Century Plaza Investors Want To Sue EB-5 Entity, Its Lawyers For Racketeering
About three months after a court decision against their interests, EB-5 investors on the foreclosed-on Century Plaza project want to sue the EB-5 entity they invested with and its attorneys, alleging racketeering.
EB-5 investors allege that the investment vehicle CMB Export and the firm that represented it, Lewis Brisbois Bisgaard & Smith, made major oversights regarding the Century City project, then "engaged in an intentional scheme" to cover up what the investors claim was misconduct, negligence or both, according to a complaint filed Thursday in federal court by 185 EB-5 investors who put $92.5M into the project.
Representatives for CMB and Lewis Brisbois didn't immediately respond to a request for comment from Bisnow.
The Racketeer Influenced and Corrupt Organizations Act, violations of which are claimed in the complaint, is often used against criminal organizations. It has been used to prosecute the Mafia figures and, in Los Angeles, Council Member José Huizar.
The investors’ complaint says CMB and its attorneys repeatedly dropped the ball, including failing to put “protective terms” into lending agreements and amendments to those agreements, as well as not requesting important documents.
One instance the complaint highlights involves CMB and its attorneys' failure to modify terms of the project’s third amended mezzanine loan, namely an "arbitrarily short" maturity date of July 2021.
"Rather than insist on an extension of the maturity date in the Third Amended Mezzanine Loan, CMB instead naively hoped for a voluntary extension to avoid foreclosure," the complaint says.
The project’s developer, Michael Rosenfeld, didn't meet that July 2021 maturity date and defaulted on $1.8B in loans for the Century Plaza project, The Real Deal previously reported.
The EB-5 investors claim that instead of admitting their mistakes, CMB and its attorneys “shifted the blame to others, and conspired and undertook a scheme to defraud [the investors] through a systematic campaign of sham litigation, fraudulent objections, and dilatory conduct,” according to the complaint.
The EB-5 investors said they haven't received any money back from their investments in the project because litigation between CMB and the Reuben brothers is ongoing in California.
The $2.5B project in Century City has been a lightning rod for litigation. In January, a two-year legal battle between the EB-5 investors and the Reuben brothers, who held a senior loan and mezzanine debt on the project, according to The Real Deal, ended with a New York court ruling in favor of the brothers.
The brothers foreclosed on some of the senior and mezzanine debt they held in 2023, which allowed them to take control of the hotel, which has opened, along with retail space and some of the project’s condos.
