company. The manager and principal of Pacific Golf is Mr. Manoucher Sarbaz. 2. In the course of financing the project, Mr. Sarbaz has worked closely with the defendant Pacific Genesis Group, Inc. (“PGG”), a broker-dealer registered with the United States Securities and Exchange Commission (“SEC” or “Commission”) and the National Association of Securities Dealers (“NASD”). PGG underwrites municipal securities, primarily in California. The defendant Mr. David Fitzgerald is the Chairman and Chief Executive Officer of PGG. 3. In late December 2000, the SEC filed a complaint and an application for injunctive relief against the defendants, alleging that they had violated various provisions of the federal securities laws in acting as the underwriter for bond offerings used to finance the project. That complaint now requires this Court to determine whether it should permit the latest bond offering on the project to move forward, and, if so, under what conditions. 4. The factual record before the Court is fairly complicated, so it is useful to briefly outline the structure of these Findings of Fact and Conclusions of Law. In presenting its Findings of Fact, the Court will begin with a general description of the project’s concept and the process for developing it. Second, the Court will describe in more detail the people and entities involved in the project, including Mr. Sarbaz and Mr. Fitzgerald. Third, the Court will turn to the defendants’ role in developing and financing the project. Fourth, the Court will describe the problems that have been identified with the development, including: (a) how the developer intends to repay bondholders; (b) the substantial amount of debt incurred on the project and whether the developer can repay bondholders with proceeds from the project; (c) how proceeds from the prior offerings have been used, and how proceeds from the current offering will be used absent an injunction; (d) the nature of the developer’s contracts with potential buyers of the lots; and (e) the developer’s failure to meet its projections. Fifth, the Court will review the standard of care for municipal securities underwriters. Sixth, the Court will summarize the evidence regarding the alleged misrepresentations and omissions committed by the defendants. Finally, the Court will briefly describe the procedural history of the suit. 5. In presenting its Conclusions of Law, the Court will begin by outlining the standard for a permanent injunction issued under the federal securities laws. Next, the Court will describe what constitutes a violation of the securities laws. Then the Court will evaluate whether the defendants violated those laws, either by employing a device to defraud, making material misrepresentations or omissions, or engaging in a practice that operates as a fraud. Finally, if it finds that there were violations, the Court will then consider whether there is a reasonable likelihood of future violations such that the Court should issue a permanent injunction. B. The Project’s Concept and the Process for its Development 6. The project is located on a 1,375-acre site in Lucerne Valley, an unincorporated area of San Bernardino County, California. Lucerne Valley is part of a region referred to as the High Desert. Local realtors estimate that the population of Lucerne Valley is approximately 10,000 people. Lucerne Valley is located on the southwestern edge of the Mojave Desert and encompasses about 400 square miles. The project is approximately twelve miles east of the city limits of Apple Valley, thirty-five miles south of Barstow, forty-five miles northwest of Yucca Valley, and twenty-one miles east of Interstate 15. The nearest hospital is approximately 17 miles to the west, in Apple Valley. 7. Mr. Sarbaz began developing Ran-cho Lucerne in 1988 by acquiring parcels of land that could be put together into one large development. When Mr. Sarbaz first acquired land, there was an alfalfa ranch on some of the property and a few homes, some of which were abandoned. Mr. Sarbaz plans to develop Rancho Lu-cerne by constructing a twenty-seven-hole public golf course that features replicas of holes of other well-known golf courses around the world and by developing lots for the construction of homes by either commercial home builders or individual purchasers. 8. In order to develop lots suitable for home construction, two types of improvements are necessary. The first type is so-called “backbone infrastructure,” which consists of the construction of main access roads, sewage lines and treatment facilities, utility connections, and water lines. The second type is so-called “in-tract” improvements, which consist of connecting utilities to the individual lots, including water and sewage lines, and grading the individual lots. When both backbone infrastructure and in-tract improvement are complete, the lots are known as “finished lots.” When backbone infrastructure is complete, but in-tract improvements still need to be completed, the lots are known as “superpads.” 9. The development of Rancho Lucerne depends in part on obtaining necessary government approvals and permits known as “entitlements.” In April 1991, the San Bernardino County Board of Supervisors (“the Board”) approved a General Plan amendment. In August 1996, the Board certified an Environmental Impact Report (“EIR”) for the project and changed its zoning classification. In July 1997, the San Bernardino Planning Commission approved a Master Tentative Tract Map and a Final Development Plan for the Project. 10. The project is divided into certain numbered “areas.” Each area contains a certain number of lots. Before specific lots may be improved, the developer will need approval from San Bernardino County of an implementing individual tract map for each area. Once an implementing final tract map has been approved for an area, the lots within that area can be improved and/or sold. C. The Principals 1. Mr. Sarbaz and Pacific Golf 11. Pacific Golf is a limited liability company formed under California law in approximately 1995 to serve as the developer of the project. Pacific Golf has a limited operating history and no assets, and is pursuing no development other than Rancho Lucerne. Mr. Sarbaz, who has acted as the managing member of Pacific Golf since 1995, is the company’s only employee. Mr. Sarbaz has no other employment outside his work with Pacific Golf. 12. Before Pacific Golf became the developer for the project, a company known as Pico Investment Company (“Pico”) served as the developer from 1988 to late 1995 or early 1996. Mr. Sarbaz acted as Pico’s president. Several lawsuits were filed against Pico, and it is no longer an active company. 13. Before working on Rancho Lu-cerne, Mr. Sarbaz developed real estate in the Los Angeles area, including small retail centers known as “mini-malls” or “strip malls” and one small office building of approximately 30,000 square feet. 14. Prior to beginning his work on Rancho Lucerne, Mr. Sarbaz had only limited experience in developing planned communities. From approximately September 1993 through the end of 1994 or early 1995, Mr. Sarbaz was involved in an investment group that purchased three unsuccessful master-planned real estate developments from banks and the Resolution Trust Corporation in foreclosure auctions. While Mr. Sarbaz was involved in that investment group, none of those developments sold any lots to home builders. 15. Mr. Sarbaz began his involvement with Rancho Lucerne in 1988 when various partnerships he formed with family members began acquiring the land that now constitutes the development. Those partnerships included Lucerne Valley Partners, Wilshire Road Partners, Club View Partners, and Monaco Investment Company. Mr. Sarbaz’s partners in those entities included his brothers, sister, wife, and mother-in-law. Those partnerships acquired a total of 1,362 acres of the project for approximately $2,469,000, or, on average, $1,812 per acre. See Ex. 265 at 28 (LH01202). 16. In 1996 and 1997, Mr. Sarbaz’s partnerships merged into limited liability companies known as Lucerne Valley LLC, Wilshire Road LLC, Club View LLC, and Makasa LLC. Those entities and Monaco Treasures, Inc., now own the land comprising the development. Mr. Sarbaz is a managing member of Wilshire Road LLC, Club View LLC, and Makasa LLC. 17. Several entities controlled by Mr. Sarbaz have filed for bankruptcy. Club View Partners filed for bankruptcy in 1993, Wilshire Road Partners filed for bankruptcy in 1994, and Jilman Partners filed for bankruptcy in 1994. All of those bankruptcy petitions were ultimately dismissed. At the time they filed for bankruptcy, both Club View Partners and Wil-shire Road Partners owned property within the project. Creditors of Club View Partners initiated an involuntary bankruptcy proceeding in January 1997. That petition was dismissed when Mr. Sarbaz reached a settlement with creditors. 18. Mr. Sarbaz was named as a defendant in five other collection lawsuits seeking unpaid fees. Default judgments in excess of $310,000 have been entered against Mr. Sarbaz in four of those suits, and one of the suits is still pending. Mr. Sarbaz and his brother, Mr. Kourosh Sar-baz, have also settled another suit in which they have agreed to pay certain sums to the plaintiff and her attorneys over time. 19. Pacific Golf is currently in default of obligations to pay the principal amount of bonds that were due in July 2000 and the interest on other bonds that was due on January 1, 2001, and January 15, 2001. 2. Mr. Fitzgerald and PGG 20. PGG has been registered with the SEC and the NASD since 1995. The firm’s primary business is underwriting municipal bond offerings, primarily in California. 21. Mr. Fitzgerald has worked in the securities industry since 1985 and specializes in municipal bond underwriting. Mr. Fitzgerald has licenses from the NASD that permit him to act as a municipal securities representative, a municipal securities principal, and a uniform securities agent. Mr. Fitzgerald has served as the lead investment banker for the underwriting of over one hundred bond issuances since 1989. 22. Since 1995, Mr. Fitzgerald has worked as an investment banker and has served as the Chairman of the Board of Directors and Chief Executive Officer of PGG. Mr. Fitzgerald owns approximately sixty-five percent of PGG. Mr. Arch Zellick and Mr. Dan Young own the remaining thirty-five percent of the firm. 23. An underwriter of municipal securities is a broker-dealer that purchases some or all of the bonds issued and attempts to sell those bonds to investors. An underwriter may associate with other broker-dealer firms to sell the bonds. The underwriter and associated broker-dealers, if any, use a preliminary official statement and an official statement that describe the investment to solicit purchasers for bonds. Upon closing of the offering, the underwriter provides a copy of the final official statement to each purchaser. The underwriter earns a fee for its services by buying the bonds at one price and selling the bonds at another price. 24. In addition to their role as underwriter, Mr. Fitzgerald and PGG also served as financial advisers to the issuer on four bond offerings related to the project in 1999 and 2000. 25. On November 12, 1997, the Commissioner of Corporations of the State of California filed a complaint against Mr. Fitzgerald and PGG, alleging violations of California corporate securities laws in connection with municipal securities offerings related to other land developments in California. On February 17, 1999, Mr. Fitzgerald and PGG entered into a settlement agreement under which the defendants agreed to the issuance of a Desist and Refrain Order by the Commissioner. That order requires the defendants to conduct their business in accordance with certain disclosure and sales practices requirements specified in the settlement and to pay part of the Commissioner’s litigation costs. The agreement can be dissolved after five years if the defendants do not violate its terms. The Commissioner later filed a motion seeking a permanent injunction and civil penalties against the defendants for alleged violations of the settlement agreement, but the motion was denied. D. The Defendants’ Role in Financing the Project 1. The Nine Offerings 26. The public improvements for the project have largely been financed pursuant to the Marks-Roos Local Bond Pooling Act (“Marks-Roos”), Cal. Gov’t Code §§ 6500 et seq. That Act enables local government entities to collectively issue tax-exempt municipal debt as a joint powers authority (“JPA”). 27. There have been a total of nine offerings by several different entities that have issued debt to finance the project. Those offerings include: (1) the $4,430,000 Lucerne Valley Public Financing Authority Revenue Notes 1996 Series A (“First Offering”), which closed on August 15, 1996; (2) the $3,750,000 Rancho Lucerne Valley Public Financing Authority 1996 Revenue Notes (“Second Offering”), which closed on December 31, 1996; (3) the $10,000,000 Rancho Lucerne Valley Public Financing Authority Revenue Bonds $9,550,000 1997 Series A and $450,000 1997 Series B (collectively, the “Third Offering”), which closed on July 31,1997; (4) the $10,200,000 Rancho Lucerne Valley Public Financing Authority Revenue Bonds 1998 Series A (“Fourth Offering”), which closed on August 1, 1998; (5) the $5,875,000 Chimney Rock Community Association Certificates of Participation 1999 Series B Offering (“Fifth Offering”), which closed on December 31, 1999; (6) the $14,500,000 Chimney Rock Community Association Lease Revenue Bond 1999 Series A (“Sixth Offering”), which closed on January 19, 2000; (7) the $14,000,000 Legends Golf Course Community Association Lease Revenue Bonds 2000 Series A (“Seventh Offering”), which closed on April 28, 2000; (8) the $8,500,000 Legend Golf Club Community Association Lease Revenue Bonds 2000 Series B (“Eighth Offering”), which closed on June 15, 2000; and (9) the $13,500,000 Desert Tortoise Public Financing Authority (“DTPFA” or “Authority”) Revenue Bonds 2000 Series A (“Ninth Offering”), which closed on December 29, 2000. 28.Each offering is sold by an Official Statement describing the project and how the proceeds from the bonds will be used. See Exs. 244 (First Offering); 65 (Second Offering); 75 (Third Offering); 29 (Fourth Offering); 158 (Fifth Offering); 159 (Sixth Offering); 418 (Seventh Offering); 301 (Eighth Offering); 419 (Ninth Offering). 29. PGG was the underwriter for all nine of the offerings, and Mr. Fitzgerald served as the lead investment banker for the offerings. Mr. Fitzgerald has read and participated in the drafting of each of the nine Official Statements. See Section I.D.3 infra, ¶¶ 42-47 (describing Mr. Fitzgerald’s role in preparing the Ninth Official Statement). 2. Mr. Fitzgerald’s Role in Developing the Project 30. Mr. Sarbaz first contacted .Mr. Fitzgerald in 1995 to seek assistance in financing the cost of constructing the backbone infrastructure for Rancho Lucerne. When Mr. Fitzgerald and Mr. Sarbaz met, they discussed the possibilities for financing the project, including bank financing and municipal bond financing. Mr. Sarbaz initially sought financing under California’s Mello-Roos Community Facilities Act of 1982 (“Mello-Roos”), Cal. Gov’t Code §§ 53311-53317.5. Mr. Fitzgerald and Mr. Sarbaz elected not to pursue Mello-Roos financing, instead issuing bonds under Marks-Roos. 31. Mr. Fitzgerald played an active role in helping Mr. Sarbaz move the development forward. In 1995 or 1996, shortly after discussing the project with Mr. Sar-baz, Mr. Fitzgerald recommended that the developer retain Tyee LLC (“Tyee”) to analyze the feasibility of financing the initial stages of the development through a bank loan. In January 1996, Tyee issued a report that recommended that PGG proceed with a $5.1 million, two-year loan. The report expressly disclaimed offering any opinion on Mr. Sarbaz’s financial capacity or status as a developer, and recommended that PGG or the prospective lender investigate his finances further. The report was addressed to Mr. Fitzgerald, who testified that he read it. See Ex. 243 at CDC 653-54. 32. In April 1996, Mr. Fitzgerald met with representatives of the Lucerne Valley Unified School District (“LVUSD”) about forming a JPA to issue bonds to finance the public improvements for the project. The LVUSD serves the area in which the development is being built and operates a high school adjacent to the project. Mr. Fitzgerald also met with representatives of the Waterford Public Finance Authority, with whom Mr. Fitzgerald and PGG had worked on other bond financings. The LVUSD and Waterford formed the Lu-cerne Valley Public Finance Authority, which issued the First Offering on August 15,1996. 33. LVUSD officials expressed concerns regarding the feasibility of the project and the value of the land used as security for the First Offering. As a result, the LVUSD withdrew from the JPA in subsequent offerings. See Section I.E.2.a.ii infra, ¶¶ 70-77 (describing the LVUSD’s concerns). 34. In late December 1996, Mr. Fitzgerald met with representatives of the City of San Joaquin about joining the JPA to replace the LVUSD. Mr. Fitzgerald and PGG had worked with San Joaquin on other bond financings. San Joaquin is approximately 200 miles from Lucerne Valley. Waterford and San Joaquin formed the Rancho Lucerne Valley Public Finance Authority on December 19, 1996 and performed the Second, Third, and Fourth Offerings on December 30, 1996, July 31, 1997, and August 1,1998, respectively. 35. On May 16, 1997, Mr. Fitzgerald sent a memorandum to Mr. Sarbaz regarding steps the developer had to take to advance the project. See Ex. 67. Mr. Fitzgerald told Mr. Sarbaz that he should obtain a second appraisal on the property on the instructions of the Authority. Mr. Fitzgerald also told Mr. Sarbaz that he should “secure letters of intent/commitment from merchant builders and Realtors to sell ‘paper’ lots upon completion.” Mr. Fitzgerald also indicated that Mr. Sarbaz should “go after the local paper and kill their reporting efforts.” Finally, Mr. Fitzgerald wrote: This will be a very difficult deal to sell— you are lagging in the entitlement process, the local school district bailed out, the local paper is after you, former partners are after you and so forth. It is time for you to get your act together and fight these battles yourself instead of asking others to do so on your behalf. 36. In June 1997, while Mr. Sarbaz was in Turkey, Mr. Fitzgerald sent several memoranda to Mr. Sarbaz in preparation for the Third Offering. In a June 29, 1997 memorandum, Mr. Fitzgerald expressed surprise at Mr. Sarbaz’s estimate of $35 million for the cost of public improvements for the first phase of the project. See’Ex. 71. Mr. Fitzgerald wrote: “Is this [the $35 million estimate] right? If so, we have major problems since you are placing far and away to much debt on 480 acres. You will have to encumber many other properties to make this feasible.” In a June 30, 1997 memorandum, Mr. Fitzgerald “strongly suggest[ed]” that Mr. Sarbaz return from Turkey to meet with investors “as quickly as possible.” Ex. 72. Mr. Fitzgerald also asked Mr. Sarbaz to provide three letters from merchant builders voicing interest in buying bulk lots for the project. 37. At least since 1998, Mr. Fitzgerald spoke with several of the project’s contractors about the status of their work and about future offerings. In particular, Mr. Fitzgerald met or spoke with officials from Kiewit Pacific Company after Kiewit stopped work on the project in 1999 because it was not being paid. Mr. Fitzgerald also discussed the project with Environmental Enterprises, the public improvements contractor, and Forsgren, the general contractor for the golf course. 38. Mr. Fitzgerald has visited the site of the project approximately fifty times. He visited the property in December 2000 prior to the Ninth Offering. 39. When issuing the bonds, PGG generally receives the bonds at a discount from par and sells them at or near par, thereby generating profit for PGG. Since 1996, the broker-dealer firms participating in the nine offerings for Rancho Lucerne have received approximately $7 million in fees. Of this amount, $2.95 million has been paid to PGG. PGG’s fee is significantly higher than the average underwriters’ fee reported by the California Debt and Investment Advisory Commission (“CDI-AC”). The defendants maintain that their fees on the Rancho Lucerne project are higher than average because they incur additional costs by performing more extensive due diligence. 40. Mr. Fitzgerald also has interests in Rancho Lucerne beyond his role as the underwriter. Since 1996, Mr. Fitzgerald, Mr. Zellick, and Mr. Young have been the principals of U2ivever, a limited liability company of which Mr. Fitzgerald holds thirty-five to forty percent. U2ivever has a joint venture relationship with Pacific Golf and is entitled to ten percent of the developer’s profits on Rancho Lucerne after the payment of all bond indebtedness. 41. These events are not the only occasions on which Mr. Fitzgerald has played a guiding role in the project. His testimony indicates that he is intimately familiar with the development, its progress, and its prospects for success. He has played a significant role in moving the project forward much faster than Mr. Sarbaz would have been able to accomplish without Mr. Fitzgerald’s assistance. 3. Mr. Fitzgerald’s Role in Preparing the Ninth Official Statement 42. The Official Statements for each offering have been prepared by PGG or lawyers working with PGG. Mr. Sarbaz and his planning consultant, Mr. Ray Johnson, have provided information regarding the project to PGG and the lawyers involved in drafting the Official Statements. The first three Official Statements were drafted by the law firm of Flanagan, Mason, Robbins, Gnass & Corman, which also served as disclosure counsel for the issuing authorities. The last six Official Statements, including the Ninth Official Statement, were drafted by the law firm of Ogden Murphy Wallace, P.L.L.C. (“Ogden Murphy”) of Seattle, Washington, in its role as “underwriters’ counsel.” Ogden Murphy has not served as the disclosure counsel, but instead is retained directly by PGG. Ogden Murphy has not been retained to protect the interests of prospective purchasers of bonds. 43. Mr. Philip Miller is the attorney at Ogden Murphy who has been in charge of preparing the Official Statements. Mr. Miller also drafted the preliminary Official Statement for the Ninth Offering and sent it to Mr. Fitzgerald. Mr. Fitzgerald read drafts of the preliminary Official Statement and provided comments to Mr. Miller. Mr. Miller then revised the preliminary Official Statement and had it printed. The preliminary Official Statement was used by PGG to solicit purchasers for the Ninth Offering. Mr. Miller also prepared the final Official Statement. 44. Mr. Miller also sent a draft of the Ninth Official Statement to Mr. Sarbaz by electronic mail. Mr. Sarbaz reviewed portions of the Ninth Official Statement. In the draft that Mr. Miller sent to Mr. Sar-baz, the Statement already contained the section entitled “Developer’s Profit” that appears on page 34 of the final version. 45. In the summer of 2000, Mr. Fitzgerald met with representatives of the Mariana Ranchos County Water District (“MRCWD”) to discuss its participation in the DTPFA and the status and plans for Rancho Lucerne. In July 2000, Mr. Fitzgerald sent the MRCWD a letter answering detailed questions about the project and predicting that the developer would earn a $10 million profit. See Ex. 318. In the letter, Mr. Fitzgerald also represented that “[t]he Developer expects to execute contracts to sell Areas 2, 3, 7 & 8 in the near future, resulting in the redemption of more than $9,000,000 in outstanding municipal debt.” Following these discussions, on November 1, 2000, the MRCWD became a member of the Authority. On November 18, 2000, when the Authority authorized the Ninth Offering, the developer still did not have a contract to sell Areas 2 and 3. Mr. Fitzgerald failed to inform either the MRCWD or the Authority of that fact. 46. In November 2000, Mr. Fitzgerald prepared a term sheet for the Ninth Offering, as he had done for the prior eight offerings. Included in the term sheet for the Ninth Offering was an explanation of how the developer expected to make a profit from the project. At a workshop with the members of the DTPFA on November 18, 2000, Mr. Fitzgerald presented the term sheet and explained the offering. Mr. Fitzgerald predicted that the developer would realize profits of $5 million to $8 million from phase II of the project. Mr. Fitzgerald also distributed to the attendees a letter dated November 16, 1999 from Mr. Lee Hill, an appraiser who assessed the value of the 467 lots in phase II at $23,850 per lot. Moreover, Mr. Fitzgerald told the participants that the project was nearly ready for road paving and that he expected the paving to be completed in December, even though he knew at the time that all construction of public improvements relating to the water and sewer and roads had been halted on the instructions of the San Bernardino County Land Use Services Department and that further construction could not proceed until that instruction was withdrawn and the general contractor was paid. 47. Mr. Fitzgerald made additional presentations concerning the Ninth Offering to the Authority on December 2, 5, and 9, 2000. At one or more of those meetings, Mr. Fitzgerald told the participants that the developer had obtained an offer from a merchant builder for 114 lots at the expected prices. Mr. James Woody, who attended these meetings as the secretary of the Authority and a representative of the MRCWD, understood Mr. Fitzgerald to say that the merchant builder was offering to purchase the lots at prices consistent with those assumed by Mr. Hill in his November 16, 1999 appraisal letter. Mr. Fitzgerald failed to inform the Authority that the developer had a sales agreement at prices ranging from eighteen to twenty-two percent below those assumed in Mr. Hill’s appraisal. E. Problems Identified with the Project 48. Throughout the course of developing Rancho Lucerne, Mr. Fitzgerald and PGG have been made aware of several potential problems with the project. Among other issues, various entities have expressed concerns about whether the developer will be able to repay bondholders with proceeds from the project in light of the substantial debt the project has incurred. 1. How the Developer Intends to Repay Bondholders 49. The structure and terms of eight of the nine Rancho Lucerne bond offerings have been largely identical. In each case, the bonds are payable solely from the potential revenue from the project and do not constitute a debt of the issuer or any other governmental entity. 50. The bulk of the bond repayments— including for the Ninth Offering — are to come from “Project Impact Reimbursement Fees,” which are fees the developer has pledged to pay from the proceeds of lot sales. Those fees are secured by liens that the developer and the relevant property owner have agreed to impose on lots pledged as security property for each of the bond issuances. As a result, full repayment of the bonds is entirely dependent upon the developer’s ability to develop lots and sell them at prices sufficient to retire the outstanding liens on the lots. 51. The Official Statement cautions: “No representation has been made regarding the sufficiency of potential Project Impact Reimbursement Fees to repay the Bonds.” Ex. 419 at 16. There are several other warnings that no assurances can be given that the Project Impact Reimbursement Fees, the developer’s resources, and foreclosure on the real property (either individually or in combination) would result in sufficient proceeds to repay the bonds. See id. at 16-17, 19, 21, 29, 34, 35-44. 52. Some of the debt from the earlier offerings has been retired in the course of subsequent offerings. However, none of the debt that has been retired was paid by revenues from the project. Instead, all of the debt that has been repaid was financed through additional offerings. The Ninth Official Statement does not disclose that fact. 2. The Debt Incurred on the Project and Whether the Developer Can Repay Bondholders 53. The project is encumbered with substantial debt. In the course of the eight prior offerings, the project has incurred approximately $70.8 million in debt, of which approximately $53.7 million is outstanding. The debt from those offerings that has been retired, approximately $17.1 million, was repaid through additional bond offerings, not from project revenues. If the Ninth Offering is fully sold, the project will have been encumbered with approximately $84.3 million in debt, of which approximately $63.9 million will be outstanding. 54. The Official Statement for the Ninth Offering identifies the bonds outstanding from the earlier eight offerings. For each of these prior bond issuances, the Official Statement provides the total amount of bonds issued, the maturity date, the shortfall in remarketing the bonds, the remaining principal balance outstanding at the close of the Ninth Offering, and whether the bonds are in default. See Ex. 419 at 8-9. The Ninth Official Statement does not, however, present a single figure showing the total amount of debt on the project as a result of all of the earlier offerings. 55. As a result of this substantial debt, the SEC claims that the project is financially infeasible. According to the Commission and its experts, the debt outstanding on the project — and the bonds constituting the Ninth Offering in particular — cannot be repaid with revenues from the project. To support that contention, the SEC cites the total amount of encumbrances on the development, the appraised value of the land as determined by one of the SEC’s experts, and the conclusion of another expert retained by the SEC that neither the superpad lots nor the finished lots will be sufficiently valuable to be sold at prices that will pay off the debt. 56. There is no dispute among the parties about the total encumbrances created by the nine offerings. However, there is substantial disagreement between the parties regarding the revenues which will be derived from the project and the value of the land as determined by the appraiser retained by the developer. a. Feasibility Studies Performed for the Developer 57. Before meeting Mr. Fitzgerald, Mr. Sarbaz had hired several consultants to assist him in analyzing the costs and feasibility of developing Rancho Lucerne. Several of those consultants analyzed the project assuming that the developer would use Marks-Roos financing, and some of the reports were either incomplete or otherwise unhelpful in assessing the value of the project. 58. In 1993, Mr. Sarbaz retained Mr. Hill to appraise the value of the property. In 1995, Mr. Fitzgerald recommended that the developer also retain Tyee to analyze the feasibility of financing the initial stages of the development through a bank loan. At trial, the validity of the valuations performed by Mr. Hill were disputed by the parties. i. The Tyee Report 59. Tyee is a limited liability corporation in the State of Washington. The three partners or members of Tyee are Mr. Bradley Roberts Corner, Mr. Daniel Pebbles', and Mr. Robert Garrity. All decisions, recommendations, and reports of Tyee required the unanimous consent of all three members. 60. Tyee performed an investigation of the financial feasibility of the Rancho Lu-cerne project from late 1995 to early 1996. Tyee’s investigation of the financial feasibility of the project was limited because Mr. Sarbaz was reluctant to send information to Tyee. 61. Tyee’s report indicated that the market for Rancho Lucerne was not positive. One of the analysts at Tyee indicated in deposition testimony that “unless there was something to draw more traffic to the project, that the absorption estimates that we were getting from other people based on existing developments in the high desert area was not positive news.” Ex. 458 at 28:13-17; see Ex. 271 (containing a draft report with Tyee’s findings). 62. Mr. Corner confronted Mr. Fitzgerald with the preliminary results from Tyee’s analysis in October and November 1995, notifying him that the project faced stiff competition and a difficult land and lot market. Mr. Corner also told Mr. Fitzgerald that Mr. Sarbaz was unrealistic about the appraised value of the land and the prospects for financing the project. 63. On January 10, 1996, Tyee delivered its written due diligence report to Mr. Fitzgerald. See Ex. 306. The conclusions and recommendations of the report were limited to offering an opinion on the financing of a $5.1 million loan from PGG to Mr. Sarbaz, and the report did not draw any conclusions regarding Mr. Sarbaz’s financial status or capacity to complete the development. The report recommended that the $5.1 million loan to Mr. Sarbaz be secured by a first position deed of trust on the entire property and that Mr. Sarbaz and all other property owners personally guarantee the repayment of the loan. After receiving the report, Mr. Fitzgerald characterized its conclusions as “stringent.” Ex. 458 at 108:1-18. However, the report did characterize the project as a “financially sound development opportunity” in light of the replica golf course and the developer’s intention to sell lots at the superpad stage rather than as finished lots. Ex. 305 at 654. ii. Mr. Hill’s Appraisals 64. Mr. Hill is a member of the Appraisal Institute and is a Certified General Appraiser in three states, not including California. He has been an appraiser for approximately nineteen years and has worked in real estate since 1968. A significant portion of his experience has been in southern California. 65. As early as 1993, Mr. Sarbaz retained Mr. Hill to perform appraisals of the property comprising the project. Mr. Hill produced an initial appraisal in August 1993 and updated it on several occasions. 66. Mr. Hill’s August 1993 appraisal valued some of the property comprising Rancho Lucerne at $28,000 per acre with entitlements. See Ex. 241. As such, Mr. Hill’s appraisal assumed that the project would obtain future entitlements; his report was not an estimate of the value of the land in its then-current (less than fully entitled) state. 67. Mr. Sarbaz provided a copy of the August 1993 appraisal to Mr. Fitzgerald and to Tyee. The First Official Statement cited Mr. Hill’s August 1993 appraisal as supporting the amount that was to be paid to the property owners for acquisition of the land for public improvements. 68. The Tyee report notes that Mr. Hill’s valuation is based on the assumption that a tentative tract map has been recorded even though that level of approval had not yet been obtained but instead was expected to occur within two years. Tyee concluded that Mr. Hill’s 1993 valuation at $28,000 per acre was not a current value but a future value. See Ex. 305 at CDC 535. One of the Tyee principals also told Mr. Fitzgerald that the appraisal was unrealistic. 69. In his testimony, Mr. Fitzgerald indicated that he has read over a hundred real estate appraisals over the course of his career. He admitted that the August 1993 appraisal was not a then-current valuation of the property. Moreover, Mr. Fitzgerald has been aware throughout the nine offerings that the developer still must obtain certain entitlements from San Bernar-dino County. 70. Mr. Fitzgerald was specifically informed from separate and independent sources that Mr. Hill’s August 1993 $28,000 per acre valuation did not represent the current value of the property comprising the development. In addition to Mr. Fitzgerald’s own knowledge of appraisals and the Tyee report, the LVUSD, one of the members of the authority that issued the First Offering, expressed significant reservations about Mr. Hill’s methodology and results. 71. In an October 4, 1996 letter to Mr. Sarbaz which was also delivered to Mr. Fitzgerald, the LVUSD questioned whether Mr. Hill’s appraisal was sufficient to justify the Second Offering. Mr. Gary Thomas, the LVUSD Superintendent, noted that “there should be an appraisal prepared by a qualified appraiser showing the fair market value of the property involved as of the date of the appraisal.” Ex. 63 at 1. He continued: “We are not seeking a contingent appraisal of what the property ‘may’ be worth at a future date if certain events take place, but what the fair market value is as of the date of the appraisal.” Id. Mr. Thomas also indicated that the appraisal should contain comparable sales within Lucerne Valley since some members of the LVUSD believed that the present value of land in the area was worth substantially less than $28,000 per acre. The letter also questioned whether the project had the necessary entitlements to proceed. 72. Around the same time, Mr. Clayton Parker, an attorney for the LVUSD, wrote a series of letters to bond counsel and other participants in the Rancho Lucerne bond offerings — including the defendants — raising questions about Mr. Hill’s valuation. In an October 1996 letter, Mr. Parker specifically questioned Mr. Hill’s selection of comparable properties, noting that no sales of undeveloped land in the region had exceeded $5,000 per acre. See, e.g., Ex. 92 at 4. In a December 1996 letter, Mr. Parker characterized Mr. Hill’s valuations as “unsupported” and indicated that “there are no land transactions approaching the valuation placed upon the project by Mr. Hill.” Ex. 172 at 2. In those letters, Mr. Parker also requested that certain statements be added to the Second Official Statement to reflect the potential problems with Mr. Hill’s appraisal. 73. Mr. Fitzgerald testified that he believed that the concerns raised by Mr. Thomas and Mr. Parker were unfounded and that their opposition to the Second Offering was motivated by concerns other than the value of the land. He also indicated that he asked Mr. Hill (or asked Mr. Sarbaz to ask Mr. Hill) to update his appraisal to address the concerns raised by LVUSD officials. Mr. Fitzgerald did not, however, request that an independent appraiser evaluate the project, nor did he provide a compelling alternative explanation for the opposition of Mr. Thomas and Mr. Parker to the Second Offering. 74. In response, Mr. Hill updated the August 1993 appraisal in October 1996. Mr. Hill’s October 1996 appraisal was derived by comparing the proposed development with similar land sales. Mr. Hill did not include data from the High Desert area and used data from land located far from Rancho Lucerne. Moreover, Mr. Hill concedes that the October 1996 appraisal, like its August 1993 predecessor, was not an “as is” appraisal. See Ex. 457 at 157:12-18. However, Mr. Hill reaffirmed his earlier valuation of $28,000 per acre with entitlements. 75. Mr. Hill updated the October 1996 appraisal again with a letter appraisal on November 12, 1996 that once again confirmed his $28,000 per acre valuation. The November 12 letter included some additional analysis of subdivisions in the High Desert area but did not make a detailed comparison of those projects to Rancho Lucerne. Mr. Hill also wrote a letter on December 6, 1996 responding to Mr. Parker and questioning Mr. Parker’s qualifications to judge Mr. Hill’s appraisals. 76. Mr. Fitzgerald received Mr. Hill’s November 12 letter and additional letters from Mr. Parker questioning its validity, as well as Mr. Hill’s December 6 response. Mr. Fitzgerald was also aware that it was necessary to close the Second Offering by December 31, 1996 in order to avoid foreclosure on a large portion of the Rancho Lucerne property to one of Mr. Sarbaz’s creditors. 77. The LVUSD declined to participate in the Second Offering for the project. The Second Official Statement summarized Mr. Hill’s 1993 and 1996 appraisals and stated that “a member of the Authority expressed concern regarding the opinion of value given by the appraiser. The Authority then requested that the appraiser revisit four projects [in the area].” Ex. 65 at 25. The Second Official Statement did not disclose, as Mr. Parker had requested, information about sales of comparable property in the area for less than $5,000 per acre. 78. Mr. Hill provided another letter update of his appraisal in November 1999, valuing the ninety-three acres of security property for the Ninth Offering at over $11 million, or nearly $120,000 per acre. Like the August 1993 and October 1996 valuations, that valuation was not a current market valuation; it presumed that the lots were finished. However, the November 1999 letter did constitute a discounted cash flow analysis. 79. Moreover, the November 1999 letter failed to deduct some of the costs of constructing the backbone infrastructure necessary to complete the development. Mr. Hill contends that his failure to include the backbone infrastructure costs was an oversight that is actually accounted for in another portion of his calculations, but he admits that his failure to include infrastructure and interest costs in the final conclusion of value for the November 1999 appraisal means that it does not comply with the Appraisal Institute’s standards. 80. Mr. Fitzgerald received and reviewed the November 1999 appraisal shortly after it was prepared. b. Analyses of the Encumbrances on the Project 81. At trial, the SEC and the defendants presented expert testimony about the projected revenues from the project. The SEC presented the testimony of Mr. Patrick Gibbons and Mr. Robert Steele to demonstrate that the developer cannot repay bondholders with revenues from the project. The defendants presented the testimony of Mr. Robert Reicher to rebut the SEC experts. The various reports of the experts were quite complicated and detailed, and the Court will review them here only to the extent necessary to explain its decision. i. Mr. Gibbons’ Report 82. Mr. Gibbons is the president of GCI Group (“GCI”), a southern California real estate consulting firm he founded in 1991. GCI provides financial analysis to land developers, home builders, and institutional investors to help them evaluate the viability of various real estate investment opportunities. The SEC called Mr. Gibbons as an expert on the financial feasibility of real estate development and financing. 83. One of the services GCI provides is a financial feasibility analysis, which is a comprehensive review of the revenue and expense projections related to a project, with the intent of developing a comprehensive project cash flow. Based on this projected cash flow, GCI advises clients regarding the estimated need and likely cost of financing and the overall feasibility or viability of the project. 84. The first step in a feasibility analysis is called a residual land value analysis. In the context of a residential development, a residual land value analysis is an estimate of how much a home builder should be willing to pay for lots that have been developed to one of three stages: finished lots, superpad lots, or paper lots. 85. In his work at GCI, Mr. Gibbons has performed financial feasibility analyses for approximately 150 projects. Of these, approximately seventy-five involved master-planned communities. Of the master-planned communities Mr. Gibbons has analyzed, all but a handful were located in southern California. 86. In June 2000, Mr. Gibbons was retained by the SEC to evaluate the likelihood that the bonds issued in connection with Rancho Lucerne and underwritten by the defendants would be repaid by revenues from the project. In July 2000, Mr. Gibbons produced a written report in which he analyzed the financial feasibility of the project at the time of each of seven prior bond offerings. See Ex. 417. In his report, Mr. Gibbons concluded that since the time of the Third Offering in July 1997, there has been no reasonable basis to believe that revenues from the project would be sufficient to repay the bonds. 87. In December 2000 and January 2001, Mr. Gibbons also analyzed the financial feasibility of Rancho Lucerne at the time of the Ninth Offering. He concluded that at the time of the Ninth Offering, there was no reasonable basis to believe that revenues from the project would be sufficient to repay that offering. 88. Mr. Gibbons used the same basic methodology in both his July 2000 report and in his analyses in December 2000 and January 2001. First, he performed a residual land value analysis to determine the net revenues the project is likely to produce from the sale of lots at the finished lot, superpad lot, and paper lot stages. Mr. Gibbons then compared his estimated residual land values with the lien release amounts imposed on the property at the time of each offering. 89. Mr. Gibbons found that from the Third Offering on, the lien release amounts were consistently higher than the amounts the developer could expect to realize from the sale of lots after accounting for the costs of constructing the backbone infrastructure. Mr. Gibbons also concluded that the lien amounts exceeded the value of the lots in all of the areas serving as security property for the Ninth Offering. This was true at the finished lot, superpad lot, and paper lot stages. Because he determined that expected revenues from lot sales were insufficient to meet the lien release amounts, Mr. Gibbons concluded that there was no reasonable basis to believe that the Ninth Offering could be repaid from lot sales. 90. Mr. Gibbons also reviewed several profit projections for Rancho Lucerne and concluded that they were inaccurate. He reached that view because the projections failed to account for the discounts that the developer had provided in preliminary contracts to sell the lots when considering the sales prices for other lots and had omitted or underestimated certain costs such as backbone infrastructure and interest expenses. 91. However, Mr. Gibbons’ analysis contained several problems that undermined its persuasiveness. First, Mr. Gibbons did not account for the potential income derived from the replica golf course or the commercial property, both of which serve as security property for some of the offerings. Second, Mr. Gibbons’ analysis focused on the lien release amounts rather than the actual debt outstanding on each lot, thereby overstating the amount of revenue that the developer would have to generate to be able to repay bondholders. Third, Mr. Gibbons’ conclusions relied on a series of assumptions regarding the sale price of finished homes, the costs of construction, and other factors that are subject to dispute. Indeed, both the defendants’ expert Mr. Reicher and the SEC’s other expert Mr. Steele used different figures for sales prices that would have fundamentally altered the results of Mr. Gibbons’ analysis. Fourth, the developer testified that his contracts to sell the lots provided discounts from the expected sales prices to reward the buyers for being the first to join the project. Finally, Mr. Gibbons’ analysis was not disclosed to the defendants prior to the SEC filing its complaint. ii. Mr. Steele’s Report 92. Mr. Steele is a real estate appraiser based in southern California. Mr. Steele has forty-five years of experience as an appraiser, much of it in the southern California area and, more importantly, in the High Desert area where Rancho Lu-cerne is located. Mr. Steele is a member of the Appraisal Institute and is qualified to render an expert opinion on land valuation. The SEC offered Mr. Steele’s testimony to demonstrate that Mr. Hill’s appraisals are flawed and that the developer will not be able to repay the bonds connected with Rancho Lucerne. 93. Mr. Steele testified that the real estate market in the High Desert area was dominated by demand from working people who commute to jobs in San Bernardi-no, Riverside, and Ontario, areas that are to the south of the High Desert area and on the other side of the San Bernardino mountains. In his view, those buyers give careful consideration to the length of them commute to work. Due to the distance of Lucerne Valley from the area’s principal traffic corridor along Interstate 15, Mr. Steele noted that the project would ordinarily be at a locational disadvantage compared to other area communities such as Victorville and Apple Valley. However, Mr. Steele concluded that a strong amenity such as the replica golf course would offset the additional distance from the road network, making the project competitive with other planned communities in the area. 94. Mr. Steele asserted that the real property comprising the project had a value of only $5,000 per acre as of July 2000. Mr. Steele arrived at that opinion by first considering the highest and best use of the property. Mr. Steele tested the feasibility of developing the property by comparing the sales price of finished lots in the High Desert area with the cost to construct such lots. Mr. Steele then found eight comparable developments in the area that supported a finished lot sale value of about $30,000. Next, Mr. Steele calculated the cost to construct such lots by taking the offering price of homes in master-planned communities in the High Desert area and deducting from the sales price the cost to construct those homes, using a nationally published cost guide and adjusting for local market conditions. 95. From this analysis, Mr. Steele found that it would cost between $29,000 and $30,000 to construct a finished lot. After adding marketing costs, a seller of such lots would lose money in selling them for the indicated price of $30,000. For these reasons, Mr. Steele concluded that developing the property for finished lots was infeasible. See Ex. 416. As a result, Mr. Steele concluded that the highest and best use for the property was to hold the property with entitlements for future sale. Mr. Steele found seven examples of sales of comparable vacant land with sales ranging from $1,387 to $8,869 per acre. After considering the differences between those properties and Rancho Lucerne, Steel concluded that $5,000 per acre was an appropriate value for Rancho Lucerne. 96. Mr. Steele also criticized Mr. Hill’s appraisals. In Mr. Steele’s view, Mr. Hill inappropriately compared the project to properties that were in primary housing areas where housing prices are higher. Mr. Steele also questioned Mr. Hill’s absorption rate and Mr. Hill’s failure to incorporate infrastructure costs. Mr. Steele also expressed doubt that the replica golf course would generate sufficient rounds played to make a significant difference in his analysis. 97. However, like Mr. Gibbons’ analysis, Mr. Steele’s analysis did not consider potential revenue from the golf course and the commercial property. While he viewed the golf course as compensating for the project’s locational disadvantage, he did not regard it as a significant source of revenue from which bonds could be repaid. Moreover, Mr. Steele’s appraisal was not disclosed to the defendants prior to the SEC filing its complaint. iii. Mr. Reicher’s Report 98. Mr. Reicher is a Vice President of Market Profiles, Inc., a southern California firm that has prepared several prior reports for Pacific Golf. Mr. Reicher has had more than thirty years of experience in evaluating market conditions for residential planned unit developments, many with golf courses. He has knowledge of and experience in the High Desert area. The defendants presented Mr. Reicher to rebut Mr. Gibbons’ testimony that the developer could not possibly repay bondholders with proceeds from the project. 99. Mr. Reicher contended that the replica golf course would be a sufficient amenity to attract buyers for the residential lots from a radius larger than traditional residential developments. He also noted that similar replica golf courses have been successful in Texas and Florida. Accordingly, Mr. Reicher concluded that the presence of the replica golf course would raise the market value of the project and assist the developer in retiring the outstanding debt from the nine offerings. 100. In analyzing whether revenues from the project would be sufficient to repay the bonds that have been issued, Mr. Reicher used the same analysis employed by Mr. Gibbons, although he disapproved of that methodology. Mr. Reicher asserted that his sales price and cost assumptions — some of which were modified shortly before his testimony — were more realistic than Mr. Gibbons’ and that the developer would be able to repay bondholders under Mr. Reicher’s assumptions. Moreover, unlike Mr. Gibbons, Mr. Reich-er focused on the actual debt encumbering each area of the project rather than the lien release amounts. 101. However, even Mr. Reicher’s analysis shows that the project is burdened with substantial debt. In many cases, his analysis demonstrated that the difference between the debt encumbering various areas and the expected revenue from sales of lots in those areas was quite small, often representing only a few hundred thousand dollars. Even with his relatively optimistic assumptions, Mr. Reicher’s analysis showed that the developer may experience significant difficulty in generating sufficient revenue to pay off the bonds, particularly if the developer incurs any additional debt. If any of his assumptions prove to be incorrect — particularly his fluctuating and somewhat questionable estimate of the price per square foot at which homes in the project would sell — his analysis would demonstrate that the developer cannot repay bondholders. 102. In addition, due to the time constraints created by the trial, Mr. Reieher performed only a limited analysis. He essentially used Mr. Gibbons’ framework to show how changing certain assumptions would alter Mr. Gibbons’ conclusion, but he did not perform his own complete analysis. 103. Mr. Reieher consistently asserted that a market-based evaluation with a discounted cash flow analysis was the standard and more proper method for ascertaining the feasibility of the project. Under such an analysis, Mr. Reieher indicated, the developer would compare the timing of when development costs and debt payments were due in conjunction with when revenues could be realized from the sale of lots. By performing such calculations on a year-by-year basis, the developer could predict whether he would have sufficient cash flow to be able to finance a project. c. The Failure to Perform a Discounted Cash Flow Analysis 104. Throughout the course of the project, Mr. Sarbaz and the defendants have failed to perform themselves or have performed by some other entity a discounted cash flow analysis that considers not only the overall costs of developing the project and the revenues generated from the golf course and sales of the lots, but also how those costs and revenues interact with the structure of the outstanding debt. In other words, while the developer and the defendants have relied on analyses that show that the project might eventually generate a profit in the long run because the project’s net proceeds might exceed the net cost of improvements, they have not obtained an analysis that considers whether they will have sufficient cash flow to reach that point in light of when the debt from the nine offerings comes due. Put another way, the developer and the defendants have failed to consider longitudinally whether they will be able to meet the project’s debt obligations and construction costs relative to the anticipated absorption rates and other revenues. If the developer cannot maintain a sufficient cash flow to pay for the development, the developer will not realize the revenues necessary to repay bondholders even if the project itself might ultimately be profitable. 105. Mr. Fitzgerald has never performed an analysis to determine whether there is a reasonable probability that revenues from the entire development will enable the repayment of all outstanding debt on the property. In Mr. Fitzgerald’s view, at the time of the Ninth Offering, a discounted cash flow analysis was unnecessary. Mr. Fitzgerald has instead relied on Mr. Hill’s appraisals as to the value of each individual piece of property securing the offerings rather than obtaining an overall cash flow analysis. Mr. Fitzgerald testified that he was “eminently qualified” to conduct his own discounted cash flow analysis had he chosen to do so. 106. The defendants have also never performed an independent analysis of the public improvement costs for the entire development. The only information that Mr. Fitzgerald has seen on the costs of the public improvements has been provided by the developer or the developer’s consultants. 107. As the lead investment banker and, in some of the offerings, the financial advisor to the issuer, Mr. Fitzgerald has played a crucial role in setting the maturity schedule for the bonds. Mr. Fitzgerald has not considered any of the absorption rate information in setting the maturity of the bonds. Most of the bonds have relatively short maturity periods ranging from two to six years. These short maturity periods mean that the developer’s projections regarding revenue from the project must be very accurate — although those predictions have been notoriously inaccurate so far, see Section I.E.5 infra, ¶¶ 138-145 — to avoid defaulting on the debt. 108. Prior to the Ninth Offering, Mr. Fitzgerald was made aware of other entities’ concerns with whether the project was feasible. In September 2000, SEC staff examined Mr. Fitzgerald regarding whether he had performed a feasibility analysis of the entire project. In December 2000, Mr. Fitzgerald engaged in negotiations with staff from the California Attorney General’s Office. In those negotiations, the Attorney General’s staff indicated that they wanted PGG to obtain an independent feasibility analysis of several development projects that PGG had helped finance, including Rancho Lucerne. 109. Mr. Reicher’s testimony indicated that a discounted cash flow analysis that considers the structure of the debt on a project relative to the timing of revenues from the sales of lots is the standard and appropriate practice for determining whether a development is feasible. See ¶ 103 supra. d. The Court’s Conclusion Regarding the Feasibility of the Project 110. In light of the reports submitted by Mr. Hill, Mr. Gibbons, Mr. Steele, and Mr. Reicher, the Court cannot definitively conclude that the Rancho Lucerne project is financially infeasible. Although the evidence before the Court raises serious and substantial concerns as to whether the project can generate sufficient revenues to repay bondholders, there are certain limited scenarios and assumptions under which the project might be successful, particularly if the golf co