If you’ve been following the controversial proposal to build a racetrack at the Michigan State Fairgrounds, then you might be familiar with the name Bernie Schrott. The Oakland County businessman has been operating as a project spokesman for the Nederlander Theatrical Organization, which plans a $200 million project to transform the fairgrounds into “a unique, world-class entertainment destination and create new economic opportunities in Detroit.”
Although the track has received the lion’s share of attention, the project has other components as well, including “new hotels, restaurants and stores” that will be “developed in northwest Detroit and the surrounding communities,” according to a Nederlander organization press release.
Schrott, a longtime fixture in the mortgage and real estate business, has played a pivotal role in the deal. As Joe Nederlander told Crain’s Detroit Business in April: “I couldn’t have done it without him. I don’t understand real estate.”
Crain’s also mentioned briefly that Schrott was sued in 1997 by eight investors in a proposed Bahamas casino project that never materialized. The paper reported that the suit was dismissed last summer, then quickly moved on.
Crain’s gets a pat on the back for at least pointing out the lawsuit’s existence. Although the fairground’s project has received a lot of ink, no other print media in Detroit has even hinted that there may be some skeletons in Schrott’s closet.
Even Crain’s, however, missed the real story. Although technically correct in saying the suit was dismissed, leaving it at that could create the impression Schrott was vindicated.
According to court documents, it was alleged that Schrott lured investors into putting up nearly a million dollars to help get the planned Stella Maris hotel and casino project off the ground. This seed money would be used for development and marketing, with the goal being to find a major casino or other deep-pockets type that would come in with the cash to actually build the resort.
What made the investment worth the risk, claimed those who put up the money, was Schrott’s alleged representation that his corporation, Cobra Investment, Ltd., had already purchased 320 acres of prime beachfront property.
It was a crucial selling point. If the resort deal were to eventually fall through, the property could always be sold, allowing investors to recoup their money.
Only problem was, neither Schrott nor anyone else connected with Cobra had actually gained title to the land.
Schrott did enter into a purchase agreement and made a down payment of $20,000 on the $1.4 million property. But, according to court records, he defaulted on subsequent payments, and the agreement was eventually voided.
Schrott continues to maintain he never told any investor that the Bahamas property was owned free and clear. His attorney, Paul Nine, told News Hits that the court records “are loaded with written documentation, and lots of it,” showing Schrott never misrepresented the property’s status.
The judge presiding over that case saw things differently. In responding to Schrott’s motion to have the case dismissed, Oakland County Circuit Court Judge Nanci J. Grant issued an opinion in March 1999 that stated: “… there is ample evidence to suggest that he (Schrott) told Plaintiffs that Cobra did in fact own the land which was to be developed. There is also evidence that Cobra did not own the land when Defendant (Schrott) made these statements. Thus, there was a fraudulent statement.”
Only eight investors out of a group that totaled at least 25 sued Schrott to recover their money. Following Grant’s opinion, Schrott entered into an out-of-court agreement to return 100 percent of the cash — about $130,000 — invested by those bringing the suit. Per the agreement, Schrott made an initial partial payment, with the bulk of the settlement due by June 25.
Attorney Donald L. Payton, who represents the investors who brought suit — and was an investor himself — told News Hits that even though the deadline has now passed, he and his clients are still waiting for their money.
“He defaulted on the payment,” said Payton.
This is not the first time Schrott has been linked to questionable business deals. News Hits has learned that Schrott figured prominently in the 1995 federal trial of accused drug dealer Felix Walls. In that case, the government’s star witness — a Los Angeles record company executive named Thomas Berry, who admitted to moving about $25 million worth of drugs during his career — testified that Schrott
laundered money as part of a smuggling ring that brought thousands of kilos of cocaine into Michigan during the late 1980s and early 1990s.
Despite that testimony, Schrott never appeared as a witness in Walls’ trial. Nor was he ever charged with a crime. Walls’ lawyer, David Steingold, claimed in court documents that Schrott was being protected because of his alleged role as an informant for the government.
Schrott told News Hits that the money-laundering allegations are “outrageous” and “preposterous.”
“If I was a money launderer, I’d be rich,” said Schrott. “I wouldn’t be worried about finding $100,000 to pay off the investors” in the Bahamas deal.
Despite being short on cash, Schrott, according to Joe Nederlander, has become involved with the fairgrounds project purely out of civic responsibility.
“I haven’t paid him anything, and he doesn’t own any property there,” said Nederlander, who went so far as to say Schrott wasn’t even a spokesperson for the development, even though as of Monday he was listed as the contact person on the project’s Web site (www.fairgroundspark.com).
According to both Nederlander and the Rev. Loyce Lester of the Original New Grace Missionary Baptist Church, Schrott has been functioning as a liaison between the church and the Nederlander organization. Among other things, the fairgrounds developers want to assist the church “with construction of a 200-unit housing complex for senior citizens.”
“All Bernie wants is to do something good for the city of Detroit,” said Nederlander. “He’s a wonderful guy.”
The Rev. Lester agrees, saying Schrott has done an outstanding job in helping to formulate the joint development venture between his church and the fairground group, in the process helping to revitalize an impoverished neighborhood. Calling Schrott the deal’s “catalyst,” Lester described him as an “outstanding person. He’s very honorable and upright in helping Detroit.”News Hits is edited by Metro Times news editor Curt Guyette. He can be reached at