By Paul Gable
Fireworks have erupted between the two Chinese principal owners of Founders Group International, LLC (FGI) as Nick Dou, one owner of the corporation, filed suit against Dan Liu, the other owner of the corporation, and three Chinese corporations Liu allegedly acts as exclusive agent for, in 15th Judicial Circuit Court on June 22, 2017.
According to the complaint, case number 2017-CP-2603932, Dou alleges Liu was stripping assets out of the corporation for personal and other uses. The suit alleges breach of contract, fraud and conversion by Liu.
Additionally, Dou asks for a full accounting of corporate assets as well as a temporary restraining order directing Liu “shall not divert, remove, alienate, convert, encumber or otherwise manipulate any corporate assets of FGI or any of the other FGI Entities for his personal use or benefit, until such time as the claims raised in this action have either been resolved by this Court, settled and/or withdrawn by the Parties to this action…”
The filing also states, “Plaintiff Nick Dou is informed and believes that the assets and property of FGI and the affiliated FGI Entities are at grave risk and danger of loss, and of material injury and impairment, at the hands of Defendant Dan Liu, if such property and assets are left under the exclusive control of Defendant Dan Liu.”
Dou asks the Court to “exercise its authority pursuant to S.C. Code Section 15-65-10, et seq., and immediately appoint a receiver over the property, assets, and operation of FGI and the affiliated FGI Entities.”
The three Chinese corporations named as co-defendants with Liu are: Jiangsu Tianru Danfo Commerce and Industry Co., Ltd., Nanjing Shuojun Trade and Industry Co. and Nanjing Xinyuanyuan Commerce and Trade Co., Ltd.
According to the complaint, all three corporations are organized and existing under the laws of the Peoples Republic of China and none of the three corporations have been “admitted to or authorized to conduct business in South Carolina.”
This is where things get murky.
Dou and Liu reportedly met in Nanjing, China in 2011. After several subsequent contacts, the two agreed in May 2014 “to establish certain business ventures in South Carolina for the purpose of investing in golf course and real estate development businesses in Myrtle Beach…”
In June 2014 through February 2016 Liu and Dou established approximately 16 limited liability companies, primarily in South Carolina, but also in Delaware, for business purposes.
“Each of the LLC entities so created by the Parties were organized with 10% of the ownership interests held by Plaintiff Nick Dou, and 90% of the ownership interests held by one or more of the Defendant Chinese companies … who were purportedly (according to Dan Liu) represented in the United States exclusively by Defendant Dan Liu.”
While the various LLCs held legal title to the assets of the golf course and real estate development businesses, Liu and Dou primarily conducted their business under the name Founders Group International, LLC.
According to the complaint, Liu has transferred substantial assets of FGI and affiliated FGI entities (the LLCs) to D&C International Holdings, LLC, a company owned exclusively by Liu and his wife Xuan Zhuang.
According to the complaint, on or about March 27, 2017, the Nanjing District Attorney’s office for the Jiangsu Province of the PRC issued public statements that it seeks the arrest of Defendant Dan Liu for suspicion of investment fraud and “absorbing public money.”
Additionally, according to online records from Horry County Deeds, 10 mortgage assignments from Jiangsu Tianru Danfo Commerce and Industry Co. to Dan Liu and one mortgage assignment from Nanjing Shuojun Trade and Industry Co. to Dan Liu were recorded on February 10, 2017. Six more mortgage assignments from Nanjing Shuojun Trade and Industry Co. to Dan Liu were recorded on May 25, 2017.
A blanket partial release of mortgage from Dan Liu to Jiangsu Tianru Danfo Commerce and Industry Co. was recorded on June 12, 2017.
According to a local attorney I consulted, there is no obvious reason for these assignments.
A power of attorney from Dan Liu to his wife Xuan Zhuang was recorded on May 1, 2017.
A question that must be asked is – ‘If none of the three Chinese corporations were “admitted to or authorized to conduct business in South Carolina” how were they able to establish and be principals in LLCs in South Carolina and how are they able to hold and assign mortgages?
It’s only 26 months since Liu and Zhuang made a big splash on the Grand Strand with their wedding reception at Pine Lakes Country Club attended by many local business owners, officials and politicians as well as approximately 60 guests from China. Reports of the event included many statements about how FGI would draw large numbers of tourists and more Chinese investors to the Grand Strand area.
One year later, the first stirrings of possible problems with Founders Group International came to light when reports from local, national and international media entities reported Chinese government investigations of fraud associated with Yiqian Funding, a Chinese peer to peer lending business that Liu was reported to be president of. At that time, Dou was a strong defender of Liu and assured local media the problems would not affect FGI.
Now here we are with Dou suing Liu for fraud, among other allegations.
There will be much more to be heard about Founders Group International and this lawsuit in the coming weeks and months. It is safe to say, however, things are not what they seemed a short time ago.
Click below to read the complete complaint.