Inside Mercer Vine: A suspended brokerage, a potential fraudster at the helm, and $260M in dead deals

From TRD LA:Robert Shapiro, the head of a conglomerate under federal investigation for potentially orchestrating a $1 billion fraud, is the quiet force behind the Los Angeles residential brokerage Mercer Vine, an investigation by The Real Deal has found.

A further examination of public records, corporation documents and interviews with government officials reveals that Mercer Vine continues to conduct business even though the state of California suspended its registration over two months ago. Operating without a valid registration is illegal under California law, legal experts said.

In September 2016, Mercer Vine announced a headline-grabbing $90 million sale of the Owlwood estate in Holmby Hills. Since then, industry rivals have been bamboozled by the firm’s incredible rise – its top producers and purported founders — Adam Rosenfeld, Kyle Giese and Domonic Labriola — were obscure figures in the industry, and the company had an unusually close working relationship with Woodbridge Group of Companies, which appeared to be its only significant client. The 55-agent boutique brokerage, which claims to have crossed the $1 billion transaction milestone earlier this year, also boasts one of the most expensive listings in the country, a $180 million spec home in Holmby Hills.

But it turns out, Woodbridge was far more than a client. Its founder, Shapiro, was actually managing the firm.

In statements sent to TRD, Rosenfeld repeatedly maintained that Mercer Vine was a standalone brokerage, stating that Shapiro was merely a “key contributor to our startup three years ago.”

But Shapiro’s connection to the firm appears to be much deeper than Rosenfeld suggested: Shapiro is identified at different times as the president, secretary and manager of Mercer Vine, corporation registration documents filed with the California Secretary of State show.

In August 2014, David Golden, the former general counsel for Woodbridge, incorporated a company called “Woodbridge Luxury Homes of California, Inc.” with the state. In March 2017, that corporation was renamed “Mercer Vine, Inc.,” and the document was signed by Shapiro, who declared himself the president and secretary of Mercer Vine.

One residential brokerage executive was not surprised at Shapiro’s involvement in Mercer Vine.

“When I first heard about them they were the cool new kids on the block,” the executive said. “But I figured they were established for Woodbridge so Woodbridge wouldn’t have to pay crazy commissions for someone else and they would just hire their own guys.”

Signs of trouble

Mercer Vine’s corporate registration was suspended on Sept. 7, state records show. TRD then made inquiries with the California Bureau of Real Estate (CalBRE), the agency charged with regulating brokerage licenses. An investigator at the Department’s Real Estate and Mortgage Fraud Task Force said they were unaware of Mercer Vine’s corporate suspension, but said that the company’s real estate license should also be suspended. The business should have ceased operations by now, said Gin Yee, the investigator.

“If they are operating with a corporate license [that has been] suspended, they cannot run a business like that,” Yee said.

Rosenfeld, through a representative, said he was aware that the license was suspended by the Secretary of State, but said it was due to a “completely unrelated Board of Equalization” issue. He also claimed the problem had been “corrected” on Nov. 29, the same day TRD brought it to his attention. The California State Board of Equalization, which handles tax administration and fee collection for businesses in the state, said they had no record of Mercer Vine in their system.

After interviews and repeated inquiries by TRD, Mercer Vine finally submitted its updated statement of information to the Secretary of State on Nov. 29, with Shapiro listed as the brokerage’s manager.

It’s unclear if and when the state will upgrade the firm’s status.

Jonas Grant, an L.A.-based attorney who practices corporate entities law, said as a business without a valid corporation registration, “you’re basically dead in the water until you fix the problem.”

Despite the suspension, Mercer Vine is going about business like usual. It has closed at least 18 deals since the time of its corporate suspension in September, according to an analysis of the Multiple Listing Service and Redfin. On at least three of those transactions, Mercer Vine represented both the buyer and the seller. All sales, except one $20 million deal at 14300 West Sunset Boulevard, were under $4 million.

It’s not clear what this will mean for Mercer Vine’s completed transactions during that period. Having a suspended registration, however, creates several obstacles for corporations, according to Joe Rose of Rose Law.

“The threshold for any California corporation is you have to have an active status and be in good standing,” Rose said. “The corporation doesn’t exist without it being in active status.”

Suspension temporarily strips corporations of a number of rights, said business and startup attorney Dana Shultz, including being able to defend itself in court or bring a lawsuit. Such corporations could also have contracts voided by a court, according to California law.

“If you don’t have the right to conduct business that would include the right to contract,” said Grant.

A sudden rise to the top

Rosenfeld’s rise in particular has been near-meteoric. The young broker, who would become the firm’s top producer, was working at the now-rebranded John Aaroe Group when he joined up with Giese, then involved with moving and home staging companies in Texas, according to his biography on Mercer Vine’s website. The two were soon each raking in annual sales north of $220 million. Giese ranked eighth in L.A. County and seventeenth nationwide on Real Estate Trends’ “Ten Thousand” list in 2017, and Rosenfeld ranked ninth in L.A. County and eighteenth in the U.S.

The baby brokerage gained traction in April 2016 when it rolled out the listing for “Skygarden,” a spec home at 10721 Stradella Court in Bel Air. The developer, Woodbridge Luxury Homes, wanted $100 million for the 15,000-square foot mansion.

After capturing headlines with “Skygarden,” Mercer Vine bolstered its brand with 10 top-shelf listings, all of which were advertised as redevelopments or spec homes. The homes had an estimated pre-construction value just under $85 million, but in a July press release Mercer Vine said it expected the homes to fetch $260 million once construction was completed.

A TRD review of MLS records found that all but one of those listings were taken off the market a year later. The majority were de-listed less than six months after listing. None of them sold.

In September 2016, the brokerage made national news by announcing a $90 million deal of Owlwood Estate, a 12,200-square-foot mansion that Tony Curtis, Cher and 20th Century Fox co-founder Joseph Schenck once called home. The buyer was Woodbridge. Then, just a year later, Woodbridge put the property back on the market for $180 million, twice its purchase price. The broker on the latest deal? Mercer Vine.

Today, the brokerage has seven active listings over the $5 million mark, according to an analysis of Redfin data. A total of 24 properties, listed either for rent or for sale, are on the company’s website.

Woodbridge properties accounted for five percent of Mercer Vine’s total transactions in 2017, Rosenfeld claimed in a statement. But that five percent is bigger than it looks — Rosenfeld also said the Woodbridge sales represented roughly 25 percent of Mercer Vine’s total dollar volume in 2017.

“I don’t even think there’s a second client in the same stratosphere,” a source said. Mercer Vine declined to disclose other clients.

“We stand behind our business”

On Nov. 14, Shapiro told TRD that he and Woodbridge turned over 4 million pages of emails to the Securities and Exchange Commission following multiple subpoenas.

But in October, investigators were continuing with a motion to hold Woodbridge in contempt of court for not providing additional emails and other documents it originally requested in January. Shapiro’s attorneys have invoked their Fifth Amendment rights in their opposition to the court order, according to filings.

In that Nov. 14 interview, Shapiro said Woodbridge has not engaged in fraud and “stands squarely behind its business model.”

In a statement, Rosenfeld defended the brokerage.

“When you are running a successful business it comes with the territory to have a target on your back,” he said. “We stand behind our business, our track record, our integrity and our success.”

James Kleimann and Harunobu Coryne contributed reporting.