Foundation sues over canceled deal to buy Aloha Lodge
No one disputes that the 20,000-square-foot Aloha Lodge in Lake Geneva, Wisconsin — which was listed in 2023 and sold in August 2024 for $21.85 million — had an earlier bid of $37.5 million from a well-known buyer of high-priced Chicago-area homes.
However, in a recently filed lawsuit in Lake County, the seller of the property alleges that financier and former pharmaceutical executive Jack McGinley’s $37.5 million offer was a binding offer that tied up the property and caused it to lose market momentum.
The lawsuit filed by the Harold B. Smith Foundation alleges breach of contract and violation of good faith and fair dealing, and seeks unspecified damages from McGinley. The foundation also alleges in the suit that McGinley, of Lake Forest, had a “habit of breaking sales contracts” and attempted to “avoid his contractual obligations and obtain different and more favorable terms than those he voluntarily agreed to.”
McGinley’s attorney, John Ruskusky, said in a written statement that the offer was not binding. Ruskusky also said that during the attorney review period associated with the offer, McGinley requested reasonable modifications, which he said the seller never responded to. That, along with a major medical episode suffered by McGinley, caused him to pass on purchasing Aloha Lodge, Ruskusky said.
A longtime business executive who died in 2022 at age 89, Harold B. Smith had been a top executive at Glenview-based Illinois Tool Works, founded by his great-grandfather, Byron L. Smith.
In 1998, Smith purchased Aloha Lodge, located on the south shore of Lake Geneva, and renovated it. The Southern Colonial-style mansion was built around 1900 for Tracy Drake, who, with her brother John Drake, built the Drake and Blackstone hotels in Chicago.
Smith built new foundations, two new wings, and a basement theater. After Smith’s death, his foundation, established in 2018, became the owner of Aloha Lodge.
According to the complaint filed Dec. 5, the foundation listed the estate for $35 million in 2023. The foundation alleges that McGinley and his wife, Julie, executed a written offer to purchase Aloha Lodge for $37.5 million in May 2023. The foundation accepted the McGinleys’ offer a day later.
After the offer was accepted, the foundation alleges in the suit, McGinley sought to see if there were any other screenings or competing offers. The foundation also alleges in the lawsuit that McGinley asked it to pause updating the multiple real estate listing service to reflect that an offer had been accepted, apparently to allow other offers to materialize.
Further complicating matters was the fact that midway through the attorney review process, McGinley suffered a pulmonary embolism requiring emergency care and hospitalization. Such a health problem, the foundation was told, could provide a basis for canceling a contract to purchase a property, according to the lawsuit.
After McGinley’s health incident, according to the lawsuit, McGinley proposed several changes to the terms of the contract, including delaying the closing date, the right to opt out for 10 days due to health concerns, and adding a due diligence provision allowing him to walk away from the deal based on renovation plans.
Ultimately, McGinley never paid a deposit and walked away from the Lake Geneva deal, according to the lawsuit. Ultimately, the foundation ended up selling Aloha Lodge in 2024 for $21.85 million to another buyer.
The foundation alleges in the lawsuit that McGinley’s “bad faith conduct” harmed Aloha Lodge’s reputation and caused the foundation to incur “substantial additional costs to sell the property at a price significantly lower than the agreed-upon contract price.” As a result, the foundation is seeking damages, “including additional marketing and maintenance costs and the difference between the contract price and the price at which (the) seller sold the property to mitigate its damages.”
A foundation spokesperson told the Tribune that by agreeing to a lower price for the Aloha Lodge in Lake Geneva, that sale price “directly harmed” the foundation and, by extension, the Chicago-area nonprofits the foundation supports, such as the Newberry Library and the Rush University System for Health.
Ruskusky denied the foundation’s allegations, telling the Tribune in its statement that “Jack is a long-time and highly reputable participant in numerous successful real estate transactions, and we categorically reject any allegations to the contrary. This was a standard real estate negotiation subject to attorney review and approval, and no final, binding contract was ever reached.”
Ruskusky said McGinley “properly invoked the timely attorney review provision to request reasonable changes, which the seller failed to make, rendering the proposal null and void by its express terms.”
McGinley almost simultaneously had a similar experience with the foundation, having entered into a contract to purchase another estate owned by the foundation in Palm Beach, Florida, for $38 million, according to the suit. Shortly before the foundation accepted McGinley’s $38 million offer for Aloha Lodge in May 2023, he separately decided not to proceed with the purchase of the Palm Beach property, which ended up being sold in 2024 for $29.25 million to payday loan mogul W. Allan Jones, according to media reports.
Public records show McGinley paid nearly $10.37 million in 2004 for his current home, a more than 16,000-square-foot mansion on nearly 3.5 acres in Lake Forest. The couple also own a 9,000 square foot century-old mansion on the Gold Coast – which they bought for almost $7.13 million in 2013 – which is the subject of ongoing litigation. A trust whose beneficiary is Julie McGinley accepted an offer from a Tampa, Fla., couple to buy the couple’s Gold Coast mansion for $7.5 million, according to a pending Cook County lawsuit. After the sale didn’t go through, the Tampa couple sued the McGinleys, seeking a court order allowing the deal to go through. This matter is ongoing.
Bob Goldsborough is an independent journalist.
