(CN) – A month after Hurricane Odile ravaged Mexico’s five-star Capella Pedregal Resort in Cabo San Lucas, the U.S. agricultural giant Cargill spotted an opportunity for an “illegal takeover” of a family business in a “seaside paradise,” a federal lawsuit alleges.
Founded by the Diaz Rivera family in 2001, the Mexican company Desarrolladora Farallon says it came to own the 23.7-acre “vacation haven” at the tip of Baja California Sur through the hard work, sacrifice and vision of the Diaz Rivera family.
Originally purchased by patriarch Don Manuel Diaz Rivera in the 1970s, the grandson Juan developed the seaside property at “tremendous personal expense,” Farallon says.
“In 1982, when the Mexican peso plummeted in value against other currencies, the family was forced to sell other assets – including the engagement ring of Don Manuel’s wife and the family matriarch – in order to meet the property’s debt service burden, which was payable in U.S. dollars,” the Jan. 23 complaint states.
It would be nearly two more decades before the Diaz Rivera family founded Farallon to transform the property into the resort the grandfather imagined, according to the complaint.
Under the terms of a May 2006 agreement, Farallon says it was supposed to be the majority shareholder in its joint partnership with Cargilll.
Capella Hotel Group, the same business behind the redevelopment of the Ritz Carlton, allegedly became the resort’s operator that same year.
The parties valued the property that year at $18.5 million, the complaint states.
Despite those high hopes, Farallon claims that “years of broken agreements, breaches of fiduciary duty, and other misconduct” helped Cargill engineer the “illegal takeover of the resort.”
Farallon alleges that Cargill appointed an asset manager for the resort that was secretly connected the agricultural giant.
In 2011, Cargill allegedly “began to divest itself of its real estate projects in Latin America, save for the resort,” and began to use “heavy-handed tactics to attempt to force Farallon and the Diaz Rivera family to submit to Cargill’s aims.”
Cargill then saw a window of opportunity in the month after a “devastating” hurricane left the resort closed for repairs, the complaint alleges.
On Nov. 7, 2014, Cargill used a “private security force” to refuse entry to Capella’s manager, and sent out a press release announcing that the hotel had severed ties with its then-operator, Farallon says.
Capella touted in a press release later that month that a New York Supreme Court judge ordered Capella’s reinstatement as the resort’s manager.
But Farallon says Cargill also got an adverse ruling in a Mexico court, an order it flouted in December 2014 when it “began to refuse Capella entry to the resort.” Farallon also says Cargill’s business dealings amount to “crimes in Mexico.”
Ann Folkman, a spokeswoman for CarVal Investors, the Cargill entity that manages the resort partnership, emphasized that the lawsuit “part of a long-running dispute.”
“CarVal Investors will vigorously defend against these allegations,” Folkman said in an email. “Beyond that, we cannot comment on pending litigation.”
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