LOS ANGELES (AP) — Creditors in a failed deal with Lennar Corp. to build massive housing tracts on the last major parcel of undeveloped land in Los Angeles County have dropped a lawsuit accusing the construction giant and a former subsidiary of defrauding California’s public pension fund and others.

The plaintiffs, identified as the LandSource Creditor Litigation Liquidating Trust, wrote in a court filing last week that they were voluntarily dismissing the suit, which had claimed that Lennar and the subsidiary, LNR Property Corp., engineered a transaction to cash in on $1.4 billion of debt they knew they would never be able to repay.

The suit was filed in Delaware in July, but U.S. Bankruptcy Judge Kevin J. Carey signed off on several delays over the year that kept it from ever going to trial. The filing did not stipulate terms of the dismissal of the suit, which had sought $700 million that plaintiffs alleged was fraudulently transferred to LNR.

The complaint did not name Lennar, which was released from liability in claims concerning the venture, known as LandSource Communities Development LLC, as part of a bankruptcy settlement.

The suit was dismissed with prejudice, meaning the LandSource creditors who filed the complaint are barred from filing another case on the same claim.

Plaintiffs’ lawyer Michael Lynch refused to comment Friday, citing a confidentiality agreement.

Jen Brown, a spokeswoman for LNR, which is now co-owned by Cerberus Capital Management LP, had no immediate comment. Lennar spokesman Marshall Ames did not respond to an email.

The California Public Employees’ Retirement System, which during the venture’s bankruptcy lost the nearly $1 billion it invested in LandSource, was not among the suit’s plaintiffs. CalPERS spokesman Wayne Davis had no comment on the dismissal.

The suit had accused Lennar and LNR of using an appraisal that overstated LandSource’s value when, as the venture’s sole owners in 2006, they secured up to $1.55 billion in financing for development projects from investors led by Barclays Bank PLC.

LandSource’s primary holding was the planned 21,000-home Newhall Ranch project on a 15,000-acre expanse of rugged hills on Los Angeles County’s northwestern fringe.

Lennar and LNR each took $700 million of the borrowed money in exchange for their shares in LandSource when CalPERS and its investment partners bought into the venture in February 2007, the complaint had said.

CalPERS and the ventures’ other creditors were left with that debt when falling land prices pushed LandSource into Chapter 11 bankruptcy protection in June 2008, according to the suit.

The suit also accused Lennar and LNR of telling lenders and investors that they would buy back the majority of LandSource’s property during the three years after they sold their stake in the venture, but they failed to do so.

The suit was filed about a year after a judge gave final approval to the LandSource’s reorganization plan, which gave the venture’s main financial backers equity in a reorganized company in exchange for the more than $1 billion they were owed.

The reorganization deal also allowed Lennar to buy 15 percent of the Newhall Ranch project for $140 million and to install an affiliate company as its manager.

Newhall spokeswoman Marlee Lauffer said the project’s planners are working on securing environmental clearances and other entitlements and that they hope to break ground by late 2012 or early 2013.

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