UPDATED, Jan. 27, 11:55 a.m.: Airbnb accuses Miami real estate developer Harvey Hernandez of defrauding the short-term rental company and diverting funds that were to be used for an apartment-sharing concept.
Airbnb claims it invested $11 million in a partnership with Hernandez’s Newgard Development Group to offer Airbnb-branded apartments. Newgard was supposed to open at least seven of these projects, including one in Kissimmee, Florida, in 2019, according to Airbnb’s lawsuit filed Thursday in Northern California. So far, Newgard has failed to open a single project.
The lawsuit comes as Airbnb prepares for its planned initial public offering this year.
According to the suit, Airbnb planned to provide the capital, and Newgard and Hernandez were to then manage, operate, and market rental properties throughout the United States.
Instead, Airbnb alleges “NGD and Hernandez stole funds, made unauthorized loans to other Hernandez-controlled companies, fraudulently backdated documents, breached contracts, and then lied repeatedly in an attempt to cover their tracks.”
Airbnb alleges Hernandez siphoned off $1 million of the investment into another one of his projects, Natiivo in Miami. Airbnb alleges Hernandez and Newgard tried to disguise the investment as a loan by producing fraudulent and backdated documentation that showed Hernandez as the signatory on behalf of both borrower and lender. The “loan” is now in default and remains outstanding, according to the lawsuit. Airbnb is demanding the return of its $11 million investment and wants out of its contract.
In a statement, Michael G. Austin of McDermott Will & Emery, who represents NGD Homesharing, called the suit “legally defective and factually inaccurate.”
“This is a case of a big corporate player attempting to use its size (and litigation tactics) to improperly usurp an innovative business and technology from the hardworking founder and the Miami-based NGD company,” Austin said in the statement.
The Financial Times first reported the lawsuit.
It is not the first time Hernandez has faced major legal issues with his real estate developments.
In 2016, Hernandez’s development company was sued over a failed robotic car garage he installed at the luxury condo tower Brickell House in Miami. In September, a Miami-Dade County judge awarded the Brickell House condo association $40.6 million from the development group after the technology malfunctioned and left residents without a working garage.