Golf

Lawsuit alleges Chinese owner of Myrtle Beach golf courses misappropriated company funds

Founders Group International managing partner Dan Liu.
Founders Group International managing partner Dan Liu. jblackmon@thesunnews.com

Founders Group International, a company led by investors from China that owns 22 Grand Strand golf courses and other area businesses and property, is in turmoil.

Following the firing of three corporate executives within the past week, ousted president Xian “Nick” Dou has filed a lawsuit alleging financial misconduct against managing partner Dan Liu and three ownership companies based in China that he represents.

Dou’s lawsuit, filed Thursday in the Horry County Court of Common Pleas, alleges Liu has misappropriated well over $1 million from FGI for the benefit of Liu and his family and friends, including the purchase and upkeep of a $390,000 boat and $550,000 for a personal attorney.

The suit also alleges the District Attorney’s Office in China’s Jiangsu Province seeks Liu’s arrest for possible financial fraud through his involvement in the Yiqian Funding lending business there, and The Sun News has acquired documentation that supports the pending arrest accusation.

Last Friday, FGI general manager Rick Taylor and chief financial officer/vice president Tommy Smothers were terminated, and Dou said he was fired Monday. In the suit, Dou attributes his firing to his questioning of Liu’s “wrongful acts and financial irregularities” regarding the operation of FGI.

Dou is requesting that the court immediately restrain Liu from operating FGI and appoint a receiver over the operations and assets of FGI and affiliated FGI entities to protect Dou’s interests as well as the company’s investors, approximate 1,000 employees and the company and entities themselves from any further misappropriation of funds by Liu until the lawsuit is resolved.

Dou’s attorney, Reese Boyd of the Davis & Boyd law firm in Myrtle Beach, has requested a hearing for a ruling on a court injunction and said he hopes to know more about the case’s timetable within the next few days.

Led by Dou and Liu, FGI purchased 22 courses between September 2014 and April 2015 to become the largest course owner/operator in the Myrtle Beach golf market with approximately a quarter of the public-access courses.

Dou, who was FGI’s president since October 2014, says in his suit that he holds 10 percent ownership of FGI and its entities, while the other 90 percent is held by one or more of the defendant Chinese companies, represented by Liu.

A statement from FGI said the company would not comment on pending litigation, adding that the company has taken steps to strengthen its management team and would soon be announcing a new organizational structure. Liu has appointed marketing director Steve Mays the acting president, and Mays said in the statement that day-to-day operations would continue as usual at FGI properties.

“All senior managers remain in place,” Mays said. “In addition, we have a strong group of managers in place at the director and supervisory levels and we’ll soon be announcing a new organizational structure that will make their roles more robust within our company.”

The suit alleges:

▪  Liu has written checks to family members and third parties without legitimate corporate purpose and used the funds of FGI and the FGI entities for his personal benefit.

▪  Through FGI funds, Liu purchased a 2017 Grady-White 336 Canyon center console fishing boat in November 2016 that is titled to the company Offshore Captain LLC, which is owned and controlled by Liu. The purchase price was $389,651 and FGI funds cover the maintenance, repair and upkeep of the boat.

▪  In March, Liu was responsible for the transfer of $550,000 from the FGI entity Founders National Golf LLC to attorney Hugh H. Mo in New York City, whom Dou believes represents Liu in his legal matters in China.

▪  Liu has transferred substantial assets of FGI and FGI entities to D&C International Holdings LLC, which is owned exclusively by Liu and his wife, Xuan Zhuang, and now owns at least 10 residential and commercial real estate parcels in Horry County through a series of real estate transactions.

▪  Liu has made FGI lease office space from D&C International Holdings for a customer call center despite there being ample vacant space in FGI-owned buildings.

▪  Liu has made FGI employ multiple members of his immediate and extended family who provide little benefit to the company.

▪  Liu is purging the company of anyone who will question his actions.

▪  Dou believes there is a grave risk that Liu will not only continue but accelerate his pattern of misappropriating and converting corporate assets for his own personal benefit.

Dou also alleges fraud in the suit, claiming that 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.

He says the two were introduced at a meeting in Nanjing, China around 2011 and Liu later contacted him for assistance with locating U.S. properties for investment.

Dou, who lived in New York for several years and now resides on the Strand, said Friday he believes he was used for his citizenship by Liu and the Chinese businesses to set up LLCs and acquire required business licenses, permits, etc.

Liu has been living in Myrtle Beach and told The Sun News last year that he was in the U.S. through a B1/B2 business/tourist visa but expects to have an opportunity to gain citizenship because of the property he owns. Dou said the visa has expired and Liu is now here on a temporary work permit.

The companies named as defendants with Liu in the suit are Jiangsu Tianru Danfo Commerce and Industry Co., Ltd.; Nanjing Shuojun Trade and Industry Co., Ltd.; and Nanjing Xinyuanyuan Commerce and Trade Co., Ltd.

Liu said in an interview last year with The Sun News he was a co-founder in 2009 of Jiangsu Tianru, a foreign trade and investment company that has just one other wealthy partner and was the primary source of FGI’s golf purchases. Liu is listed as the company's legal representative on 2009 incorporation papers, according to Chinese government online records.

It is believed Liu has become wealthy at least in part through the Yiqian Funding peer to peer lending company in China, which appears to be in turmoil and under investigation for possible financial fraud.

The Sun News has obtained documentation emanating from the District Attorney’s Office in the Jiangsu Province that indicates at least 12 senior staff members of Yiqian Funding have been arrested on suspicion of financial fraud, and Liu is sought for arrest.

One of those purportedly arrested was Xiuli ‘Lily’ Xue of Nanjing, China, who described herself as a business partner of Liu and investor in FGI. She has been on the Grand Strand multiple times and brought 30 Chinese businessmen and entrepreneurs who are former graduate school classmates to Myrtle Beach in November 2015 to vacation and look at the beach's investment opportunities.

In a previous interview with The Sun News, Liu said Xue is the primary owner of the Founders Club at Pawleys Island.

Liu has contended in several interviews with The Sun News that he is solely a paid adviser for Yiqian Funding, but he identified himself as the chairman of Yiqian in a video obtained by The Sun News last May, and the letter from the Jiangsu Province prosecutor identifies him as a company head.

The letter alleges Yiqian company funds may have been misappropriated for personal use by executives. People who claim to be owed money from Yiqian have protested against the company, according to pictures obtained by The Sun News.

Dou claims in the suit he is entitled to damages and a full accounting of all actions taken by Liu, his family or friends with respect to FGI.

He also wants the court to rule on Liu’s authority to run FGI as the exclusive empowered agent for the defendant companies because of the alleged ongoing criminal investigation into Yiqian Funding in China.

FGI owns many of the Strand's acclaimed courses and 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.

Its ancillary businesses include the Prime Times Signature Card membership program, a tee time call center, two golf package companies and a few popular golf- and tourism-related websites. Twelve courses and the businesses were acquired in the final purchase in April 2015 of most of the assets of National Golf Management, which was formed through a 2012 merger of the Myrtle Beach National Company and Burroughs & Chapin Golf Management.

In addition, FGI owns 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, and the 80-resident multifamily Stonewall Villas development in Longs.

In January 2016, FGI investors purchased 29.1 acres of Myrtle Beach oceanfront property situated between the Ocean Club at Grande Dunes to its south and the Vista Del Mar luxury condominiums and The Dunes Golf and Beach Club to its north from Grande Dunes owner LStar Communities for a listed sales price of $25.6 million. A high-rise hotel is expected to be part of development there.

FGI has a division that handles residential and retail development, and executives say it has partnered with one of the largest travel agencies in China to bring golfers and wedding parties to Myrtle Beach.

Dou has said the company spent approximately $100 million on its area golf courses. The first 10 were acquired for a total of $58 million, according to property records, though it’s unclear through property records how much was spent on the last 12 it purchased from National Golf Management.

Alan Blondin: 843-626-0284, @alanblondin

FGI courses

Horry County

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

Myrtlewood Palmetto

Myrtlewood PineHills

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

Georgetown County

TPC Myrtle Beach (parts in both counties)

Founders Club at Pawleys Island

Litchfield Country Club

Pawleys Plantation

River Club

Tradition Club

Willbrook Plantation

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