Judge lets owners keep running bankrupt Legacy Park but smells 'smoke' in operation

A federal bankruptcy judge has denied a request from government attorneys to replace the owners of Legacy Park in east Mesa for incompetently running the popular facility, saying he feared doing so would delay the sale of the facility, expected to be months away.

Judge Daniel Collins, in his ruling issued Aug. 9, did not dismiss the government’s detailed argument that the park had been run in a way that showed gross mismanagement. The judge said he expected the parties involved in the bankruptcy proceeding would investigate and ferret out any misdeeds.

“The Court smells smoke,” he wrote, adding that the government and the bank and entities owed money would "eventually determine whether there is fire.”

Collins wrote that he intended to “make sure any party engaged in wrongdoing …will be held to account.”

Collins said that there could come a time when it might make sense to replace the owners of Legacy Park with an outside entity, as the government requested. But, he said, that time was not now.

Doing so, he said, would slow down the process of selling the park, a vital step to make sure investors get paid back as much of their money as possible.

"Importantly," Collins wrote in his ruling, "from day one in this case, all parties appear to agree on one thing—this estate is losing money at an alarming rate and the estate’s assets must be sold sooner than later."

Legacy Park is owned by a nonprofit organization called Legacy Cares. That previous for-profit business converted to a charitable organization to allow it to seek cheaper financing terms by having bonds issued by a relatively unknown state agency, the Arizona Industrial Development Authority.

Legacy Cares defaulted on those bonds in October. It sought bankruptcy protection in May, looking to sell the park and dissolve itself.

Doug Moss, the CEO of the nonprofit, said in a statement issued Friday through a public relations firm hired by Legacy Cares he was grateful for the judge’s ruling.

He said in the statement that the “real winners in this decision are the Park’s employees and the countless customers of all ages who visit our facility.”

The park has been courting potential buyers. Judge Collins has scheduled an Aug. 31 hearing to approve the sales procedure. He also noted that he would take action if he sensed that process was not operating smoothly.

“[A]ll efforts must be made by the Debtor and its professionals to bring this case to a successful sale,” he wrote. “Should they prove to not be up to the task, this Court is prepared to act swiftly.”

The clock is ticking. With judicial approval, UMB Bank, the trustee for the bonds, approved additional funding so the park could keep operating. The cash is estimated to run out by the end of October.

The 320-acre park is expected to sell at a loss. The highest price mentioned during court proceedings was $185 million. The company arranging the sale would get a bonus if the price were that high. Investors who bought bonds are owed a collective $300 million.

That loss will trickle down to investors who bought the bonds from the bank, either directly or through retirement accounts that hold a pool of such investments. The bonds were marketed as "muni" bonds, seen as safer than private investments because they were issued by a government.

The sprawling sports park on the edge of east Mesa has reliably seen its sports fields, pickleball courts and gymnasiums filled with amateur and youth athletes every weekend. It has hit its projected attendance numbers but still failed to make a profit. Legacy Cares told the court the park loses an estimated $1 million each month.

Legacy Park was the vision of Randy Miller, an East Valley man who figured there were many parents who spent their weekends as he did: ferrying their children to different sporting events around the city.

In a March interview with The Republic, he said he thought of a facility that could host multiple events of varying types, along with an adjoining restaurant and bar where parents could refresh.

Miller, on paper, stepped aside from owning the park, leaving it to the nonprofit Legacy Cares. His company, Legacy Sports, jointly owned with one of his sons, Chad Miller, signed a contract to manage the facility. Randy and Chad Miller remained the public faces of the park.

U.S. Trustee's office laid out concerns about tax forms, other documents

Attorneys for the Office of the U.S. Trustee, the government agency tasked with overseeing bankruptcy cases, argued that Legacy Cares had bungled the park so badly that it couldn’t be trusted to remain at the helm. It asked the court either to dismiss the case or appoint someone to take over.

The judge said, in his ruling, that he didn't consider dismissing the case as the U.S. Trustee did not "seriously argue" for that outcome in arguments to the court.

The government’s case, bolstered by a combing of the park’s financial records and an interview with Moss, suggested that Moss and Legacy Cares did not engage in proper oversight of Randy Miller’s operation of the park.

The government’s motion noted that Legacy Cares’s tax filings listed more than $7 million in loans to Legacy Sports and other entities owned by Randy Miller, including two that looked to build similar facilities in Texas and Tennessee. Such loans would be impermissible use of bond funds, the government said.

Legacy Cares, in its filings, said the payments were not loans but were mistakenly labeled as such in tax forms.

Further, the government noted, when the park was in financial trouble, it was Miller who sought refinancing for it, not Legacy Cares.

And, just before Legacy Cares filed for bankruptcy, it terminated Miller’s company, Legacy Sports, as management. In its place, Legacy Cares hired a newly created entity called Elite Sports Group, run by Miller’s other son, Brett Miller.

But, the agreement with Elite Sports Group contained a mistake.

The first page of the agreement, which was included in a court filing, listed the company as being incorporated in Delaware. But the signature page of that same document listed Elite Sports Group as being incorporated in Arizona.

That error was caught by the U.S. Trustee’s office, which also informed Legacy Cares that at the time Elite Sports Group had yet to register itself with the state and could technically not transact business.

During a July 27 hearing, Larry Watson, an attorney for the U.S. Trustee, said such sloppy paperwork could have serious ramifications. Watson told the court that he wondered if Elite signed any insurance policies and whether those would be invalidated because of this error.

“We don’t know what the exposure is,” Watson said. He said the issue could affect the public who attends the events, “including my two-and-a-half-year-old niece who is going to attend dance classes out there. We have all-star athletes with million-dollar careers on the line.”

In a July 28 statement to the Republic, Legacy Cares said that Legacy Park has been fully insured since it opened. After it took over management, Elite Sports was added as an additionally insured entity on the policy, the statement said. Elite’s corporate status in Arizona was immaterial, the statement said.

In court, another attorney for the U.S. Trustee, Jennifer Giaimo, told the judge that Legacy Cares could not be trusted to oversee the facility. She said there was a “public interest” in making sure the wrongs that were committed in the past were stopped.

“We can’t have charitable organizations using these conduit bonds of semi-state agencies to get money to funnel to private entities,” she said. “It’s just not proper. They need to be called out on this.”

An attorney representing Legacy Sports and Elite Sports Group told the judge at the hearing that his clients disagree they did anything wrong and would vigorously defend themselves against any actions taken against them.

Failed project funded by bonds blessed by state agency

Legacy Cares opened in January 2022 under the name Bell Bank Park. The name changed to Legacy Park in April after that financial institution asked that its naming rights deal be ended.

Legacy Cares filed for bankruptcy in May 2023.

Legacy Park is the fourth project aided by the Arizona Industrial Development Authority to fall into default.

Taxpayers are not on the hook for the default, but bond experts say that the state blessing the projects – including former Gov. Doug Ducey literally signing off on some of them – could sully the state’s reputation.

Dirk Swift, executive director of the authority, acknowledged the potential blow to Arizona’s reputation during a January legislative hearing. “Yes, there can be a reputational risk related to a project going bad,” he told lawmakers. “We are exposed to a reputational risk with everything we do. It’s a part of business.”

Gov. Katie Hobbs, who took office in January, has refocused the Industrial Development Authority. She asked for more scrutiny on potential developers and asked the authority board to focus on certain types of projects within Arizona, including affordable housing, renewable energy and manufacturing.

In July, Hobbs appointed three new members to the five-person board. With that change, only one board member remains from the board that approved the Legacy Cares deal: Lea Marquez Peterson, who also serves as an elected member of the Arizona Corporation Commission.

Reach the reporter at richard.ruelas@arizonarepublic.com or at 602-444-8473. Follow the reporter on X, formerly known as Twitter, at @ruelaswritings.

This article originally appeared on Arizona Republic: Legacy Cares to keep running Mesa's Legacy Park, but judge smells 'smoke'