Commercial Real Estate and Legal Issues and Law and Real Estate & Retail

HDG Mansur hit with $5.8M court judgment

August 8, 2013

A federal judge in New York has slapped HDG Mansur with a $5.8 million judgment, ruling in favor of a former client that said the Indianapolis real estate firm misappropriated funds.

The ruling, handed down this month, was a victory for Cayman Islands-based Global Property Investment Fund.

Companies tied to HDG Mansur own the downtown Market Tower, a 31-story building that’s the city’s fourth-tallest, in addition to the Illinois Building across the street.

In its suit filed in January, GPIF accused HDG Mansur of misleading two of its funds with deceptive accounting practices.

HDG Mansur was in financial distress, according to the suit, and had little to no sources of additional revenue other than the fees from the funds.

“There is a significant possibility that without their ‘cash grab’ from the funds’ assets, the HDG entities would be unable to continue operating,” GPIF says in its suit.

The funds—which manage money for overseas investors—hired the HDG Mansur entities in 2002 to provide management and investment advisory services.

Their relationship remained intact for 10 years, until December 2012, when the funds say they discovered that the HDG entities had paid themselves millions of dollars from the funds’ assets without their knowledge.

The funds claim in their suit that they were told by HDG Mansur CEO Harold Garrison that the HDG entities charged them $5.8 million in additional financing fees to rectify a billing error dating to the inception of the agreement.

HDG arrived at the figure after determining it was entitled to fees based on total amounts invested in the funds, rather than on just the financing arranged for each investment, the funds allege in their suit.

“The HDG entities’ new interpretation of the agreements would result in their being paid again based on the gross acquisition price, and thus is a classic case of ‘double dipping,’” GPIF said in its claim.

The court ruled in favor of GPIC on summary judgment, without going through a full-blown trial.

HDG Mansur continues to have counterclaims against GPIC that were not addressed in the ruling. The Indianapolis firm says those claims amount to millions of dollars.

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