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NMS Files Amended Complaint Alleging Fraud by AEW Capital and its Executives Eric Samek and Marc Davidson After Winning on Appeal

Massive East Coast Hedge Fund Allegedly Defrauded Local Family Real Estate Business with False Promises

SANTA MONICA, Calif., Sept. 27, 2018 (GLOBE NEWSWIRE) -- Today, Neil Shekhter and his affiliated companies filed their amended complaint for fraud against the multi-billion dollar, Boston-based hedge fund, AEW Capital, as well as its former executive, Eric Samek, and its current Managing Director, Marc Davidson.  The complaint alleges that AEW’s executives fraudulently induced Shekhter to transfer five valuable properties in prime Los Angeles areas into a joint venture with AEW at significantly below fair market value.

This new lawsuit comes after Shekhter won on appeal.  The Court of Appeal reversed the prior dismissal of the case on demurrer by Judge Suzanne G. Bruguera, holding that Shekhter and the other plaintiffs can go to trial against AEW on their fraud claim.  Specifically, the Court of Appeal ruled that “during negotiations, AEW knowing [sic] made false representations about the joint venture program, including that there was a monetization right and that Shekhter’s transfer of his properties to the joint venture at below fair market value would be ‘of no moment’ because of his right to ‘take-out’ AEW within a few years.”

According to the amended complaint, AEW promised Shekhter that he would have the right to take out, or buy out, AEW’s interest in the joint venture within 5 years by paying AEW a 24% annual return on its investment.  Relying on those promises, Shekhter and his entities transferred five valuable properties into the venture for over $50 million below market value; contributed over $10 million into the venture; and developed the properties without charging a developer’s fee.

As agreed, Shekhter tried to exercise the take-out right in 2013 by paying AEW $106 million which constituted AEW’s investment along with the 24% annual return.  By then, the properties had significantly appreciated in value – so AEW went back on its word, denied the take-out right and decided to hold onto the properties for themselves.

As detailed in the complaint, AEW’s fraud have been confirmed by numerous independent third-party witness.  One of those witnesses is a former AEW employee, Daniel Lennon, who worked directly for Samek at AEW on the deal.  Lennon, a decorated Navy fighter pilot and a graduate of the Wharton School, submitted a “smoking gun” sworn declaration in which he revealed AEW’s fraud: “During a conversation I had with Samek, Samek told me that although Shekhter believed he could monetize or take-out AEW's interest in the joint venture, AEW did not intend to allow that to happen.”

According to Skip Miller of the firm Miller Barondess, LLP, Shekhter’s lawyer: “We will prove, and we have the evidence to prove, in our lawsuit that AEW defrauded NMS, a local, family-owned real estate developer, by making promises that it never intended to keep.  We look forward to our day in court before a California jury.”

The complaint asks the Court to rescind the transfer of the five properties or, alternatively, damages in excess of $300 million which is the current market value of the properties.

Media Contact:  Eric W. Rose (213) 741-1500 X 525

Please click here to see the complaint