THE TROUBLE WITH OPUS: Bankruptcies, lawsuits, fraud charges mar history of student apartment developer

A comeback trail through Columbia

COLUMBIA, Mo 4/22/14 (Beat Byte) -- A Minneapolis-based student apartment developer threatening to sue the City of Columbia "for millions" is no stranger to tangling with government. 

The Opus Corporation once sold a subsidiary's failed interest in a National Oceanographic and Atmospheric Administration (NOAA) research center to a company Opus leaders unaffectionately dubbed GAMD, LCC -- "Government Assholes in Maryland".       

Opus East, once one of five Opus Corp. divisions, had a contract to build the near-300,000 square foot facility in College Park, Md.   But construction disputes prompted Opus to sue the Federal government and helped land the division into one of several bankruptcies that tore the company apart.  

Court records say Opus East left 2,000 creditors holding some $600 million in debt.   Still in court five years after its 2009 filing, the Opus East bankruptcy now features creditors sparring over about half that amount, the Washington Post reported in February.  

"This was a real company that developed real estate successfully for 15 years as the entire real estate development industry did," Opus East attorney John Gordon told the Post. "It took a terrible hit when the recession occurred and it went into bankruptcy. But that does not prove that anybody did anything wrong."

Opus Corp.'s troubles began in early 2009, when regional subsidiaries Opus East, Opus West, and Opus South plunged into bankruptcy after the 2008 economic meltdown.   Fraud charges followed, as large creditors accused the company of unlawfully transferring tens of millions of dollars into private trusts of the Rauenhorst family, whose patriarch, Gerald Rauenhorst, started Opus in 1953 as Rauenhorst Construction.  

Rauenhorst pioneered the "design-build" concept, implementing it through Opus, a single entity that delivered architectural, engineering, and construction services.   At one point, the commercial development giant was billing over $2 billion annually.   But the company's good fortunes -- and ethical reputation -- turned down with the economy.   

"Prior to dumping Opus East into bankruptcy, the Opus insiders cherry-picked the most valuable assets and left hundreds of millions in unpaid claims," attorney Patrick Coffin explained in the WaPo article.  "After shedding these obligations, the same group of people continue to do business today as The Opus Group." 

The company's "cherry-picking" modus had been alleged before.  US Bank sued Opus over an unpaid debt of more than $78 million in 2009, claiming the company became insolvent after transferring money to Rauenhorst.    The two sides settled the suit that same year. 

 

Lawyers for Opus West sued the Rauenhorst-led parent company, accusing its leaders of having a "voracious appetite for self-dealing" and "carefully cultivating a myth":  the company's reputation for ethical leadership.   "Rauenhorst Construction Company embraced a culture of honesty...and building trust with clients along the way," the Opus Group website explains. 

 

Opus West settled with Opus Corp. in 2011, amidst claims the suit was meritless. 

 

Creditors, however, maintained Opus Corp. left them holding the bag.   Electrical contractor Kelly Anderson "had crews working on Opus jobs in Arizona when Opus West filed for bankruptcy and he had to lay off workers.  'It proves that our money -- little guys like me in the world -- is sitting in the foundation of a very wealthy family and they know they stole my money.  They know that," Anderson told the Minneapolis Star Tribune in 2011.

The litigation didn't stop with the bankruptcy proceedings.   Sixteen former Opus employees accused the company of embezzling their pensions, again for the Rauenhorst family trust funds.   They filed a 2010 federal lawsuit that alleged racketeering, bank fraud, and $32 million in lost compensation and pension fund obligations.

"Opus headquarters would wire emergency money to Opus West just before lenders would come to see if the subsidiary was in compliance with loan covenants and ratios, then pluck the money back within a few days, the lawsuit alleges," the Star-Tribune reported. 

Opus and its former employees settled that suit in 2012, reportedly for pennies on the dollar.  

Columbia is on Opus' comeback trail, a resurrection from years of litigation and bankruptcy that saw the firm reorganized as The Opus Group, but still under control of the controversial Rauenhorst clan. 

A citizen-led petition to repeal City Council approval of Opus' downtown student apartment may prove a significant bump in the trail, but difficult predicaments are nothing new to the firm. 

"The company has gone through some really tough times," Opus Group CEO Tim Murnane told Midwest Real Estate News in an interview about its comeback.   "Today, we are a company that has been re-capitalized by the family that owns us.  We can now go forward and get projects completed."