Bank Chairman Thomas Lumpkin testified he never saw "amended contract" and didn't know Franco existed. Cases: Franco Investments v. Pine Run Developers et al; Franco Investments v. Green Palm et al
Case no: 04-17806-CA-06, 04-17804-CA-40
Description: Breach of fiduciary duty, civil theft
Filing date: Aug. 18, 2004
Trial dates: June 7-15, 2010
Final judgment: $14.06 million
Judge: Miami-Dade Senior Judge Eugene Fierro
Plaintiff attorney: Robert Zarco and Alejandro Brito, Zarco Einhorn Salkowski & Brito, Miami
Defense attorneys: None
Details: Like many Venezuelans who left their homeland in recent years, Moises Franco arrived in the U.S. a decade ago with liquid funds and a desire to invest. After dabbling in the stock market, Franco turned to a real estate investment project with several acquaintances he’d met at an Aventura synagogue.
The real estate market was getting hot, and the other investors said the project had promise: They bought a 9.8-acre agricultural parcel in Palm Beach County and planned to turn it into a 77-townhouse development. To join, Franco dealt with a handful of investors who owned Landmark Investments and Green Palm, the two firms that ran the development company Pine Run.
On Nov. 5, 2003, Franco paid $570,000 to buy half of Landmark, giving him a 25 percent stake in the development project. Months later, he paid $240,000 to buy a portion of Green Palm, increasing his stake in the development to 34 percent. At that price for his share, the land was valued at $2.4 million.
Franco and the heads of the other two companies — Landmark’s Michael Levin and Green Palm’s Jose Corkidi — signed a 2003 agreement requiring all three men to sign off on any major decisions and Pine Run expenses. It also prevented taking out any mortgage other than for construction on the Pine Run property.
Plaintiff case: Franco figured he could turn his $810,000 into $4.5 million in a few years. He soon felt like a third wheel with no control over the project, and his attorneys say Landmark and Green Palm were run without his consent.
By June 16, 2004, Franco wanted out and agreed to take $1.1 million for his share. But none of the other investors showed up at the scheduled closing, and Franco sued two days later. He claimed the other investors drained Pine Run’s bank account, took out a $2.25 million mortgage from Biscayne Bank and depleted that without building a thing.
Franco filed two lawsuits claiming Pine Run breached the contract and accusing several investors of fraud, civil theft and conspiracy.
Zarco and Brito accused investors of misappropriating more than $1 million in the Pine Run bank account. Miami forensic accountant Alan Fiske was called as a witness to analyze Pine Run’s canceled checks, profit and loss statements, balance sheets and disbursements.
The attorneys also noted that when investors offered to buy out Franco for $1.1 million, he wasn’t told home-builder D.R. Horton had offered $3.65 million for the property.
The 2003 investment agreement was not fully recorded in Palm Beach County public records. Bank chairman Thomas Lumpkin testified he never saw the amended contract and didn’t know Franco existed.
Defense case: Several attorneys — Aventura’s Richard J. Burton, Dania Beach’s Marcy Resnik and Howard Kahn, and Hallandale Beach’s Mark Perlman — dropped out before trial, leaving the Landmark and Green Palm investors to represent themselves. A default judgment was entered against the defendants, and the trial proceeded on damages only. Levin represented himself, and the others offered no defense.
While in the case, Burton argued Franco did not buy stock directly from Pine Run but instead from previous investors.
The Landmark principals were Levin and Irving Carpman. Other stakeholders in Green Palm were Corkidi, Max Carlos Lederman and Jacques Aghion. The investors and their former attorneys except Burton did not return calls for comment by deadline.
Zarco said investors claimed all of the Pine Run spending was legitimate and denied breaching their fiduciary duty because Franco agreed his signature wasn’t necessary at times. The defendants also said they acted together for Pine Run but not in a conspiracy against Franco.
Outcome: A single jury decided both cases at the same time. The panel awarded $7.13 million for civil theft against Levin, Corkidi, Lederman and Aghion and $4.67 million for breach of fiduciary duty against Landmark, Levin, his wife Hannah, Corkidi, Lederman, Aghion and Carpman. In the second case, the jury awarded $2.26 million against Green Palm, Corkidi, Lederman and Aghion for breach of fiduciary duty. Franco also was awarded attorney fees, which Zarco estimates at more than $1.5 million.
Quote: “When your ownership interest in property isn’t recorded in public records, anybody else can take action on that property because it’s not properly recorded by you,” Zarco said. “That made Franco vulnerable because in essence he didn’t exist.”
Post-verdict: To recover the funds, Franco’s attorneys have promised to track down asset transfers by the defendants.
— Jose Pagliery
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