A-Rod fights civil theft, RICO calls for real estate action

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Left to right: Alex Rodriguez, former professional baseball shortstop and third baseman, and Constantine Scurtis, Managing Director, Lynd Acquisition Group (Getty Images, Lynd Acquisitiion Group, iStock, Photo Illustration by Steven Dilakian for The Real Deal )

Alexander Rodriguez has so far left the stadium in a lawsuit brought by his ex-brother-in-law, Constantine Scurtis, over their unraveled real estate empire.

A Miami judge on Wednesday overturned Scurtis’ racketeering and theft charges, two civil lawsuits, against A-Rod, saving the former baseball slugger from tens of millions of dollars in damages.

The decision came on the heels of the judge’s dismissal in September of 13 lawsuits brought by Scurtis against Rodriguez. (These lawsuits were separate from Scurtis’ main lawsuit but were still related to the real estate business.)

Still, some claims from the total trial of 59 counts remain, and a jury trial is scheduled in Miami later this month.

Rodriguez married Scurtis’ sister Cynthia Scurtis in 2002, and soon after partnered with Constantine Scurtis on real estate purchases. The duo have amassed around 5,000 apartments, mostly Class C units, in Florida, Texas, Mississippi, Indiana and Oklahoma for $ 300 million, according to court documents. They also bought an assembly in Miami’s trendy Edgewater neighborhood that they dubbed “Promised Land,” where they envisioned a 782-unit luxury condominium.

When Rodriguez and Cynthia Scurtis divorced in 2008, the real estate partnership also broke down, with Constantine Scurtis being removed from the business, according to the judge’s ruling.

Scurtis first sued Rodriguez in 2014, alleging he was kicked out and harmed over his earnings. Rodriguez responded with a counter-suit against Scurtis, alleging he had dug into the partnership’s coffers to the tune of $ 1.4 million. Rodriguez claimed in court that pursuing Scurtis was a way of trying to extort and harass the ex-Yankee and opt out of reimbursing the money Scurtis had taken.

In the years that followed, Scurtis amended his complaint four times to strengthen the claims, claiming at one point that he owed him $ 2.2 million in profits from the sale of property and $ 8 million under of an agreement that he would receive a 3% sales charge.

He added the counts of racketeering and theft in his latest amended lawsuit, filed in January.

In his ruling, Miami-Dade Circuit Judge Michael Hanzman said the charges were added “for the sole purpose of embarrassing Rodriguez, generating tabloid press and increasing the effect. leverage of regulations “.

Hanzman then called some of Scurtis’ claims “completely fanciful”, “selfish” and “anemic”.

Before the kerfuffle broke, Rodriguez and Scurtis built their empire by purchasing each property using a different affiliate.

Rodriguez, as a well-heeled baseball player who was with the Yankees at the time, funded the business and had a 95% stake in each buying entity, according to the judge’s ruling. Scurtis, as a knowledgeable real estate partner, provided the know-how in selecting the properties they purchased. He held a 5 percent stake in each entity.

The general partner of each purchasing entity was a limited liability company called ACREI – for Alex Constantine Real Estate Investments – and controlled by Scurtis, according to Hanzman’s ruling. The control of the general partner gave Scurtis legal control over the purchasing entities.

This structure changed in 2005 with essentially Newport Property Apartment Ventures Inc. replacing ACREI, putting Rodriguez, instead of Scurtis, in control of the new general partner, according to the judge’s ruling. The rearrangement was made because the business was growing and the duo created a new entity to act as guarantor of the loan, so that Rodriguez and Scurtis would protect themselves from personal liability on the debt, the judge wrote.

The partnership continued to amass real estate under the new structure.

Although Scurtis signed this transfer of control, he later claimed that it was a fraudulent reassignment and that he had not knowingly signed, Hanzman wrote in his ruling.

Scurtis alleged that his interest in the business was stolen behind his back and that he believed he continued to control the general partner – a claim according to the judge “stinks of afterthought and puts a strain on gullibility” .

In fact, Hanzman wrote, there was nothing strange about Rodriguez taking legal control of the business, as he was, after all, the majority owner of the business.

For a while, Scurtis himself had told lenders that the company had a new general partner, Hanzman wrote. And when his ties to the company were severed, Scurtis sent messages to employees telling them he was no longer working for the partnership.

Scurtis has since become the head of the acquisition arm of Texas-based multi-family investor Lynd.

Scurtis also alleged that the partnership made tax returns showing that he was being paid, even though he was not. What really happened was that Scurtis took out loans from the partnerships, Hanzman wrote. When the debt came due, the partnership essentially paid it off with Scurtis ‘portion of profits, but still reported Scurtis’ income to the Internal Revenue Service, as it should have been, said the judge.

Scurtis claimed that after its ties to the partnership were severed, the company attempted to commit insurance fraud by inflating damage from Hurricane Ike. And he also attempted to commit mortgage fraud by making the properties appear to have a healthy cash flow: Rodriguez employees were said to have been asked to pay rent as if they were living in the apartments, Scurtis claimed.

Hanzman replied that no civil or criminal action had been brought for the alleged insurance and mortgage fraud. Even though there were such frauds, they “did not target Scurtis and cause him absolutely no harm,” the judge wrote.

The move is good news for Rodriguez, as allegations of racketeering and theft would have exposed him to triple the amount of damages Scurtis could earn in the pending case.

“The court’s conclusion in the order speaks for itself,” Rodriguez’s lawyer Benjamin Brodsky said.

Scurtis’ lawyer was less happy, although she stressed that this was not the end of the battle.

“We strongly disagree with the court’s decision,” Katherine Eskovitz said in an emailed statement. “We intend to continue this matter until Mr. Scurtis receives fair compensation for his injuries.”

The jury trial begins Nov. 15 over Scurtis and Rodriguez’s remaining claims.


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