LOS ANGELES (CN) – A group of investors claims a San Diego businessman defrauded them in his $20 million purchase of the Crowne Plaza Downtown hotel in Hartford, Conn. The investors say they put $8.4 million into the deal, based on Kyurios Cho’s omissions and misrepresentations.
Gene Choe and 13 other investors say they invested $8.4 million in CHOA Vision LLC after its principal Kyurios Cho told them they would “double their money within two years,” and promised them 12 percent annual dividends.
CHOA and Cho are the defendants in the Superior Court complaint.
The investors say Cho “intentionally concealed” important facts:
that the hotel had been losing money;
that it had “recently lost one of its major corporate clients;”
that it “had a prolonged history of low occupancy rates” in its 350 guest rooms;
that Cho “was to receive a substantial finder’s fee for his role in the acquisition of the hotel;”
and “that he did not invest any of his personal wealth to obtain his own membership interest in the LLC.”
All 14 plaintiffs, like Cho, have Korean surnames.
The investors say the hotel lost more than $7 million under Cho’s management. They say the “growing dissent amongst the members of the LLC” forced Cho to resign in March 2010, and that “only after K. Cho resigned were plaintiffs able to discover K. Cho’s deceit and the extent of his fraudulent conduct.”
They say Cho intentionally concealed material facts during all three rounds of the investments he sought, and misrepresented himself as well.
“K. Cho made efforts to gather a group of investors to join the LLC to purchase the hotel by branding himself as a successful Christian hotelier with humble beginnings,” the complaint states. “K. Cho built his reputation through speaking engagements at churches and other venues where he touted his expertise and success in the hotel industry. And although news articles were being written about K. Cho making assertions that he owned over 40 hotels, K. Cho did not dispute these claims.”
Before signing an operating agreement in early 2007, the “original members,” or investors, parted with roughly $8.4 million, based in part on Cho’s promises of 12 percent annual dividends, the complaint states.
Four plaintiffs say they were original members.
CHOA Vision then bought the hotel for $20.2 million, backed by a $13.1 million bank loan, according to the complaint.
From the summer of 2007 to late 2008, Cho solicited more investors, “first round members” and “second round members.”
Six plaintiffs say they were first round members; four say they were second-round members.
The investors say that took nearly 8 percent of the first-round investments for himself. The first and second round members say Cho concealed that the hotel had been losing money before the LLC bought it, after the LLC bought it, and concealed “that there was an extreme risk involved with their investment.”
Lead plaintiff Choe is assignee of Lux Equity Investment LLC’s interest in CHOA Vision.
The investors seek damages for fraud by misrepresentation, fraud by concealment, negligent misrepresentation, breach of fiduciary duty and violations of corporation codes.
They are represented by S. Young Lim with Park & Lim of Los Angeles.