(UPDATED WITH CORRECTION 3-11-09): The San Francisco millionaire
who federal prosecutors allege poached endangered fish on his
Gilroy property last spring has filed three Chapter 11 bankruptcy
claims through his various companies in the past four months with a
total debt of nearly $75 million, according to federal court
documents.
CORRECTION: In the original article, The Dispatch reported that Luke Brugnara had also filed bankruptcy along with three of his companies. Luke Brugnara has not filed for personal bankruptcy. Only three of his companies – Brugnara Corporation, Brugnara Properties I and Brugnara Properties VI – have filed for Chapter 11. The Dispatch apologizes and regrets the error.
The San Francisco millionaire who federal prosecutors allege poached endangered fish on his Gilroy property last spring has filed three Chapter 11 bankruptcy claims through his various companies in the past four months with a total debt of nearly $75 million, according to federal court documents.
That’s not including the $45.5 million in capital gains IRS officials claim Luke Brugnara did not report after selling four properties in San Francisco and one in Las Vegas, Nev., between 2000 and 2002, according to a federal grand jury indictment from April 2008 that charged him and his seven companies with filing false tax returns. Brugnara Corporation and Brugnara Properties I and VI all filed for Chapter 11 between Oct. 31 and Jan. 7, according to federal documents.
Brugnara Corporation, a company that manages commercial property, used the man’s 112-acre Gilroy property on Redwood Retreat Road for $8.2 million in collateral despite county tax records indicating the property was worth $1.1 million. According to federal court documents, the company allegedly owes $4.1 million to Seattle-based Avatar Income Fund, $11.4 million to Irvine-based Jorei Enterprises and $4,000 to the Santa Clara County Office of the Assessor. There’s an additional $20,000 in unsecured claims, and Brugnara closed the corporations’ Well Fargo checking account in January, according to court files.
Last year, U.S. Attorney Joseph Russoniello charged Brugnara – who did not return messages for comment – with damming part of Little Arthur Creek, which runs through his Gilroy property, to trap steelhead, an endangered trout species. It was the first federal criminal case in Santa Clara County charging someone with the poaching of steelhead, which spawn in inland creeks before journeying to the Pacific.
Brugnara has maintained his innocence in both criminal cases and has described everything from the size eight boot prints he said officials surveyed on his land – he wears a size 13 shoe, he said – to their initial interest in his property as “a bunch of BS,” a well-connected form of revenge orchestrated by the Santa Clara Valley Water District. The district had it out for him, he said, after he offered to sell water running through his property to the city of Gilroy. City Administrator Tom Haglund eventually rejected the proposal in August, citing environmental concerns and legal uncertainties related to the potential purchase from Brugnara’s seasonal reservoir – which state agencies have only incomplete records on.
Water coming down Mount Madonna flows into the Little Arthur Creek on Brugnara’s property and then feeds the Uvas Creek before percolating into the aquifer below Gilroy. Instead of paying the Santa Clara Valley Water District $2.4 million each year to pump nearly 3 billion gallons of water from the aquifer – which the district helps replenish by releasing water from the Uvas Reservoir – Brugnara offered to sell “his” water in arrears for $300,000 a year.
Haglund called the entire premise of the proposition “puzzling” because, he wrote, it seemed like Brugnara was trying to profit off the way water already flows. It already leaves Brugnara’s property and travels down Uvas Creek along with the district’s artificially released water, but Brugnara said he wanted the city to dump the “God-like” water district and pay him instead.
Brugnara will appear in federal court in April on the poaching charges and in June for a potential jury trial on the tax charges, according to court documents. He could face up the three years in prison along with millions of dollars in fines for tax evasion and additional time for poaching endangered fish and making false statements to investigators.
Aside from the Chapter 11 tied to his Gilroy’s property, Brugnara Properties I – which filed for bankruptcy in October – allegedly owes $121,000 to private individuals and public and commercial agencies, including $29,000 claimed by PG&E for unpaid services. PEM Group/Joreie Enterprises has an additional $41.35 million in secured claims against Brugnara’s 150,000-square foot office building at 351 California St., San Francisco, which court documents value around $50 million. The city’s tax assessor wants an additional $24,300. Brugnara will appear in court March 27 in this matter.
Creditors have until May 11 to file claims in the Brugnara Corporation matter and the Brugnara Properties VI Chapter 11 case. This company relied on the real estate tycoon’s $17.8 million San Francisco home on Sea Cliff Avenue to cover $17.53 million in debts claimed by Jorie Enterprises and San Antonio-based Wachovia Mortgage. The city and county tax collectors claim $30,000 and private lenders an additional $10,000, according to court documents.
BRUGNARA BANKRUPTCY FILINGS (in millions)
Brugnara Corp.
Date Filed: 1/7/09
Liabilities: $15.5
Assets: $8.2*
Brugnara Properties I
Date Filed: 10/31/08
Liabilities: $41.5
Assets: $50.2
Brugnara Properties VI
Date Filed: 1/7/09
Liabilities: $17.54
Assets: $17.8
* County tax records indicate $1.1 M instead
Source: United States Bankruptcy Court, Northern District of California
