Investors in AstroWorld plan taken for a ride, jury decidesJune 28, 2017 Updated: June 29, 2017 2:15pm
Businessmen who had proposed to develop Houston's fondly remembered AstroWorld amusement park face a civil judgment that could total more than $100 million after a jury in a long-running investor-fraud lawsuit sided with their jilted investors.
"They took my client on Mr. Toad's Wild Ride," said Frank Spagnoletti, a lawyer representing the plaintiff. "This was the last ride of the AstroWorld property."
Lawyers for the defendants did not respond to phone calls seeking comment.
Barring appeals, the verdict marks the end to a three-year legal battle centered around the former site of an iconic Houston landmark. The 104-acre parcel has sat largely unused since the amusement park closed in 2005. It is turned once each year into a parking lot for the Houston Livestock Show and Rodeo, which owns the tract.
The plaintiff, a group of foreign investors known as B Choice Limited, will most likely be awarded a sum that exceeds $100 million once complex calculations are done on the 42 questions the jury was asked to answer after a nearly two-year trial, barring any appeals.
Six Flags acquired the park in 1975 and developed several innovative rides there, including the world's first rapids ride, Thunder River, in 1980, and the first suspended, swinging roller coasters in 1984. The park was demolished after Six Flags closed it.
The would-be redevelopers of this property, defendant Epicentre Development Associates LLC, had solicited investments to build a high-density residential area, according to the lawsuit that was filed in July 2014.
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The jury ruled Tuesday that Epicentre took $25 million from B Choice, used it to buy about 11 acres, ran the money through a series of mortgages as an alleged laundering technique then pocketed the leftovers.
"Nothing was developed and my client lost $25 million," Spagnoletti said. "They were not happy about that."
The awarded sum most likely will be much larger than $25 million because the case was litigated under the Racketeer Influenced and Corrupt Organizations Act, or RICO Act, a statute usually used to bring criminal charges against fraudulent operations. Under RICO, that $25 million can be tripled.
The jury also opted to award $35 million in punitive damages to B Choice.
The RICO statute is relatively uncommon in civil cases as it requires substantially more proof than mere fraud.
"Fraud is the easy part. The tricky part is that you must demonstrate that there's an ongoing pattern of criminal activity that is the cause of this loss," said David Kwok, a specialist on white collar crime at the University of Houston Law Center. "That there is some sort of ongoing threat to society going on."
The defendants were four men and a slate of development, holding, consulting or investment companies under their control.
They "were masters at 'moving the finish line' when the end was almost in sight," the original petition said. They eventually acquired only 11 of the 104 acres they promised their investors they'd own.
Nevertheless, in summer 2011, the defendants falsely informed B Choice that all land had been purchased, and they claimed they needed to borrow an additional $13.65 million to begin development of the property. B Choice provided the money, but Epicentre eventually sold the 11 acres and kept the proceeds for itself.
On June 4, 2014, the CEO of Epicentre Albert Delaney met with representatives of B Choice in Houston.
"At that meeting, Delaney admitted there was no longer any money remaining of the B Choice investment or loan, and that EDA no longer had any ownership interest in any property," the petition said.
In court documents, defendants attributed the loss of the investment to the Great Recession that began in 2008.
Their investors didn't buy that explanation, nor did the jury.
"My clients, who didn't know any better, believed this would be a fabulous project," Spangoletti said. "Instead it would be a scam."
Source : http://www.houstonchronicle.com/business/article/Jury-Investors-taken-for-a-ride-11254691.php