Residence Inn Baltimore at the Johns Hopkins Medical Campus is part of a revitalization effort led by the East Baltimore Development Inc. (Giacomo Bologna/The Baltimore Banner)
A Colorado firm is accused of helping a shady businessman in Baltimore dupe Chinese investors out of $47 million by inflating construction costs on a doomed project.
Executives at Hensel Phelps, the national construction company in Greeley, flew to China, talked nearly 100 people there into investing in an $87 million Marriott in a blighted part of Baltimore, ensured their firm would be paid an unusually high amount, and left investors holding the bag when the hotel failed -, as Hensel Phelps knew it would, according to 44 investors.
“They knew, expected and intended for plaintiffs to lose all of their money,” investors allege.
Those allegations are in a nearly-100-page lawsuit that was filed in Baltimore on Dec. 18 and first written about by The Baltimore Banner. Hensel Phelps’ development and construction arms are both defendants, as are three current and former executives.
Heather Ward, a spokeswoman for Hensel Phelps, did not return a request for comment.
In the fall and winter of 2014 and 2015, Hensel Phelps Construction CEO Mike Choutka and then-Hensel Phelps Development President Eric Wilson reportedly made several trips to China. They were joined by Ronald Lipscomb, a once-prominent developer with a criminal past.
Facing accusations of bribing a city councilwoman, Lipscomb pleaded guilty to violating campaign finance laws in 2009 and agreed to testify against an ex-girlfriend, Baltimore Mayor Sheila Dixon, in another bribery case. Dixon was later convicted of a minor offense.
But in China, investors were told only that Lipscomb had “extensive experience as a developer,” including $2.5 billion in projects, according to a copy of the offering memo they were given. That memo sought $500,000 each from 94 investors under the EB-5 program, which grants permanent residency to foreign nationals who invest in certain development projects.
Choutka, Wilson and Lipscomb, among others, sold investors on the Residence Inn Baltimore at the Johns Hopkins Medical Campus, a 15-story and 194-room extended-stay hotel. Their offering memo projected it would be profitable by its second year and paying dividends to investors soon after that.
The hotel opened in 2017, according to Baltimore media reports, but has never been profitable and recently defaulted on a $21 million bank loan. The 44 investors now suing its creators say that failure wasn’t due to unforeseen circumstances but, instead, was intentional.
“Defendants knew at the time that they solicited plaintiffs’ investment that the project was not economically viable,” the lawsuit alleges. And yet, they used a “false marketing scheme to dupe plaintiffs into investing into a project that all defendants knew was doomed.”
While the average cost for constructing a comparable 194-room hotel is $24 million, the Residence Inn cost $56 million to build and $87 million in total, its investors say. And that doesn’t include 88 parking spots that were supposed to be built, because only 19 were added. So the hotel has been leasing parking from a neighbor, at a significant cost.
According to investors, Hensel Phelps knew that annual updates blaming COVID for the hotel’s losses in 2020 and blaming a unionization attempt for losses in 2021 were inaccurate. But by then, Hensel Phelps and Lipscomb had made their money. Only investors lost out.
In addition to Choutka and Wilson, the Chinese nationals are suing Laird Heikens, a vice president at Hensel Phelps who had a management role on the project. The defendants face 22 claims, including fraud, fraudulent inducement, civil conspiracy and gross negligence.
Residence Inn Baltimore at the Johns Hopkins Medical Campus is part of a revitalization effort led by the East Baltimore Development Inc. (Giacomo Bologna/The Baltimore Banner)
A Colorado firm is accused of helping a shady businessman in Baltimore dupe Chinese investors out of $47 million by inflating construction costs on a doomed project.
Executives at Hensel Phelps, the national construction company in Greeley, flew to China, talked nearly 100 people there into investing in an $87 million Marriott in a blighted part of Baltimore, ensured their firm would be paid an unusually high amount, and left investors holding the bag when the hotel failed -, as Hensel Phelps knew it would, according to 44 investors.
“They knew, expected and intended for plaintiffs to lose all of their money,” investors allege.
Those allegations are in a nearly-100-page lawsuit that was filed in Baltimore on Dec. 18 and first written about by The Baltimore Banner. Hensel Phelps’ development and construction arms are both defendants, as are three current and former executives.
Heather Ward, a spokeswoman for Hensel Phelps, did not return a request for comment.
In the fall and winter of 2014 and 2015, Hensel Phelps Construction CEO Mike Choutka and then-Hensel Phelps Development President Eric Wilson reportedly made several trips to China. They were joined by Ronald Lipscomb, a once-prominent developer with a criminal past.
Facing accusations of bribing a city councilwoman, Lipscomb pleaded guilty to violating campaign finance laws in 2009 and agreed to testify against an ex-girlfriend, Baltimore Mayor Sheila Dixon, in another bribery case. Dixon was later convicted of a minor offense.
But in China, investors were told only that Lipscomb had “extensive experience as a developer,” including $2.5 billion in projects, according to a copy of the offering memo they were given. That memo sought $500,000 each from 94 investors under the EB-5 program, which grants permanent residency to foreign nationals who invest in certain development projects.
Choutka, Wilson and Lipscomb, among others, sold investors on the Residence Inn Baltimore at the Johns Hopkins Medical Campus, a 15-story and 194-room extended-stay hotel. Their offering memo projected it would be profitable by its second year and paying dividends to investors soon after that.
The hotel opened in 2017, according to Baltimore media reports, but has never been profitable and recently defaulted on a $21 million bank loan. The 44 investors now suing its creators say that failure wasn’t due to unforeseen circumstances but, instead, was intentional.
“Defendants knew at the time that they solicited plaintiffs’ investment that the project was not economically viable,” the lawsuit alleges. And yet, they used a “false marketing scheme to dupe plaintiffs into investing into a project that all defendants knew was doomed.”
While the average cost for constructing a comparable 194-room hotel is $24 million, the Residence Inn cost $56 million to build and $87 million in total, its investors say. And that doesn’t include 88 parking spots that were supposed to be built, because only 19 were added. So the hotel has been leasing parking from a neighbor, at a significant cost.
According to investors, Hensel Phelps knew that annual updates blaming COVID for the hotel’s losses in 2020 and blaming a unionization attempt for losses in 2021 were inaccurate. But by then, Hensel Phelps and Lipscomb had made their money. Only investors lost out.
In addition to Choutka and Wilson, the Chinese nationals are suing Laird Heikens, a vice president at Hensel Phelps who had a management role on the project. The defendants face 22 claims, including fraud, fraudulent inducement, civil conspiracy and gross negligence.
