Chinese investors have convinced an alleged co-conspirator to help them pursue EB-5 fraud claims against the builders of a since-shuttered Miami hotel in exchange for the dismissal of all claims against him, according to a settlement agreement filed in Florida federal court Monday.
In a joint motion, the investors asked U.S. District Judge Darrin P. Gayles to approve their settlement deal with Anthoney Reitz, who is accused of helping Palm Beach County-based developer Joseph Walsh Sr. dupe investors into funneling millions of dollars into a failed Greystone development project on Collins Avenue in Miami Beach.
“Given that Reitz was acting pro se in this matter and that the settlement agreement envisions his cooperation with plaintiffs in this lawsuit, both counsel for plaintiffs and Reitz himself believe that court approval of the settlement agreement is warranted,” the motion said.
The proposed deal is the latest chapter in the October 2019 lawsuit launched by the Chinese investors, who say they each invested $500,000 toward Walsh’s Greystone Hotel project. They made their investments through a regional center run by Walsh that coordinated the funds under the federal EB-5 program, which allows foreign investors in U.S. enterprises that create American jobs to obtain visas to live in the U.S.
However, the investors claim Walsh duped them out of their money by getting them to deposit their funds into a bogus escrow account, called the WWB Trust LLC, at PNC Bank with the help of Reitz, who signed the escrow agreements and was the account’s chief financial officer. Walsh then transferred the money to personal accounts for his own benefit, the suit says.
The complaint describes Reitz as a former PNC Bank employee with “extensive knowledge of PNC’s policies,” but the bank through its attorneys disputes that he ever worked there.
The investors also claim that multiple bank employees ultimately accommodated Walsh’s request to set up escrow account services free of the typical restrictions on such an account in violation of the bank’s internal rules, regulations and policies.
The suit accuses the bank and its employees of aiding and abetting breach of fiduciary duty and fraud in the inducement, as well as conversion by Walsh and his associates. The suit also asserted several counts of conspiracy, including under the federal and Florida Racketeer Influenced and Corrupt Organizations acts.
In September, Judge Gayles tossed the RICOclaims for good and dismissed the remaining claims with leave to amend, and in December, the investors notified the court that they struck a confidential deal with the bank to resolve the claims against it. Meanwhile, they asked the judge for more time to amend their complaint, and the judge gave them until March 29.
In February, the investors notified the judge they struck a settlement in principle with Reitz, which they asked the judge to approve Monday.
In Monday’s motion, the investors said the Greystone defendants have refused to stipulate to the dismissal of Reitz, meaning a court order approving the settlement is needed.
The agreement says Reitz denies all liability but has handed over documents that the investors say substantiate some of their allegations against the other defendants. The agreement says Reitz has agreed to corporate with the investors in the litigation in exchange for the claims being dismissed.
Counsel for the Greystone entities declined to comment Monday, and counsel and representatives for PNC and the investors didn’t immediately respond to requests for comment. Contact information for Reitz wasn’t immediately available.
The investors are represented by Jordan A. Shaw, Zachary Ludens and Steffani M. Russo of Zebersky Payne Shaw Lewenz LLP and Kevin Qi of SMS Law Group APC.
PNC is represented by Nicholas A.R. Kato of Ballard Spahr LLP and Nina Stillman Mandel of Mandel & Mandel LLP.
Reitz represents himself.
The Greystone entities are represented by Stephen A. Mendelsohn of Greenberg Traurig LLP.
The case is Yuanxiao Feng et al. v. Joseph Walsh et al., case number 1:19-cv-24138, in the U.S. District Court for the Southern District of Florida.
–Additional reporting by Nathan Hale. Editing by Brian Baresch.
Update: The story has been updated to reflect that PNC Bank disputes that Reitz ever worked for the company.