CBRE settled a class action lawsuit for $100 million over a recession-era embezzlement scheme that involved Florida office properties and scores of elderly investors.
The class action lawsuit was settled last month with 179 plaintiffs, according to Law360.
The case stemmed from a scheme in which Cabot Investment Properties executives Carlton Cabot and Timothy Kroll swindled money from the victims who invested in a tenant-in-common structure involving six Florida office buildings. Four of the properties are in South Florida, one is in Orlando and one in Jacksonville.
In 2016, Cabot and Kroll pleaded guilty to having stolen about $17 million of investor funds to pay for personal and business expenses, according to the U.S. Department of Justice, which prosecuted the case. The two further concealed the fraud from investors by manipulating financial statements. Both are now in prison.
According to the class action lawsuit, CBRE and its employee Gloria Hernandez helped Cabot and Kroll embezzle the funds. CBRE and Hernandez denied any involvement in the embezzlement. In a motion earlier this year, CBRE said that it and Hernandez had no contract with the plaintiffs and never saw the quarterly reports to investors.
LeaseCos, the subsidiary asset manager for each property, hired CBRE to manage the properties. Hernandez also worked for CBRE as a property manager at some of the properties.
In total, the plaintiffs claimed they lost more than $139 million from the crime, with the initial embezzlement causing mounting financial hardships.
In a statement to Law360, a CBRE spokesperson said the company “settled the class action litigation to avoid the time, cost and uncertainty associated with a lengthy jury trial and years of appellate proceedings — regardless of the verdict.” [Law360] — Keith Larsen