Popejoy, Bay Club embroiled in legal dispute

Noaki Schwartz

NEWPORT BEACH -- Both claiming to be victims of high-stakes financial

deception, a prominent banker and the owner of the Balboa Bay Club have

exchanged lawsuits as well as bitter accusations over a failed purchase

of the club.

Banker William J. Popejoy, who became the chief executive of Orange

County after its 1994 bankruptcy, filed a lawsuit against club owner

Beverly Ray, claiming that she backed out of a deal to let him purchase

the $73.5-million landmark for her own financial gain.

Ray, however, claims that it was Popejoy who couldn’t come up with the

money and continually tried to renegotiate the terms and lower the asking

price.

The club’s sale, which has been kept tightly under wraps for the past six

months, began simply enough.

In October, Ray -- whose family has owned the club for nearly three

decades -- recruited Popejoy to find investors for the club. With his

financial background, 12-year membership at the club and position as one

of the governing board members, he seemed a good match, she said.

“I called him because I thought he’d be able to put together a group of

local investors,” she said. “And he said, ‘In fact, maybe I want to be

the investor.’ I was surprised, but pleased.”

Precisely what went wrong after that is in serious dispute.

The club, once an exclusive spot for millionaires and Hollywood types in

the 1950s, is in dire need of renovation. The city-owned site houses a

hotel, meeting rooms, apartments, a beach club and yacht marina.

Completing that renovation is a condition in the Bay Club’s 50-year lease

extension with the city, as is making portions of the exclusive facility

open to the public because it sits on publicly owned tidelands.

The large-scale redevelopment project requires financing, which Ray, and

International Bay Clubs, Inc. Chief Executive David C. Wooten, say they

were actively pursuing parallel to their discussions with Popejoy.

But Popejoy’s attorney, Irvine-based Ron Rus, claims it was Popejoy who

was securing the desperately needed financing.

Ray claims Popejoy couldn’t come up with his share of the agreed price,

which was $60 million, and pushed the escrow date back from Oct. 26 to

March 31.

But Popejoy’s attorney said it was Ray who kept trying to renegotiate the

terms, finally walking out on the deal once Ray had secured Popejoy’s

financial expertise in getting banks to back the renovation project.

When the deal fell out of escrow, Popejoy demanded a $4-million payment

for his help and threatened to sue her, according to the lawsuit filed by

Ray’s attorney, Chris Dubia.

Part of the club’s deal with the city calls for Ray to pay 20% of any

profits from a sale made within two years of completing the renovation.

Rus claims that avoiding this payment was a factor in Ray’s decision to

pull out of the deal with Popejoy.

“She renegotiated [the deal] to make it appear lower for her tax reasons

and to avoid paying the city what they would be due,” Rus alleged.

Wooten, however, said that claim was ridiculous and said Popejoy is

trying to extort the company.

“The city has to approve the transaction and we have to live with them

for 50 years,” he said. “It never crossed our minds to cheat the city.”

When Popejoy’s $4-million fee was turned down, he slapped Ray and Wooten

with a lawsuit demanding that either she sell him the club or pay him $50

million in damages.

Ray, Wooten and International Bay Clubs, Inc. then filed a lawsuit

against Popejoy, seeking a ruling that Ray performed her contractual

obligations and that Popejoy is owed nothing.

While the lawsuits slowly find their way through Orange County Superior

Court in Santa Ana -- a process that could take up to a year -- Ray and

Wooten vow they will start the club’s renovations in mid-July.

“I hope it doesn’t delay the commencement of construction,” said Dubia,

Ray’s attorney. “If it does, it will lead to additional lawsuits.”