CA Ventures Fends Off Spurned Investor’s Lawsuit

An investor’s allegation that CA Ventures CEO Tom Scott and his longtime associate Jeffrey Krol engaged in “horrible stewardship” of real estate near the potential Chicago Bears stadium site in Arlington Heights didn’t hold up in court.

Cook County Circuit Court Judge Sophia H. Hall dismissed a lawsuit brought by Lake Forest-based investor Samuel Long against Scott, Krol and various CA Ventures affiliates late last month, finding that Long failed to demonstrate the defendants had a fiduciary duty to him. The case was dismissed with prejudice, meaning on the merits of the claims rather than a technicality that would allow the allegations to be revived later.

CA Ventures’ successful defense could play a role in other cases brought against the firm by investors who said they’ve been harmed by bad decisions and commingling of funds and debts carried out by the Chicago-based development firm’s leadership.

In particular, CA Ventures faces a lawsuit brought last year by a group of investors led by a Chicago-based LLC called TCP GP Fund I Aggregator, which claims they’ve lost most of nearly $14 million they advanced to CA Ventures entities in 2021 and 2022. It alleges Scott and fellow CA Ventures executive John Diedrich misrepresented how they intended to use funding, instead paying off debts they personally guaranteed.

Scott and CA Ventures entities also faced an allegation of fraud from their former investment partner QuadReal, which alleged that it was improperly put on the hook for the costs of a big office lease that CA Ventures took at 448 North LaSalle Street despite Scott’s partial ownership of the property.

After disputes over nonpayment of rent with both CA Ventures and WeWork, the building became distressed. Its developer, a venture that included Chicago-based Jay Javors, handed the building back to its lender to settle a $70 million debt last year. QuadReal’s lawsuit against Scott and the CA Ventures entities is pending in Cook County court.

“We expect to be able to use this in the other pending cases, for optics if nothing else,” David Rammelt, an attorney for CA Ventures and Scott who won dismissal of the Long case, said in an email reviewed by The Real Deal. “While this decision does not set a precedent that requires that the other cases be dismissed, having a Cook County judge find that these kinds of fraud claims are meritless will send a strong signal. When we do move to dismiss the TCP GP matter on summary judgment, we expect to rely on this opinion liberally.”

Long’s lawsuit, filed in 2023, alleged that Scott and Krol — who frequently invested in projects led by Scott’s firm — mismanaged a $400 million plan called Arlington Downs that would create 1,000 apartments, 38,000 square feet of retail, a hotel and the conversion of a waterpark into a rock climbing facility. The targeted real estate sits just west of the former Arlington International Racecourse site that the Bears bought as a possible new stadium location.

Long alleges that Scott and Krol squeezed their former partner David Trandel out of the management of the companies that controlled real estate. Keeping Trandel away from decision-making violated operating agreements of the various businesses that invested in the property, Long claimed.

Trandel was later bought out of a partnership called Springbank that CA Ventures entered into with plans to redevelop parcels throughout Chicagoland. His removal from Springbank occurred in 2017, Long’s suit said.

While the first phase of Arlington Downs was completed with the conversion of a former hotel into the 214-unit One Arlington apartment complex, subsequent phases haven’t gone as smoothly. Long said some of the property he had invested in for the master redevelopment was sold for $1.9 million without his knowledge, and without any proceeds being distributed to him. He claimed the transaction occurred “below market value” and called it potentially fraudulent in his suit.

CA Ventures’ other struggles in the area include surrendering a 263-unit apartment complex called Payton Place that it built next door to One Arlington, to its lender TPG after a $75 million debt fell into default. CA Ventures affiliates in recent months have also had lenders seize other vacant parcels inside the Arlington Downs plan that had been previously slated for development.

But Scott and Krol argued that Long’s complaint misconstrued their business agreements, and that they owed Long no fiduciary duty. Judge Hall agreed and further found that Long “failed to support a finding of fraud.”

Miguel Miranda, an attorney for Long, was not immediately available to comment. It’s unclear if Long will attempt to appeal the ruling.