Horsey Set Cries Foul

Howard Keim, the developer hired to run Scottsdale's Horseworld project, has been criticized for the sluggish financial performance of the multimillion-dollar playground for pony people. Now he's named as a defendant in a federal lawsuit accusing him and several other people of defrauding investors in another equestrian park near Santa Fe.

That park, a proposed 1,000-acre development titled Los Caballos de Santa Fe, has not been built, and its principal fund raisers have declared bankruptcy. The plaintiffs, mostly Valley doctors, pension plans and retirement funds, claim that Keim and the other defendants either knew or should have known the New Mexico project was a scam.

Keim's attorney, Seymour Sacks, won't be representing him in this suit since one of Sacks' other clients is a plaintiff. However, Sacks describes Keim as merely a paid consultant to Los Caballos. "Howard is a guy who's very good at horse development kinds of things," says Sacks, adding that he's "99 percent sure" that the Scottsdale developer had no ownership interest in the New Mexico deal. But Phoenix lawyer Russell Piccoli, who filed the lawsuit on behalf of more than 100 plaintiffs, alleges in his complaint that Keim was a member of the project's management committee.

Investors ponied up more than $11 million to help build Los Caballos, a proposed horse park that was to be ringed by residential subdivisions and commercial office space. Many investors now say they'll be lucky if they see any of their money again. "If I get back twenty cents on the dollar, I think it's going to be remarkable," says Michael Lawson, a specialist in nuclear medicine at Good Samaritan Medical Center who invested $15,000.

Lawson says investors were led to believe they were covered in the event of a foreclosure. "The way it was presented to everyone was the land was worth more than double the amount that was being loaned," he says. "So it seemed like a very, very secure situation. What we discovered is that when they did default, the land was only worth about a tenth of what they had purported it was worth."

Ronald I. Gross, a financial planning consultant in Phoenix, says he sunk $25,000 of his own money into Los Caballos, and two of his clients forked over another $20,000. "It was an easy project to be fooled on, let's put it that way," says Gross, who took a leading role in organizing plaintiffs for the suit. "I can honestly tell you, had I flown over to see the property, I probably would not have made the investment. From what I've been told, the property, although off a main road, is out in the middle of nowhere."

Gross says most of the money was raised by Larry LaPrade and Michael Smith, the principal owners of a company called Incor. LaPrade and Smith also were the developers of L'Auberge de Sedona, the Oak Creek Canyon resort that recently went bust and is now operating under a reorganization plan of the federal bankruptcy court.

A total of thirteen defendants are named in the suit. Two of those people, William T. Sprague and John Hill, have filed a $1 million counterclaim against the plaintiffs. Sprague and Hill deny all the charges included in Piccoli's complaint and assert that the U.S. District Court has no jurisdiction over the case. According to records, Keim, who did not return phone calls from New Times, is still preparing an answer to the complaint.

Keim himself had to threaten the Los Caballos partnership with legal action just to get his consulting fees, says Sacks. Indeed, Piccoli's complaint suggests that one reason the project developed an "insatiable demand for cash" was to pay Keim.

Sacks acknowledges that the suit may cast a shadow over Keim's involvement with Scottsdale's city-owned equestrian park, but he adds, "That's absolutely unfair." Scottsdale Mayor Herb Drinkwater seems unfazed by the allegations. "Anybody can sue anybody," shrugs the mayor, adding that he hasn't actually seen the suit yet. "Mr. Keim has been a very honest, good man to work with.

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Andy Van De Voorde