Signature on document in Mastro case was forged, lawsuit claims

One of bankrupt Seattle real-estate magnate Michael R. Mastro's largest "Friends & Family" investors says Mastro was responsible for forging his name on a document that cost him an interest in some California land.

The allegation is in a lawsuit investor Alan Cheung of Rolling Hills Estates, Calif., filed against Mastro in federal bankruptcy court in Seattle this week.

Mastro, a veteran developer and lender forced into bankruptcy this summer, owes Cheung $7.2 million, according to court papers filed by both men. Like the other roughly 200 Friends & Family investors, who are considered "unsecured" creditors, it's highly likely Cheung will lose most or all of it.

Mastro and his attorneys did not respond to an e-mail seeking comment.

According to the lawsuit, Cheung began lending money to Mastro in 1998. The loans were secured by an interest in property owned by Mastro in Riverside County, Calif.

In 2001, the suit continues, a document was recorded in Riverside County in which Cheung gave up that interest. But, while the document bears Cheung's signature, the lawsuit says Cheung didn't sign it and wasn't aware of its existence until about two months ago.

In bankruptcy, creditors whose claims are not secured by property are the last to be paid. If Cheung doesn't qualify as a secured creditor, the lawsuit says, he will suffer "substantial harm."

Cheung's Seattle attorney, Anthony Hoare, said it's unclear who forged the retired anesthesiologist's signature. But the document was notarized by a Mastro employee, he added.

Mastro later used the property as collateral for another loan before eventually selling it, Hoare said.

Cheung did not return a call seeking additional comment.

In his lawsuit, Cheung asks the court to exempt his claim when it "discharges" Mastro from his debts, a step in bankruptcy that bars creditors from taking further action to collect what they are owed.

Fourteen other Friends & Family investors filed a separate lawsuit against Mastro in bankruptcy court this week, also seeking to block discharge. That suit alleges Mastro has hidden property and concealed, destroyed or failed to keep records, but provides no specifics.

Dominick Driano, the attorney for the 14, did not return a call seeking comment. His clients include the Seattle lodge of the Sons of Italy, the Italian Club and the Italian Community Hall.

Discharge usually occurs fairly early in bankruptcy. But Mastro and James Rigby, the court-appointed trustee charged with liquidating Mastro's assets, agreed in October to postpone it at least several months.

Rigby has said he, too, might object to discharge.

Mastro, 84, was forced into bankruptcy involuntarily by three of his banks, who said he was not paying his debts. He has filed papers listing liabilities of more than $580 million and assets with a significantly lower value.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com