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Shell shock: Charles Basham has dodged the bullet, but his $10 million real estate portfolio hasn't.

Basham Brawl Update

So far, Little Rock commercial real estate developer Charles Basham has survived lawsuits alleging commingling of funds, fraud and more.

But the punishment dished out by a former business partner, John Grillo, has cost Basham plenty.

Basham once presided over a $10 million real estate portfolio.

Now, about the only untroubled property left is Basham's Eden Isle home near Heber Springs. And the rumor mill already is churning on that one.

Basham has avoided criminal charges and skirted bankruptcy through a series of settlements and consent judgments.

Due to the courtroom maneuvering of his attorney, David Grace of Little Rock, Basham has brought the most threatening legal problems under control.

He still must deal with a string of foreclosure suits and other litigation, however.

The legal fireworks aren't over in the Basham brawl. But the expected October explosion didn't occur. Instead, there was a cloud of secrecy and closed-door settlements.

A hearing was scheduled for Oct. 18 on a motion by Grillo's lawyer requesting a temporary restraining order that would remove Basham from the day-to-day operations of various real estate projects.

The motion sought to turn property management over to Grillo or a court-appointed trustee until an accurate financial accounting could be assembled.

Had the restraining order been granted, it would have forced Basham to relinquish control of business records. And if Grillo's allegations of fraud were true, the records could have provided damning evidence against Basham.

More importantly in the short haul, Chancellor Robin Mays would have had to rule whether Grillo even had the authority to file suit on behalf of West Markham Properties Inc. In the process, the judge would have had to determine if Basham or Grillo was telling the truth about the ownership split of WMPI.

Grillo claimed he owned half, giving him the right to bring suit in the name of WMPI.

Basham claimed Grillo owned one-third, which would prohibit such a move.

Waiting to be thrust into the middle of the confrontation was Drew Basham, who would have had to refute or substantiate the documentation and testimony of his father.

The courtroom drama never unfolded.

On the day of the hearing, the closed settlement was worked out, and the legal brawl between Grillo and Basham was called off.

The details of the agreement remain a secret. But some of the particulars have surfaced.

According to real estate records, Basham signed over his interest in three projects to Diversified Equity Properties Inc., a corporate entity of John Grillo. The properties are:

* The Colonnade Shopping Center, a 22,900-SF development at 315 N. Bowman Road in west Little Rock.

* The Colonnade Terrace, a 9,700-SF development adjacent to the Colonnade Shopping Center.

* Mall Cinema Four, a 2.97-acre project behind the Hot Springs Mall.

Grillo, through Diversified, apparently now owns 50 percent of the Colonnade (John B. May of Little Rock owns the other half), all of the Colonnade Terrace and all of Mall Cinema Four.

According to letters sent to tenants, Basham also relinquished his interest in Little Rock's West Markham Shopping Center, a 14,200-SF development at 11321 W. Markham St. That would leave Grillo with 25 percent of the project. May, Donald Kirk and Bill Goodrich each own 25 percent.

There's no public record to prove it, but Grillo likely picked up Basham's 20 percent interest in the Sherwood Oaks Shopping Center, a 16,582-SF development at 2001 E. Kiehl Ave. in Sherwood.

What's Left?

Little remains of Charles Basham's real estate empire.

Sources say Derol May effectively has taken over the JFK/Kiehl Shopping Center, a 15,500-SF retail project in Sherwood. At one time, Basham owned 50 percent of the development.

Real estate records reflect that Basham has given up his interest in adjoining, undeveloped acreage to May.

Basham also turned over 2.34 acres of undeveloped commercial property in Sherwood, land tied to a $250,000 mortgage. Stephens Security Bank of Stephens now owns the land near the Indianhead Shopping Center.

Little Rock's First Commercial Bank foreclosed on an adjoining 2.16 acres Basham owns. The undeveloped commercial land is tied to a $215,000 mortgage.

Basham earlier deeded over his interest, in lieu of foreclosure on the last undeveloped tract on west Little Rock's Markham Park Drive, to Mid America Financial Services Inc. The company is a subsidiary of KW Bancshares, the bank holding company of Holiday Inn founder Kemmons Wilson. Clary Development Co. of Little Rock is moving forward with plans to construct a 54,000-SF retail project there.

Basham moved out of the Hinson Corners Office Building in west Little Rock to head off formal eviction. He gave up his interest in the 8,850-SF project to Henson Loop Partnership after defaulting on $65,000 in outstanding land payments.

One National Bank of Little Rock filed a foreclosure suit after Basham defaulted on the project's $709,565 construction loan. The bank claims an ownership interest in the development.

Basham reportedly has reached a settlement with National American Insurance Co., the bonding company that backed the development. NAI sued Basham after subcontractors filed more than $210,000 in claims stemming from unpaid work.

That situation also resulted in fraud allegations against Basham. The construction loan was spent, real estate observers note, but why weren't the builders paid?

The Pleasant Valley Corporate Center, a 46,800-SF office condominium project at 2024 Arkansas Valley Drive in west Little Rock, is still in question as far as Basham's ownership is concerned.

Three Little Rock financial institutions -- Worthen National Bank of Arkansas, Metropolitan National Bank and what was Arkansas Federal Savings Bank -- have foreclosure suits pending against Basham.

Basham reached settlements with Pulaski Bank & Trust Co. of Little Rock and Georgia Edson over unpaid mortgages linked to several office condos. He also gave up ownership in two units to Betty Wallace.

Basham lost the property management contracts for three other projects:

* Apple Valley Shopping Center, a 23,450-SF development at 800 John F. Kennedy Blvd. in Sherwood.

* 1400 South University Plaza Shopping Center, a 17,617-SF retail center in Little Rock.

* Stagecoach Plaza, a 10,000-SF project at 8912 Stagecoach Road in Little Rock.

The cease-fire between Grillo and other plaintiffs brought a degree of peace to Charles Basham. But most believe the respite is only momentary. A new round of litigation could erupt in the coming weeks.

The question now is whether Basham can find the money to make good on the consent judgments and settlements?
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Title Annotation:real estate developer facing various criminal lawsuits
Author:Waldon, George
Publication:Arkansas Business
Date:Nov 18, 1991
Words:1079
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