Legal woes continue to mount in China for Dan Liu, the managing partner of the China-based company Founders Group International that owns 22 Grand Strand golf courses and numerous other area properties.
Liu’s business partner in the Chinese peer-to-peer lending company Yiqian Funding, Xiuli ‘Lily’ Xue, was sentenced Friday in China to 15 years in prison for her role in the company’s alleged fraudulent fundraising.
Liu is largely being blamed for investors allegedly being out more than $1 billion and is wanted on fraud charges in his home country, according to prosecutors, government news releases and media reports in China.
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. — presumably the Strand properties.
Liu, 40, who resides in Myrtle Beach, professed Friday that he did nothing illegal with Yiqian Funding in a statement to The Sun News through Kingfish Communications, which represents FGI.
“I won’t comment on legal proceedings in China, but the work done with Yiqian Funding was always within the framework of the law,” said Liu, a Chinese national whose application for a visa to remain in the U.S. is being considered, according to U.S. Citizenship and Immigration Services documents.
Xue, 41, who is also an FGI investor who visited Myrtle Beach several times prior to her arrest in 2017, was sentenced in the Nanjing Intermediate People’s Court, where she testified during her trial in May 2018.
Xue acknowledged in her testimony that Yiqian does not have the money to repay many of its investors but blamed the shortage on mismanagement, including rapid expansion that caused escalating operating costs, rather than intended fraud.
She testified that Liu was in control of the company when it became unable to repay many investors what prosecutors estimate to be $1.1 billion — 7.5 billion renminbi yuan — of the $2.7 billion it raised.
Xue vowed in court to help repay investors, and also pleaded for Liu to bring money back from overseas to help reimburse them.
A release Friday from the Nanjing prosecutor said $2.9 million (20 million renminbi yuan) of Xue’s personal property was confiscated and has been or will be liquidated to repay victims in the case, and she will face further restitution for investor losses.
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 testified Yiqian invested some of the incoming funds as a business practice in addition to lending to borrowers.
Xian ‘Nick’ Dou, who partnered with Liu to make FGI’s purchases before being fired in June 2017 from his position as FGI’s president, said in 2017 he believed much, if not all, of the estimated $140 million FGI has spent on Strand properties emanated from Yiqian Funding.
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.
Dou, a China native and Myrtle Beach resident who was an immigration consultant based in New York when he met Liu, has an ongoing lawsuit against Liu, FGI and its subsidiary companies.
Trouble in China
Prosecutors in Xue’s trial accused Liu and Xue of being complicit in fraud that included running investors’ money through their personal accounts and spending it for their own benefit, including overseas investments.
The prosecution said Xue’s 15-year sentence was lenient because she willingly surrendered to authorities and testified, and they believe Liu had more control over Yiqian, which was actually two affiliated companies.
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.
Prosecutors said during Xue’s trial that approximately 70,000 of 95,000 investors in Yiqian are still owed money.
Xue testified that she attempted to flee China late in 2015 with a purchased passport to the South Pacific island nation of Vanuatu, but could not get through Hong Kong customs and opted to turn herself into Chinese authorities after consulting an attorney.
Xue testified that she and her husband have permanent resident status in Hungary, and that Liu applied at the same time, so he also likely has resident status in the European country.
Xue’s trips to Myrtle Beach 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.
Despite the claims of Xue and prosecutors, and the testimony in court documents of dozens of former Yiqian employees who identify him as a company operator, Liu has previously 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 in April 2016 named FGI and reiterated that property in the U.S. will be sold to pay investors.
Three years later, FGI has not sold any Strand courses and is not believed to have sold any significant area property, though it has submitted a rezoning and preliminary redevelopment proposal featuring 512 total housing units to Horry County for Indian Wells Golf Club in Garden City. So that course may be sold in the near future.
Horry County Council requested an FGI official attend a council meeting in June and explain how Liu’s legal troubles and lawsuits involving the company might impact a future development at Indian Wells, but that request was tabled indefinitely, as was the consideration of rezoning for the development.
Additionally, Litchfield Racquet Club at Litchfield Country Club in Pawleys Island has been under contract to be sold and become housing, but it will require the passing of a zoning amendment by Georgetown County Council.
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 EB-1C visa for managers and executives being transferred from a foreign company to a related entity in the U.S.
With it pending for more than 3½ years, the last referenced interaction was the USCIS requesting and receiving more information from Liu and FGI in October 2017.
The estimated processing time for an EB-1C visa at the Texas Service Center where Liu’s request is being processed is between 8.5 months and 11 months, according to the USCIS website.
Liu can remain in the U.S. while awaiting a decision on his visa, as work authorization is commonly granted during a pending visa case in one-year increments and can be renewed, according to Johanna Keamy, a San Diego attorney who specializes in business immigration law with a focus on foreign investors.
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.
If Liu and his wife, Xuan Zhuang, become unavailable to operate FGI, local real estate investor and developer D.J. Karavan has been assigned power of attorney by Liu, according to documents filed in Horry County.
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.
Dou’s lawsuit, filed 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.
It 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.
A mediation attempt on May 22 lasted more than six hours and involved Dou, Liu and their attorneys, but it was unsuccessful. “It didn’t go as I expected and the litigation will probably move forward,” Dou said.
Earlier this month, Dou’s wife, Mengjia Xia, was added as a plaintiff along with Dou, accusing Liu of taking her investment of $300,000 for part ownership of a golf course that was never granted.
Liu tightened his grip on the company between February-May 2017, creating 17 mortgages on company properties with promissory notes totaling approximately $140 million, then assigning them to himself.
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.
FGI is embroiled in at least two other lawsuits.
Two members of the Wild Wing Plantation Property Owners’ Association filed a suit in June 2017 on behalf of the entire POA against multiple defendants including FGI, its owners and some current and former company executives, claiming their actions have contributed to a shortfall of more than $500,000 in association funding.
The suit claims Wild Wing Plantation’s owners dating back to 2006 have controlled the POA board with multiple officers or board members, and have purposely underfunded the HOA to benefit themselves and their companies. FGI took ownership in 2015.
The Wild Wing defendants including FGI have countered that they have acted reasonably, within their rights and in good faith and have requested the dismissal of parts of the suit.
In November 2017, past FGI vice president Tom Plankers, now 72, sued the company for age discrimination based on the termination of his employment in January 2017.
FGI has denied the allegation in a court filing, and the case has been moved from the Horry County Court of Common Pleas to the U.S. District Court for the District of South Carolina, Florence Division.
Liu has allegedly been victimized within his company as well. In September 2018, former FGI chief executive officer Rick Taylor and chief financial officer Tommy Smothers were arrested for embezzlement, accused of stealing more than $245,000 through checks fraudulently written for their benefit from January-March 2017.
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.
In addition to its courses, FGI owns 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 proposed for the property.
FGI or subsidiary companies also own more than 300 acres of land at Wild Wing, 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.
“Founders Group International will be celebrating its fifth birthday this fall,” Liu said Friday. “During that time, it has grown into one of Horry and Georgetown counties’ most successful companies. I look forward to the role FGI and our 1,100 team members will continue to play in the growth of the Myrtle Beach community.”
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