Richard Meruelo, who built up the largest property portfolio in downtown Los Angeles, is on the verge of losing control of his bankrupt real estate company.

U.S. Bankruptcy Court Judge Victoria Kaufman has tentatively endorsed a plan by dissident shareholders that would remove current managers from Meruelo Maddux Properties Inc. The May 19 decision is expected to be finalized in the next few weeks.

The judge’s order would marks a stunning reversal for the hard-driving real estate magnate, who created his downtown empire with a series of shrewd purchases of old industrial properties and parking lots over the last two decades.

By 2007, when Meruelo took his company public, he had amassed more than 3.4 million square feet of space in the area and CB Richard Ellis Group Inc. declared him the biggest downtown landholder.

Meruelo also was a political player; he was the largest donor to Antonio Villaraigosa in his 2005 campaign for mayor.

But the company quickly unraveled as the real estate market collapsed and Meruelo Maddux couldn’t refinance its loans. In March 2009, the company announced it couldn’t make payments on $266 million in debt and filed for Chapter 11 bankruptcy protection. The company has since sold off pieces of its portfolio to major shareholders and creditors.

Meruelo had filed his own bankruptcy exit plan, which called for him to stay as chief executive and the current management to remain intact. Creditors would be repaid through the sale of properties and the refinancing of debts.

But dissident shareholders Charlestown Capital Advisors LLC and Hartland Asset Management, New York investment firms that own about 2 percent of Meruelo Maddux, accused him in court papers of mismanaging the company and using corporate money for personal purposes.

They put forward their own exit plan that called for Meruelo’s ouster and proposed an alternative recapitalization strategy. The plan would refinance Meruelo Maddux with $38 million in fresh capital, including a $15 million loan and $17 million to purchase 55 percent of outstanding shares.

Meruelo’s attorneys responded in subsequent court filings that all money was used for legitimate business purposes and that Charlestown and Hartland were trying to bury the company in document searches as part of a “war of attrition.”

Calls to Meruelo were not returned, nor were calls to Meruelo’s lead bankruptcy attorney, Gary Klausner.

In an earlier interview, attorney Christopher Prince, who represents Charlestown and Hartland, said the firms want two interim executives to run Meruelo Maddux until the board selects new management.

The next step is for Charlestown and Hartland to draw up final documents for the judge to consider. Assuming the judge approves those documents, the management of the company will pass to the interim managers.

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