An investor client of Adam Leitman Bailey, P.C. invested several million dollars in a number of separate real estate investment properties owned or controlled by a single real estate developer.
The developer represented to the investor that the offerings were private in nature and not subject to the registration filing requirements prescribed for public offerings of real estate investment securities by the Martin Act, New York State’s “blue sky” law.
Over time, the client came to believe that the developer had misrepresented the private nature of the offerings and mismanaged and/or fraudulently diverted investment profits to the detriment of the client’s investments.
The client hired Adam Leitman Bailey, P.C. to review the investments and obtain the payment of the investment profits that the client otherwise should have received from the developer. Adam Leitman Bailey, P.C.’s review and analysis of the investments concluded that the nature and structure of the offerings were not in fact private in nature, but were such that they should have been registered as public offerings subject to the full protections given to investors by the Martin Act.
Adam Leitman Bailey, P.C.’s review also concluded that the client’s suspicions of mismanagement and possible diversion of investment profits were supported by Adam Leitman Bailey, P.C.’s analysis of the periodic investment reports issued by the developer which showed that the ratio of expenses claimed by the developer were inconsistent with the representations made in the various offering materials submitted to the client and to other investors.
When confronted with Adam Leitman Bailey, P.C.’s analysis and conclusions concerning the client’s investments, the developer initially refused to consider the client’s demands. Nevertheless, while continuing to deny the client’s allegations, the developer eventually agreed to enter into a confidential settlement agreement that was satisfactory to the client.
This matter was handled Adam Leitman Bailey and by John M. Desiderio, the Chair of the firm’s Real Estate Litigation Group.