A court-appointed receiver, Bernice Lee, is taking control of Rishi Kapoor’s former development firms. Her primary tasks will include investigating the disgraced developer’s alleged misappropriation of $93 million in investor funds, and determining from whom to claw back monies.
Last week, Chief U.S. District Judge Cecilia Altonaga appointed Lee to manage Location Ventures, its co-living and co-working focused subsidiary Urbin and all affiliates with ties to Kapoor. The developer stepped down as CEO last summer from the Coral Gables-based development companies he founded. Location Ventures and Urbin were already in the process of being shut down, and both firms are entangled in various lawsuits as defendants.
Most recently, the U.S. Securities and Exchange Commission sued Kapoor, Location Ventures, Urbin and 20 other entities. The SEC lawsuit alleges that Kapoor and company executives loyal to him engaged in a real estate scheme to defraud more than 50 investors. Kapoor vehemently denied any wrongdoing.
He did not object to the appointment of a receiver, court records show.
Altonaga sided with SEC lawyers in determining that a receiver would get to the bottom of how the $93 million was improperly spent, and if any of those funds can be recovered.
“Based on the record, the appointment of a receiver in this action is necessary and appropriate for the purposes of marshaling and preserving all assets of the company defendants,” Altonaga wrote in her order. The SEC presented enough evidence showing “a reasonable approximation of a likely disgorgement award against the company defendants, which exceeds the amount of assets to be frozen,” Altonaga wrote.
Also this month, Altonaga ordered that all of Kapoor’s assets be frozen and that Kapoor preserve any company documents still in his possession. All pending litigation against Kapoor, Location Ventures, Urbin and any affiliates are stayed until the SEC case is adjudicated, Altonaga’s order states.
The judge also granted Lee the power to investigate and prosecute claims against Kapoor, his former companies and anyone who allegedly assisted in the misappropriation of the $93 million.
In the last several months, Location Ventures was managed by retired Miami-Dade Judge Alan Fine, who was hired by the firm’s remaining board members to implement a liquidation plan to pay back creditors in lieu of filing for bankruptcy. However, Fine’s contract ended this month, a motion by SEC lawyers states.
Fine also did not possess the powers or the authority of a court-appointed receiver, therefore he was not permitted “to investigate actions taken by Kapoor and other insiders; initiate lawsuits to recover investor funds that may have been misappropriated; or exercise any authority over Urbin or its projects,” the SEC motion states.
While Location Ventures owned a majority stake in Urbin, the two firms were completely separate. Fine was put in charge of Location Ventures, but Urbin was being managed by Vivian Bonet, Location Venture’s chief development officer, who regularly sided with Kapoor’s management decisions, the SEC motion states.
Fine could also not investigate a buyout agreement between Kapoor and Location Ventures’ largest investors, Alex Kleyner and Diana Ulis, who have a pending Miami-Dade civil lawsuit against him. The married couple allege that Kapoor failed to pay back $25 million of the $45 million they invested in Location Ventures and two of the firm’s real estate projects.
Kleyner and Ulis recently acquired the two development sites they invested in, including their $30 million purchase of a Fort Lauderdale Beach oceanfront vacant property. Kapoor had planned to develop the Edition Residences Fort Lauderdale, a boutique condominium project consisting of two 11-story buildings with 65 units,
The SEC alleges that Kapoor improperly transferred almost $20 million in company funds to partially pay back Kleyner and Ulis. Those funds included $10 million from a $12 million loan secured by an Urbin mixed-use project in Coconut Grove that Kleyner and Ulis have no ownership interest in, the motion states.