SAN DIEGO (CN) - Promoters of the Hard Rock Hotel San Diego took tens of millions of dollars through bait-and-switch contracts that led investors to believe they would be treated like "rock stars" in suites that cost as much as $2 million apiece, but let them use the rooms for only 4 weeks a year, according to a federal class action.
The class claims that promoters sold investment contracts on studios and suites at Hard Rock Hotel San Diego without registering them with the SEC or qualifying them with the California Department of Corporations because they didn't want federal and state regulators reviewing the agreements.
The class claims the purchase contracts gave the hotel control of the keys to the units and allowed investors to use them only 28 days a year. Whether the investors made money on the units wholly depended on the efforts of the promoters, the complaint states.
The investors say the money they are receiving is only a fraction of what they need to break even. They claim to have "suffered tens of millions of dollars in damages."
The class claims that when they entered the agreements, they thought had a choice about whether to use the promoters as managers - but they had no such choice.
"The Hard Rock Hotel San Diego Investment Contract was an artifice of deception" used to "shift substantial risks of the [hotel] to dazzled investors," according to the complaint.
The defendant promoters include the Tarsadia Hotel, 5th Rock LLC, MPK One LLC, Playground Destination Properties, and East West Bank; the individual defendants are Tusher Patel, B.U. Patel, and Gregory Casserly.
The class seeks rescission and damages for misrepresentation and omissions, and securities and corporations violations.
They are represented by Maria Severson with Aguirre, Morris & Severson.
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