The city of Henderson, Nev., southeast of Las Vegas, claims it got duped into a sweetheart public land deal by Austin, Texas-based developer Christopher F. Milam, who proposed building a multi-arena sports complex, according to a Jan. 28 lawsuit filed in Clark County District Court. The city contends that Milam "conspired" to falsely buy 485 acres of federal land southeast of Interstate 15 and St. Rose Parkway "below what a true competitive bidding process would yield" and "sell it piecemeal to residential and commercial developers at a substantial profit," court papers say.

But Milam says in a 124-page rebuttal filed on Feb. 5 in Clark County District Court the city's claims are "without any basis" and "constitute irreparable harm."

The city alleges it was victim to "breathtaking fraud" when it entered into a pact with Milam and his associates in 2011 for a 750,000-sq-ft, 16,500-seat indoor basketball arena, with future plans for two additional covered multisport venues. Things started well, and in February 2012, Milam announced a tentative 42-month, $650-million project loan at 20% interest from China Security & Surveillance Technology. But, the Shenzhen, China-based financier backed out when an anchor tenant couldn't be secured, leaving Henderson officials with cold feet. Land consultant Michael Ford, a retired 25-year Bureau of Land Management employee, acted as a go-between for the city and Milam, while being paid by both.

The city asked Ford to delay the "modified competitive sale" of the two-parcel, contiguous tract, thereby allowing more time to investigate Milam, court documents say. Ford, however, a partner in Henderson-based Abbey, Stubbs and Ford LLC, ignored those instructions and told the BLM to publish the sale notice in the Federal Register, which was "in violation of his duties to the city," the complaint says. Ford stood to earn a $528,000 "success fee" if the deal went through, court papers say, noting that former U.S. BLM director and Ford partner Robert Abbey pledged aid while still in office. Ford, through his lawyer, denies any fraud.

Although Abbey and his company are not named as defendants, the Dept. of the Interior has since "requested that the matter be reviewed by the Inspector General. The Bureau of Land Management has not yet processed the patent and is fully reviewing the transaction," the agency said in a Feb. 8 written statement.

Milam submitted a $2.1-million deposit for the $10.5-million purchase in June, placing on Nov. 28 the balance due into escrow—the same day he canceled the arena development pact in a hand-delivered letter to the city amid claims it was no longer financially viable. Milam then began "secretly marketing" the mixed-used-zoned $21,650-per-acre property to "third parties for single-family residential development," says the lawsuit. A Milam-produced marketing brochure compares the property to the nearby master-planned Inspirada community, where land sells for $500,000 an acre.

The city filed an injunction to stop the sale on Jan. 29—a move Milam calls "an extraordinary and drastic remedy." In his rebuttal, he added, "The court must not rewrite the Master Project Agreement [to] relieve [the] Plaintiff from what it now feels was a bad deal."

In 2011, Milam unsuccessfully tried three times to build similar projects in unincorporated Clark County and Las Vegas. His firm currently is facing a $1.1-million fraud judgment for a failed Las Vegas condominium project in 2005; that judgment is under appeal.