Businessman Sues Schwabs for $25 Million

LOS ANGELES (CN) - Charles Schwab plotted to squeeze a business partner out of an ecological real estate development on land owned by the family of Indonesian dictator President Suharto, the partner claims in a $25 million lawsuit.

Nicholas Behunin, Sealutions and Grain Collective sued Charles Schwab, 76, his son Michael Schwab and others in a Superior Court complaint that alleges fraud, negligent misrepresentation, breach of fiduciary duty, constructive fraud and breach of contract.

Charles Schwab is the founder of the brokerage Charles Schwab Corporation.

A spokesman for Charles Schwab called Schwab a "passive investor in Mr. Behunin's company with no other involvement."

"The lawsuit is baseless and seems to be trying to shift the blame for Behunin's bad business judgment," Gary Gable wrote in an email. "He has no legitimate claim and his suit can only be characterized as a nuisance."

Behunin claims in the lawsuit that he founded Sealutions to pursue environmentally friendly real estate developments and invest in "technology to address a broad array of coastal and marine issues." In 2010, he formed an entity called Seachange with Michael Schwab, according to the complaint.

The pair later established a charitable corporation called Seathos, according to the 24-page lawsuit. In 2010, Behunin says, he persuaded (nonparty) Julia Roberts and her husband, Daniel Moder, to give $200,000 to the charity.

Behunin claims that through Seachange, Michael and Charles Schwab later formed the SeaChange Opportunity Fund whose "initial emphasis would be on real estate acquisitions and coastal development in Indonesia and its environs."

The Schwabs then pursued a real estate partnership with the Suharto family, which had acquired millions of acres of land during President Suharto's 31 years in power, according to the lawsuit.

"It was widely reported that during his tenure as president of Indonesia, Suharto and his family had amassed an enormous fortune, reputed to be in the tens of billions of dollars, from illegally siphoning off the wealth of that country, in furtherance of which Suharto had committed numerous human rights atrocities," the complaint states.

During the Indonesian military's occupation of East Timor between December 1975 and October 1999, at least 100,000 people died. Suharto died at 86 in 2008.

Though Charles Schwab knew of the "nefarious means in which the Suharto family had acquired its enormous wealth and power" he hand no qualms about doing business with the family, according to Behunin's lawsuit.

Behunin claims that during a round of golf with the Schwabs at the San Francisco Golf Club in May 2011 Charles Schwab said "he wanted to solidify the business relationship with the Suharto family, and reconfirmed that he would fund SCOF [SeaChange Opportunity Fund] for the contemplated Indonesian real estate investments."

As they played golf, Behunin claims, he discussed a development in Bali between Sealutions and Suharto's youngest son, which would make use of land President Suharto had acquired using "military force."

"Charles Schwab thereupon instructed Behunin to keep the project moving forward and to make certain that the Suharto family knew that Charles Schwab had a continued interest in developing a long-term relationship with them in Indonesia," the lawsuit stares.

Behunin claims that in June 2011 the Schwabs and other investors hatched a plan to freeze Sealutions out of an Indonesian real estate development on land owned by the Suharto family.

He claims that over the course of several meetings at Michael Schwab's home in Venice, Calif., Michael Schwab stated that the Schwabs would cut off funding for Sealutions unless Behunin agreed to terminate his interest in Seachange.

"Michael Schwab promised and represented to Behunin that if Sealutions agreed to terminate all connections with Seachange, Michael Schwab would form a new entity, to be owned one-half by Behunin and one-half by Michael Schwab, that would take over the interests of Sealutions in Seachange," the lawsuit states.

Michael Schwab in November 2011 founded a company called Big Sky Asia PTE and gave Behunin a 50 percent interest in the company, Behunin claims. But he says that Schwab never transferred Sealutions' new interest in Seachange to the new entity. The Schwabs later cut of funding for Sealutions, according to Behunin.

He claims that the Schwabs transferred all Seachange and SeaChange Opportunity Fund assets to three other businesses, including a defendant Cayman Islands entity called Emergent Indonesia Opportunity Fund.

Behunin claims that $65 million was placed in the fund, including a $30 million investment from the Suharto family and a $35 million investment from Charles Schwab.

Previously, the Schwabs allegedly had promised to convert the $3 million in loans it had made to Sealutions into equity in the company. But Behunin claims the Schwabs broke that promise and said that Behunin had to pay back the funding.

"As a result of the conduct of defendants and each of them, Sealutions has been forced to cease all operations," the lawsuit states.

Named as defendants in addition to the Schwabs are Live Oak Ventures, Big Sky Ventures, Big Sky Partners, Big Sky Real Estate, Seachange, Matthew Burwood, MB Realty Investments, Timothy Albinson, Somerset Advantage, Emergent Indonesia Opportunity Fund, Emergent Capital Management, and Emergent Capital Partners.

Behunin seeks $25 million in damages. He is represented by Leonard Steiner with Steiner & Libo of Beverly Hills.

Defendants' spokesman Jason Kinney told Courthouse News: "We intend to vigorously point out the facts to the court, defend ourselves in this legal proceeding and expect the court to dismiss the action at the appropriate time."

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