By Paul Gable
Dan Liu, majority partner of the Founders Group International entities, fired back hard at minority partner Nick Dou in answering a complaint in a lawsuit filed by Dou against Liu, three Chinese corporations and the many limited liability companies that make up the Founders Group International holdings.
According to Dou’s complaint, the three Chinese corporations were 90 percent owners of the Founders Group properties and Dou was 10 percent owner. Liu was the exclusive authorized agent in the U.S. for the Chinese corporations.
In his lawsuit, 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or benefit, until such time as the claims raised in this action have either been resolved by this Court, settled and/or withdrawn by the Parties to this action…”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 complaint 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’s complaint also states, “Upon information and belief, 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.”
A copy of this public statement release was submitted as an exhibit with Dou’s complaint.
Liu’s response denies all of Dou’s allegations, including the Nanjing prosecutor release, except for technical details about the Founders Group International entities, as well as claiming Dou invested no money in the corporations and was given ownership interest based on “erroneous and incorrect information” provided by Dou.
In his response, Liu is now attempting to deny the ownership interests claimed by Dou. However, in one exhibit filed with the court Liu breaks down ownership percentages of each LLC involved, which contradicts this claim. See here fgi ownership interests
Additionally, Liu claims Dou was terminated as a manager of the properties on June 19, 2017 “as a result of misconduct and malfeasance in connection with the FGI entities.”
One of the most interesting and involved aspects of the case involves nearly $140 million in promissory notes and mortgages transferred from the Chinese corporations to Dan Liu in a series of approximately 25 transactions recorded in Horry County.
Seventeen of the recorded transactions assigned promissory notes and mortgages from one or more of the three Chinese corporations, for which Liu allegedly acted as exclusive U.S. agent, to Liu. Papers for eleven of the transfers to Liu were signed on February 3, 2017 and recorded on February 10, 2017 and papers for the remaining six transfers were signed on April 28, 2017 and recorded on May 25, 2017.
In each case, the promissory note was signed for $5.00 and other considerations.
The result of these transactions is that virtually all Founders Group International properties in Horry and Georgetown counties, reportedly debt free prior to these encumbrances, are now encumbered by Liu with mortgages and promissory notes payable to Liu and no money paid to the LLC’s except for the minor consideration of $5.
In an affidavit accompanying the response, Liu claims that “the transactions are for a legitimate business purpose and at no time did the Plaintiff Xian (Nick) Dou object to the execution of those documents.”
Additionally, Liu claims in the affidavit, “Currently the Founders Entities and the Atlantic Entities own and operate 12 golf courses and numerous parcels of property, some of which are either in negotiations or under contract to be developed, sold, or acquired.”
The above statement begs the question, were these promissory notes and mortgages, ultimately payable directly to Liu, created because of the above referenced negotiations and are they legally enforceable?
Much more will undoubtedly be heard about Founders Group International, Liu, Dou and the three Chinese corporations as this lawsuit goes forward.
A hearing is scheduled for August 2, 2017 for the judge to hear Dou’s request for a temporary injunction against Liu and for the request for a referee to be appointed for all FGI holdings.