Accusations and legal tribulations are mounting for Dan Liu, managing partner of the China-based company Founders Group International that owns 22 Grand Strand golf courses and numerous other area properties.
Liu is being blamed for investors in China allegedly being out more than $1 billion and is wanted on fraud charges in his home country.
Liu’s partner in the Chinese company Yiqian Funding, a peer-to-peer lending business that seeks investors, testified May 3 in her fraud trial in Nanjing that Liu was in control of the company when it became unable to pay many investors what prosecutors estimate to be $1.17 billion — or 7.4 billion yuan.
Xiuli “Lily” Xue, also an FGI investor who visited Myrtle Beach several times prior to her arrest last year, acknowledged in her testimony that Yiqian does not have the money to repay many of its investors but blamed the shortage on mismanagement rather than intended fraud.
Prosecutors alleged during Xue’s trial that approximately $154 million of investors’ money was spent on 22 golf courses and some land in the U.S.
Xian ‘Nick’ Dou, who partnered with Liu to make FGI’s purchases before being fired last June from his position as FGI’s president, said last year he believes much, if not all, of the estimated $140 million FGI has spent on Strand properties emanated from Yiqian Funding.
Dou has an ongoing lawsuit against Liu, FGI and FGI subsidiary companies that accuses Liu of misappropriating FGI funds. Liu has countered in court filings with claims that Dou stole from the company, and both have denied the allegations.
Liu and FGI said last week through the company’s public relations representative LHWH Advertising and PR that they have no comment.
Trouble in China
Xue testified for four hours over two court sessions and remains imprisoned as she awaits a verdict from judges and possible sentencing. A news release from the Nanjing District Attorney’s Office in March 2017 called for the arrest of Liu, Xue and 11 Yiqian senior executives, and it is believed all have been arrested except for Liu, who remains in Myrtle Beach.
The Chinese national’s immigration status has been pending since his visa application was filed nearly 2½ years ago.
According to Xue’s translated testimony, she said Liu was responsible for attracting Yiqian investors while she dealt mainly with investing some of the incoming funds, which she said the company did in addition to lending to borrowers.
In Yiqian’s P2P business model, investors provide funds to the company, which lends the money to borrowers, and the company and investors each profit from the interest on loan payments.
Xue admitted to making mistakes, but said she did not intentionally defraud investors and wanted to find a way to repay them.
Prosecutors laid out a different picture, accusing Xue and Liu of being complicit in fraud that included running investors’ money through their personal accounts and spending it for their own benefit, including overseas investments.
Xue’s trips to Myrtle Beach have included attending Liu’s wedding in April 2015 and escorting 30 Chinese businessmen and entrepreneurs who are former graduate school classmates in November 2015 to vacation and look at the area’s investment opportunities.
According to Liu, Xue is the primary owner of Founders Club at Pawleys Island.
Xue was led into the Nanjing Intermediate People’s Courtroom in handcuffs and was flanked by a pair of guards as she stood in front of a solitary chair in the middle of the courtroom facing three judges.
She wept as charges and instructions were read for several minutes before she was constrained in the chair with a bar above her legs during questioning.
An article about the trial and case on the well-known Chinese web portal Sina — which is comparable to Yahoo in the U.S. and is a widely respected news outlet — said prosecutors claim more than 95,000 people invested the equivalent of $2.9 billion in Yiqian over several years and more than one-third of that is unaccounted for.
At least 140 people watched the trial at the courthouse and 520,000 people watched it live on the court’s website, the article stated. There have been several large protests against Yiqian over the past two years, and Sina interviewed a few alleged victims after the trial.
Liu has denied being in charge of Yiqian. He told The Sun News multiple times early in 2016 that he was solely a paid advisor to the company and Yiqian and FGI are unrelated aside from his involvement in both.
But in a video dated April 14, 2016, Liu introduced himself as the Yiqian chairman and stated he was going to the U.S. to sell property to relieve a monetary shortage. The video followed a police raid on a branch location that included the seizing of some company funds.
A letter posted on the Yiqian website later that month named FGI and reiterated that property in the U.S. will be sold to pay investors.
FGI has not sold any Strand courses and is not believed to have sold any significant area property.
The Sina article said Liu blamed then Yiqian chief executive officer Jianrong Cao for the company’s problems, accusing him of embezzling the equivalent of $14.1 million and firing him.
Between September 2016 and November 2016, the Sina article says the cash-strapped Yiqian proposed to pay investors back in alternative ways, including wine or property in the U.S. that could be sold with the assistance of an FGI attorney for a 4 percent commission, or rented and managed with the help of Yiqian.
By February 2017 authorities announced an investigation of Yiqian for suspected fraud, and in March 2017 they announced arrest warrants for Liu, Xue and 11 senior officials, Cao among them.
Meanwhile, FGI purchased its 22 area golf courses between September 2014 and April 2015, as well as the Prime Times golf membership program, tee time call center, two golf package companies and a few popular golf- and tourism-related websites.
FGI investors also purchased 29.1 acres of Myrtle Beach oceanfront property from Grande Dunes owner LStar Communities in January 2016 for $25.6 million, according to Horry County records, and a luxury high-rise hotel was recently announced for the property.
FGI or subsidiary companies also own more than 300 acres of land at Wild Wing Plantation, TPC Myrtle Beach and International World Tour Golf Links; 200 lots at Wild Wing; the 80-resident multifamily Stonewall Villas development in Longs; and other tracts.
Dou’s lawsuit filed in Horry County in June 2017 is against Liu, three Chinese companies represented by Liu that own approximately 90 percent of FGI, and 15 FGI-affiliated U.S. limited liability companies.
Liu and Dou purchased all of the courses and most of FGI’s properties between September 2014 and April 2015 as partners through nearly 20 limited liability companies under the FGI umbrella. The purchases were debt-free, according to the partners.
Liu provided the money and Dou, a China native and U.S. citizen and immigration consultant based in New York, received approximately 10 percent for his largely non-monetary contributions. He retains his ownership percentage despite being fired.
Dou initially requested in his suit that financial control of FGI be taken from Liu through a temporary restraining order and appointment of a receiver, but he has withdrawn those requests with agreed-upon stipulations regarding FGI purchases and sales outside the normal course of business, and company financial reports regularly provided to him.
“I do not wish to harm the operation of the defendant companies in this litigation,” Dou stated in a court document in late February. “I will cooperate in full with any reasonable request from the defendants when they have exercised their full cooperation and compliance with the [stipulations].”
Liu tightened his grip on the company last year. Between February and May 2017, 17 mortgages on company properties with promissory notes totaling approximately $140 million were created then assigned to Liu.
As the managing partner of FGI, Liu essentially has 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 and leaving Dou without an ownership interest.
The terms of the promissory notes are identical in every mortgage. An annual interest rate of 3.25 percent must be paid quarterly, 20 percent of the note must be paid by its third anniversary in 2020, and the loan maturation date is in 2023.
Attorney Daniel MacDonald, who represents the 15 FGI subsidiary LLC defendants, asserts in a court filing that the approximate $140 million spent on properties was initially booked as a capital contribution by the Chinese companies, but FGI’s accountant discovered the funds should have been classified as debt owed to the companies and deemed it beneficial for FGI’s entities to create the debt.
Liu has assigned secondary power of attorney — after his wife, Xuan Zhuang — to local real estate investor and developer D.J. Karavan, allowing him to act on his behalf and manage his finances in the event neither Liu nor his wife are available or of sound mind.
That creates the possibility Karavan could take over management of FGI and its properties if Liu leaves the U.S. or is incarcerated. FGI has roughly 1,100 employees.
Karavan has been involved for many years in the ownership and operation of numerous properties and businesses on the Strand, such as restaurants and golf courses, including the now-closed Cypress Bay Golf Club in Little River.
In his suit, Dou questions Liu’s legal authority as the operating agent for the three Chinese ownership companies, claiming he has never seen signed agreements appointing Liu the authorized representative.
According to U.S. Citizenship and Immigration Services documents, Liu’s immigration status is still pending approval.
Founders Group International LLC filed an I-140 Immigrant Petition for Alien Worker form on Liu’s behalf in December 2015, requesting an EB1(c) visa for managers and executives being transferred from a foreign company to a related entity in the U.S. In October, the USCIS requested and received more information from Liu and FGI.
If the visa is approved, the process can be fairly quick for conversion to a green card and permanent residency.
However, the process includes a background check, and the applicant and his family members must prove that they do not have prior immigration or criminal violations or other issues that may restrict them from receiving a green card. Similar legal issues also are required to be disclosed on an I-485 green card application that would be considered following a visa approval.
Liu’s legal problems in China and Dou’s lawsuit could impact the USCIS’ consideration for a visa and subsequent consideration for a green card.
Liu can remain in the U.S. while awaiting a decision on his visa. According to Johanna Keamy, a San Diego attorney who specializes in business immigration law with a focus on foreign investors, work authorization is commonly granted during a pending visa case in one-year increments and can be renewed.
Another suit filed
Another former FGI executive has filed a suit against the company, as past vice president Tom Plankers, 71, has sued the company for age discrimination based on the termination of his employment in January 2017.
Plankers was hired as FGI’s general manager in December 2014 and said he was promoted to vice president in the spring of 2016. During 2016, he claims his age was repeatedly referenced by other executives with the company, and upon his termination a company-wide email announced he had instead retired.
Plankers’ letter of termination that was acquired by The Sun News included a compliance stipulation: “If all transition items go smoothly and there are no problems or detrimental actions in the community, Dan has agreed to pay you an additional $15,000 at the end of 2017.”
Plankers said he was not paid despite not publicly discussing his termination last year.
Plankers was absorbed into FGI after it purchased International World Tour Golf Links, where he was the existing GM. He spent the previous two decades running the four-course Ocean Ridge Plantation then three-course Sea Trail Resort. He’s now the director of new business development for East Coast Golf Management, which manages several Strand courses.
As Liu’s troubles play out, the 22 golf courses are being operated through FGI president Steve Mays and a series of regional managers overseeing the areas of the south Strand, central Strand and north Strand.
Founders Group International’s courses
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
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