Founders Group International managing partner Dan Liu has defended his actions and fired back at former partner and ousted company president Xian “Nick” Dou, who filed a lawsuit last month accusing Liu of misappropriating company funds and jeopardizing FGI’s future.
In his court-filed answer Friday, Liu discredits Dou’s claim to ownership in the company, defends as good business the unconventional creation and assignment to himself of more than $140 million in mortgages against FGI properties, and suggests change could be coming to some of the company’s many properties.
FGI and affiliated entities own 22 Grand Strand golf courses and numerous other area properties and businesses.
Liu and Dou purchased all of the courses and most of the properties between September 2014 and April 2015 as partners through nearly 20 limited liability companies under the FGI umbrella. Liu provided the money as a Chinese national representing three Chinese companies that own approximately 90 percent of FGI, and Dou found properties and helped negotiate deals and establish business operations as a U.S. citizen and immigration consultant based in New York.
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In his suit, Dou claims Liu lied, withheld information about the manner in which his Chinese companies conducted business, and misled him in order to entice his personal investment and involvement in FGI.
In Liu’s answer, he asserts Dou invested no money into any of the FGI entities and his approximate 10-percent interest was awarded based on “erroneous and incorrect information” provided by Dou, so he is now challenging the validity of Dou’s ownership.
Some of the properties may soon be changing hands or changing form, according to Liu’s court filing.
In a sworn testimony affidavit, Liu says some of FGI’s accumulated properties “are either in negotiations or under contract to be developed, sold or acquired.”
FGI owns many of the Strand's acclaimed golf facilities including Pine Lakes Country Club, TPC Myrtle Beach, Grande Dunes Resort Course, Myrtle Beach National Golf Club, International World Tour Golf Links and Pawleys Plantation, and has several golf-related businesses.
Additional holdings include 29 acres of Myrtle Beach oceanfront property, more than 300 acres of undeveloped land at Wild Wing Plantation, TPC Myrtle Beach and International World Tour Golf Links, 200 lots at Wild Wing, dozens of acres in Carolina Forest, and the 80-unit multifamily Stonewall Villas development in Longs.
In the affidavit, Liu acknowledges a series of transactions that created more than $140 million in mortgages against nearly all of FGI’s properties and assigned those liens to himself, and says the transactions “are for legitimate business purposes.”
As the managing partner of FGI, Liu essentially would have to pay himself with company funds to keep the mortgages current, or he could conceivably foreclose on the defaulting properties, taking individual control of all of them.
Two separate answers were filed to Dou’s lawsuit Friday.
Dominic Starr, the attorney for Liu and the three Chinese companies, is coordinating the defense of the suit with attorney Daniel MacDonald, who represents the 15 FGI subsidiary LLCs that were added as defendants six days after the initial suit was filed.
Liu requests dismissal of the suit, and claims Dou’s allegations are subject to arbitration pursuant to the terms of the operating agreements of FGI LLCs.
Liu denies essentially all claims of impropriety in Dou’s suit. Those assertions include using FGI funds for the purchase and upkeep of Liu’s nearly $400,000 boat; transferring $550,000 to New York attorney Hugh H. Mo for the defense of Liu’s personal legal matters in China; transferring FGI assets to his company D&C International Holdings LLC and purchasing “10 or more” properties through D&C Holdings with FGI funds; and further misappropriating company funds.
MacDonald’s filed answer generally reiterates Liu’s denials of the accusations against him, though in some instances it states the LLC entities lack sufficient information to admit or deny some allegations.
In addition, the 15 LLCs also request the suit be dismissed, and contend “that to the extent actions complained of by [Dou] did occur, if any, then those actions were taken with the full knowledge, consent, agreement, encouragement, advice and acquiescence of [Dou].”
While Dou says in his suit he believes he was fired as president of FGI on June 19 because of his questioning of Liu’s alleged wrongful acts, Liu’s answer says Dou was “terminated and removed as a result of misconduct and malfeasance in connection with the FGI entities.”
Liu denies Dou’s assertion that a prosecutor’s office in the Jiangsu Province of China has issued a statement claiming it seeks his arrest on the suspicion of investment fraud, though The Sun News has obtained documents that support Dou’s assertion.
Liu argues Dou is not entitled to injunctive relief of Liu’s operation of FGI, a court-appointed receiver to run the company, or a full accounting of all business activities and actions undertaken by Liu with respect to FGI — three things Dou requested in his suit.
Hearings on motions for an injunction and the appointment of a receiver have a preliminary court date of Aug. 2 in the Horry County 15th Judicial Circuit Court of Common Pleas.
In his answer, Liu affirms he is in the United States via a valid temporary work permit, which he refers to as a work “visa.”
Founders Group International applied in December 2015 for an EB1(c) visa on Liu’s behalf, according to U.S. Citizenship and Immigration Services documents, and the request is still pending. EB1(c) visas are for U.S. managers of an international company, and Liu allegedly is remaining in the U.S. through the work permit as he awaits the visa outcome.
Addressing a pair of Dou’s accusations in his answer, Liu acknowledges FGI employs two of his family members and says they are appropriately compensated for their duties, and says FGI’s leasing of office space for a call center from his D&C Holdings company is justified.
Liu reiterates his authority to act on behalf of the three majority owner Chinese companies, which Dou questioned in his suit, and the 15 defendant LLCs also reiterate that authority in their answer.
Liu says in his answer that Dou was terminated as a manager “as a result of defendant Dan Liu acting within the scope and authority for the owners of the 90 percent membership interests and in accordance with the operating agreements for the entities.”
In his affidavit, Liu also claims and in some cases provides written evidence for the following:
▪ Two employees were terminated for cause “related to financial matters and an investigation is ongoing. It is uncertain whether [Dou] was involved in the financial issues.”
▪ Dou signed three documents in October 2016 acknowledging Liu as the authorized representative and principal owner in the three Chinese companies that are majority owners of the FGI LLCs.
▪ The owner of the largest overall percentage of Founders entities is Jiangsu Tianru Danfo Commerce and Industry, of which Liu is the majority owner.
▪ Dou is still a manager of one LLC — Founders GCC LLC — because Dou’s wife is a company member and Liu accidentally failed to give her notice of a meeting called for a member vote on Dou’s termination on June 19.
▪ After notice of Dou’s termination meeting, Dou sent an email to FGI management employees challenging Liu’s authority to manage the companies and stating he was the sole legal individual member and manager of FGI.
▪ Dou tried to remove various permits and business licenses from FGI businesses following his termination.
▪ Regarding the fishing boat Liu purchased, $350,000 was borrowed through loans from First Palmetto Bank ($250,000) — no documentation was provided for this loan — and the FGI entity Founders National Golf LLC ($100,000) that was signed by Dou and Liu. The boat was used for business to entertain clients and contacts.
▪ Dou received more company distributions than he was entitled to receive.
▪ Dou consented to the hiring of Mo “to assist with issues that affect the Founders entities.”
Dou’s attorney, Reese Boyd, said he was expecting the tenor of Liu’s answer. “It’s no surprise a defendant is going to deny, deny, deny,” Boyd said. “That’s what defendants do.”
Aberdeen Country Club
Burning Ridge Golf Club
Colonial Charters Golf Club
Grande Dunes Resort Course
Indian Wells Golf Club
International World Tour Golf Links
Long Bay Club
Myrtle Beach National West
Myrtle Beach National SouthCreek
Myrtle Beach National King's North
Pine Lakes Country Club
River Hills Golf & Country Club
Wild Wing Plantation
TPC Myrtle Beach (parts in both counties)
Founders Club at Pawleys Island
Litchfield Country Club