Litigation over the doomed Fashion Mall project in Plantation shows no signs of slowing, and a real estate developer is now facing allegations of fraud, self-dealing and usurpation of corporate opportunities.
Bankruptcy trustee Kenneth Welt seeks to recover millions allegedly lost through fraud, while the purported majority investor looks likely at best to regain only a fraction of its claim.
The project’s primary investor, Chinese steel mogul Zhen Zeng Du, who claimed he invested $160 million in the project, filed a motion to compel Welt to distribute the estate’s remaining funds. A hearing on his motion is set for Sept. 13 before U.S. Bankruptcy Judge John Olson.
The property sold in April 2015 for $37.7 million—far less than the $48.7 million proof of claim Du’s conglomerate, Tangshan Ganglu Iron & Steel Co. Ltd., submitted to Welt.
And there’s also more bad news for Du. About half of the sale proceeds are already gone: nearly $16.8 million to two lenders and general contractors, $573,787 for the trustee and $1.16 million to cover administrative expenses. The remaining $19.6 million will likely dwindle from about $1.8 million in pending administrative bills from lawyers and consultants.
“Mr. Du and Ganglu will never fully recover their losses,” Ganglu’s attorney Lida Rodriguez-Taseff said. “What they want right now is to receive as much as they can possibly get.”
The trustee, meanwhile, is on his own recovery mission.
Welt filed an adversary complaint Aug. 5 seeking more than $9 million that Du’s former partner, Wei Chen, allegedly diverted from the project. He alleges “misconduct, self-dealing, usurpation of corporate opportunities and fraudulent transfers,” according to Welt’s attorney, Glenn Moses of Genovese Joblove & Battista in Miami.
The complaint names Chen and his ex-wife, Hong Huang, or Linda Huang, and two Chen companies, Jin Zhi Star and WCH Hospitality, as defendants. It alleges Chen transferred $4 million to Jin Zhi Star, dipped into the Fashion Mall till to purchase an office building, siphoned $3 million into a failed side business and billed $2 million in personal purchases to a corporate American Express account.
Chen controlled the mall’s redevelopers—Mapuche LLC, U.S. Capital Holdings LLC and U.S. Capital/Fashion Mall LLC—and put all three companies into bankruptcy after Du ousted him as project manager in 2014.
The plan had been to replace the shuttered mall with a branded hotel, condominium tower, new retail and Class A office space as part of a $300 million venture on 33 acres. The project languished for more than a decade before the former partners wrestled for control amid allegations Chen swindled millions for personal investments and luxury purchases.
Chen faces embezzlement charges in China. He and Huang appear on a Chinese government list of 100 most-wanted alleged economic fugitives who fled to avoid prosecution for money laundering and other financial crimes. Chen and his attorneys did not respond to requests for comment by deadline and have not answered the trustee’s or Ganglu’s latest court filings.
Multiple limited-liability companies linked to Chen and his spouse filed claims to recover money from the Fashion Mall bankruptcy.
“We’re pleased that the trustee filed an adversary against the Chen parties,” Ganglu’s bankruptcy attorney, Peter Russin of Meland Russin & Budwick in Miami, said. “We think that will help move the case along, which is beneficial to all the creditors.”
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