Brokerage Firm Slapped With $2 Million Default

     (CN) - The firm of a hotel broker charged with mail fraud and other crimes must pay $2.15 million to the New Jersey company that says he fleeced them, a federal judge ruled.
     CHNJ Investors allegedly consulted Virginia broker Robert Koger about three years ago to help with buying a $25 million loan secured by the Crowne Plaza Hotel in Cherry Hill, N.J., which was in foreclosure proceedings at the time.
     It said Koger never intended to negotiate a fair price or close a legit deal.
     The 47-year-old was arrested on Sept. 9, 2013, and a Virginia federal judge reportedly ordered Koger detained until trial because he is a "flight risk."
     In its civil complaint against Koger and his firms, Molinaro Koger Inc. and Purcell NJ LLC, CHNJ claimed that it gave Koger a refundable deposit of $1 million years ago, as per their retainer agreement, and loaned him another $150,000 that he never repaid.
     The broker allegedly lied that the loan's owner, MTGLQ Investors, refused to sell the loan to CHNJ directly, preferring to instead have CHNJ buy the loan from Purcell.
     In February 2011, Koger induced CHNJ to agree to indemnify Purcell from claims arising from a fake confidentiality agreement barring Purcell from discussing the loan with CHNJ, according to the complaint.
     Months later, CHNJ allegedly entered a $15 million purchase and sale agreement, which was amended within days so that the company would pay $1 million to Purcell and $1 million into escrow, plus $150,000 to extend the closing date by six weeks.
     CHNJ said it soon discovered, however, that Purcell had paid MTGLQ only $12.5 million for the loan so that Koger and Purcell could keep the $3 million difference.
     Koger and Purcell then agreed to reduce the price to $12.5 million, and CHNJ agreed to pay Koger an extra $825,000, plus $25,000 in attorneys' fees, the complaint states.
     But Koger and Purcell allegedly never returned this money, despite CHNJ's demands.
     Ultimately, because the loan sale never closed, Koger and Purcell defrauded CHNJ out of at least $2.125 million, according to the complaint.
     CHNJ then negotiated directly with MTGLQ to acquire the loan on April 10, 2012, according to the complaint. Around that time, MTGLQ allegedly told CHNJ that the confidentiality and indemnification agreements Koger produced were "bogus and false."
     The nine-count complaint asserts claims for fraud; negligent misrepresentation; unjust enrichment; conversion; misuse of the corporate veil, alter ego, and undercapitalization; malpractice; breach of and duty of good faith and fair dealing; and state civil RICO. CHNJ seeks compensatory, consequential, and punitive damages, plus attorney's fees, costs, and interest.
     While a motion to dismiss from Koger and Molinaro Koger's was pending, their attorney withdrew from the suit, and they were ordered to retain new counsel by April 9, 2013.
     The firm never did so, however, and Koger said on April 12 that he would represent himself pro se, as he had sold his interest in and was no longer a principal of Molinaro Koger.
     CHNJ moved for default judgment against the brokerage firm, seeking $2.15 million.
     U.S. District Judge Jerome Simandle granted the motion Jan. 21, finding that "CHNJ authorized the deposits to be released from escrow in reliance on Molinaro Koger Inc.'s representations that the loan transaction would be completed, but Molinaro Koger Inc. never intended to consummate the transaction. CHNJ's deposits were never refunded. Plaintiff provided documents supporting these facts. Plaintiff has thus shown that Molinaro Koger Inc. is liable for plaintiff's losses of $2.15 million."
     The brokerage firm has made no effort to argue otherwise, the ruling states.
     "The clerk's office entered default against defendant Molinaro Koger Inc. on May 15, 2013," Simandle wrote. "Since that time, defendant Molinaro Koger Inc. has not entered an appearance and has not responded to either of plaintiff's default judgment motions. Molinaro Koger Inc. failed to obtain new counsel despite ample notice and opportunity and, thus, it has failed to defend itself."
     The latest decision makes no mention of Purcell, which took no part in last year's motion to dismiss.