UPDATED Dec. 17, 4:30 p.m.: Developer Edgardo Defortuna faced three lawsuits alleging he cheated small sources of project financing and advanced a condo development by blocking the sale of an adjacent property. But a Miami-Dade Circuit Court judge on Monday dismissed a case that could have led to a trial in a suit brought by three plaintiffs.
Capital Building, Florida Beach Investment and Spartan Lending had alleged that Defortuna lied when he claimed a big loss on his Jade Ocean condo development in Sunny Isles Beach while paying fat fees to corporate affiliates under his control.
In an email statement to the Miami Herald, Defortuna said this lawsuit “is completely without merit, and I look forward to the date that the court dismisses these false and unsubstantiated claims, once and for all.”
Capital Building and Spartan Lending each loaned $250,000 to the Jade Ocean project, and Florida Beach made a $500,000 equity investment. But they claim they were told that Jade Ocean was unprofitable, and they never recovered the money they put into the project. Each plaintiff seeks three times the money they put into Jade Ocean as damages, plus accrued interest.
In their lawsuit, the three plaintiffs alleged that Defortuna made “preferential” payments of interest and principal to companies controlled by his Fortune International Group. For example, Fortune paid one of its affiliates the principal amount of a $7 million loan to the Jade Ocean project plus “substantial interest.” Fortune also paid “inflated” fees and commissions to an affiliated management agency and sales group for their work on the Jade Ocean project.
The three plaintiffs also claimed that Coral Gables-based accounting firm HLB Gravier produced a misleading audit and fake financial reports showing that the Jade Ocean project lost about $63 million. The plaintiffs’ own analysis shows the project generated a $100 million profit, close to the developer’s projected profit of $105.7 million in a prospectus.
In a separate lawsuit, another lender to the Jade Ocean project, Iver Invest and Trade, claims that Defortuna defaulted on a $2 million loan with an unpaid balance of $1.5 million, plus accrued interest.
Fortune International Group’s law firm Coffey Burlington has filed a motion to dismiss Iver’s lawsuit, claiming the lender waited too long to sue. A hearing on the motion is scheduled for January.
In a third lawsuit, the owners association at the Tropicana Condo in Sunny Isles Beach alleges that Defortuna and a partner blocked a sale of all 48 units at the Tropicana to advance their development of a taller condominium on an adjacent site.
According to the lawsuit, Defortuna formed a partnership with two other defendants, Chateau Group and its principal Manuel Grosskopf, to build a 52-story condominium under the Ritz-Carlton brand next to the nine-story Tropicana Condo.
The lawsuit alleges that the developers arranged for straw buyers to acquire five of the 48 units at the Tropicana Condo, just enough to vote against and block a deal to sell the entire Tropicana building for $115 million.
Glen Waldman, an attorney for the Tropicana Condo owners association, told the Miami Herald that Defortuna and Grosskopf arranged for the unit purchases by straw buyers because they were promising potential buyers of units on the upper floors of the Ritz-Carlton condominium that they would have unimpeded views of the ocean and beach to the south, where the shorter Tropicana building is located.
While acquiring condos through straw buyers is legal, Waldman said the inability of Tropicana owners to sell their units to a developer prevented them from collecting about $2 million each. [Miami Herald] – Mike Seemuth