Four years ago, Chinese investors sued the developer behind a condo complex in Vail, accusing him of defrauding them and 150 others out of $83 million through a “rigged” loan.
As the long legal journey that followed winds down this month without a trial, those investors stand to receive nothing for their efforts. Their lawyers, on the other hand, will get paid $725,000. And lawyers for the developer they sued may make even more.
The litigious dispute dates back to the early 2010s, when the Vail developer Peter Knobel was seeking foreign funding for Solaris Residences, an upscale condo project. In 2011 and 2012, 165 Chinese nationals invested about $500,000 each, or $82.5 million total.
Their money was sent to the Colorado Regional Center, which solicits investments from foreign individuals in exchange for permanent resident visas, more commonly called green cards. The CRC then loaned the $82.5 million to Knobel and his companies to build Solaris.
Under this arrangement, Knobel had two options as the loans matured: He could give investors 19 condos as collateral for the $82.5 million in loans, or repay them with interest. Because the Vail condo market was struggling at that time, he chose to turn over the condos.
Thirteen investors, believing those 19 condos were “a freakish under-collateralization” and that the loans were “rigged to never get repaid,” sued Knobel and the CRC in federal court in 2019. Their lawsuit used versions of the word “fraud” 26 times.
That case and a second similar lawsuit by another group of Chinese investors were bad news for the CRC, whose arrangement with Knobel required it to indemnify the developer and bear the costs of any Solaris litigation. And for four years, there was a lot of litigation.
Both federal cases were thrown out in 2021 and the investors were ordered to pay as much as $1.6 million in attorney fees to the defendants. But that decision was partly reversed by an appeals court in 2022, which revived the lawsuits and voided the attorney fee award.
Meanwhile, a third group of investors filed a lawsuit in Denver District Court against Knobel and Solaris, similarly accusing the developer of breaching contracts by not repaying them in cash. That case was scheduled to be decided at a three-day trial downtown in late August.
Instead, all parties have agreed to settlements which, if approved by judges, will end their four years of litigation. The settlements are marked confidential but were filed as exhibits in the Denver District Court case and obtained by BusinessDen through records requests.
Under those settlements, the CRC will pay $500,000 to Doug Litowitz, the Chicago-based lawyer for 33 investors; $125,000 to a New York law firm that represents 31 investors; and $100,000 to a California firm that represents another 16 investors. The CRC must also pay a to-be-determined amount for attorney fees incurred by Knobel and Solaris.
“Continued litigation will be extremely expensive, with an uncertain outcome for all parties (and) further potential for appeals of the rulings,” plaintiffs and defendants wrote recently in a joint motion asking Denver District Court Judge Jill Dorancy to approve the settlements.
The only concession that investors won is that the CRC must continue selling condos at the complex and returning the proceeds to investors, as it has. To date, 13 have been sold and $42 million returned to investors, leaving three unsold condos worth an estimated $20.5 million. Under the settlements, those must be sold in 30 months.
“The parties believe the settlement agreements offer the certainty of a greater return to limited partners on a shorter time frame than…continuing to litigate,” the joint motion states.
Sale proceeds go to a CRC subsidiary called Colorado Regional Center Project Solaris LLLP, in which the Chinese investors are limited partners. The bad news for investors is that the settlement payments to Litowitz and others must be made by that same subsidiary.
“Current projections have the limited partners receiving roughly 80 percent of the amount they invested” after the last of the 19 Solaris condos are sold, according to the court filing.
Lawyers involved in the Solaris cases declined to discuss the settlements in detail because they are confidential and have not been approved by judges. That includes Litowitz, who in the past has unshyly called Solaris “a roach motel” and referred to Denver’s legal and investment communities as a “backwater inbred cesspool of self-congratulatory imbeciles.”
“When I started this case, the limited partners had received zero. After I pushed this case, they are now getting back money,” Litowitz said Thursday, referring to the 80 percent recovery rate they are projected to receive. “I worked harder on this case than any other lawyer and kept fighting it longer than any other lawyer, so I was awarded more money.”