When a 26-year-old Uber driver walked into a California deeds office two years ago, it was the real-estate equivalent of a butterfly flapping its wings and causing a tsunami half a world away.
Hired by an elderly Chinese passenger to do more than drive, he began shifting titles to luxury U.S. hotels owned by Beijing-based conglomerate Anbang to shell companies run by one “Andy Bang.” The events that followed — including nearly $1 trillion in claims – will be under scrutiny in a Delaware courthouse starting Monday in one of the most eccentric cases in the state’s history.
The timing of the title transfers in 2018 was hardly coincidental. The Chinese government had declared that Anbang, a multi-billion-dollar holding company, was a fraud, and sentenced its flamboyant founder, Wu Xiaohui, to 18 years in prison as it sought a buyer for the hotels. The South Korean asset manager Mirae Global won the competition for the $5.8 billion purchase that included the Essex House on Central Park South and the Ritz Carlton Half Moon Bay Resort in northern California.
What Mirae didn’t know was that, as the authorities were closing in, Wu used a Delaware law to make an agreement with the shell companies and protect his interests. In other words, the South Koreans promised to buy hotels that Anbang may no longer have owned.
Or, as the Chinese argue, the title transfers, along with eye-popping awards approaching $1 trillion, may have been part of a massive fraud and not worth the paper on which they’re printed. Either way, the South Koreans want out of the deal; the Chinese — in the form of a reconstituted Anbang now partly known as Dajia Insurance Group — say that’s not an option. Judge Travis Laster of Delaware Chancery Court has the unenviable task of deciding who’s right – as well as whether the plunging value of the hotels, due to Covid-19, is another basis for scrapping the purchase.
At a court hearing earlier this year, Laster questioned whether Andy Bang is a real person or “part of some criminal syndicate.” He called the case “odd” and “exceptional” and seemed to credit Dajia’s assertions that the case involved “potentially insubstantial shell companies who were using the courts for nefarious purposes.”
In response to a request for comment, Mirae said that at trial, it “will show that Anbang’s effort to frame this litigation as a case of ‘buyer’s remorse due to Covid-19’ was a smokescreen designed to divert attention from the fraud and concealment, and Anbang’s breach of the sales agreement, that are the true reasons why this transaction did not close.”
Dajia officials in China didn’t respond to a set of questions for this article. But a representative in New York pointed to a May statement in court by one of its lawyers, Adam Offenhart, asserting that Mirae “is basically cloaking itself with the cloud generated by these fraudsters, by people that courts on two coasts have dismissed actions because they refused to appear or because they thought fraud was involved.”
Zhao Yan, an officer of one of the Delaware companies, said in a telephone interview that the firms aren’t fraudulent and aren’t working for Wu but for themselves and “to defend private property against wrongful taking by the Chinese government.” Zhao, a former journalist for The New York Times who spent three years in a Chinese prison on what were widely viewed as trumped-up fraud charges, was considered a crusading investigative journalist 15 years ago.
The story starts with Wu, an ex-car dealer whose third wife was the granddaughter of former paramount leader Deng Xiaoping. In 2004, Wu set up an insurance company for the growing Chinese middle class. As premiums poured in, he went on an $18-billion buying binge starting in 2014. He snapped up New York’s Waldorf Astoria hotel for nearly $2 billion and bought Dutch insurer Vivat. In 2016, he acquired Blackstone Group’s Strategic Hotels & Resorts unit for $6.5 billion. That company’s luxury lineup featured San Francisco’s Westin St. Francis, the Four Seasons Resort in Jackson Hole, Wyoming, and the Half Moon Bay. (He also began talks to buy 666 Fifth Avenue, the marquee tower owned by the family of President Donald Trump’s son-in-law, Jared Kushner.)
But in 2017, weeks before his arrest, Wu signed an agreement empowering the Delaware limited-liability shell companies to act on his behalf. Under Delaware law, owners of such companies aren’t listed in public records.
The pact, written in Mandarin and referred to in court papers as the “DRAA Blanket Agreement,” relies on the Delaware Rapid Arbitration Act, created in 2015 for speedy recognition and payment of arbitration awards.
The agreement “authorizes the recording of grant deeds transferring ownership of properties held by Anbang” including hotels, banks and bank branches. It gives Wu’s family and other signers of the contract claims to the hotels, including the Waldorf Astoria.
The 15-page contract also specifies that if Chinese regulators seize Anbang, the Delaware companies can sue it. And if the Chinese authorities learn about the existence of the pact, the signers contend their lives are in danger and arbitration panels can impose massive penalties to be paid to the LLCs.
The signers were, on one side, Wu and Chen Xiaolu, an ex-Chinese military officer and son of a former mayor of Shanghai, and on the other, one of the LLCs, the Amer Group, and Andy Bang. After being questioned by the authorities about Anbang two years ago, Chen died of a heart attack.
Zhao wrote in his brief that as part of the collateral backing up the DRAA, Anbang agreed to put up 16 hotels and four other properties valued at at least $9 billion, and pledged $1 billion in cash as a “performance bond.”
The Amer Group owns the U.S. trademark to “An Bang” and has had long-running litigation, both in the U.S. and China, over it with Anbang, although some here and there suspect Amer is working with Wu on the alleged scam. A lawyer for Wu, Chen Youxi, declined to comment on anything related to Anbang.
Three weeks after the DRAA contract was finished, Wu was arrested. A year later, he was sentenced to 18 years in prison for fraud and embezzlement of more than $12 billion. He also had assets worth 10.5 billion yuan ($1.65 billion) confiscated, including four villas.
With Wu in a cell, the Chinese government took over Anbang and injected 60.8 billion yuan ($8.8 billion) to insure its solvency.
Four months later, the Uber driver, Daniil Belitskiy, walked out of the San Mateo County recorder of deeds office with ownership papers to the Half Moon Bay resort. Over the next three months, he did the same with five other resorts in California — the Four Seasons Silicon Valley, the Montage Laguna Beach, the Ritz Carlton Laguna Nigel, the Westin St. Francis in San Francisco and the Lowes Santa Monica Beach Hotel. All were transferred to Delaware shells.
A person familiar with the case said Belitskiy, who didn’t return calls, got into the title-transfer business after he picked up an Uber fare named Andy Bang.
One of the more perplexing questions is: Who is Bang? Some in the case say he’s the on-the-ground supervisor of the scheme, dispatching Belitskiy and then seeking to monetize the ownership claims. They say he also uses the pseudonyms Mike Martin, Joe Martin and Boss Chou to communicate with the Delaware companies’ lawyers and others. His real name may be Hai Bin Chou, Anbang contends. “We believe he is the natural person behind these LLCs,” Shireen Barday, one of Anbang’s attorneys, told Laster at the January hearing. She also said he signed the incorporation papers for several of the firms.
Most of the emails made public in the court hearing are not from Bang but from Mike Martin, who describes himself in one of them as an “86-year-old former lawyer.” In other emails, he’s described as a native Chinese speaker.
For a while, Martin was in close touch with Evan Williford, a Delaware attorney who represented the shell companies for five months in 2019. He told Judge Laster Bang and the Martins appear to be real. “For all I know, these are three separate people,” he said at the January hearing. Williford didn’t respond to calls and an email seeking comment.
Emails Made Public
No matter what his name is, an “elderly Chinese man” using the moniker of Andy Bang visited the Montage Laguna Beach Hotel in November 2018, according to emails made public during an August court hearing. The man said he was “a person familiar with Anbang from previous associations,” and he “shared his knowledge about the company and its chairman,” Matthew Hart, an executive of the Anbang unit that operated the hotels, said in a November 8, 2018 email. The visitor also asked to review the property’s financials, Hart noted. The hotel refused.
A month later Belitskiy transferred title to the 30-acre resort, where rooms go for more than $770 per night, to Andy Bang LLC, one of the Delaware shells, according to public records.
Chinese regulators said they knew nothing of this when they sold the properties to Mirae Global. Mirae’s lawyers claimed that Dajia, which has taken over many Anbang assets, knew as early as March 2019 about the DRAA agreement when it came up in a trademark dispute between the Amer Group and Anbang in Beijing’s Intellectual Property Court. They contend the company kept it quiet to ram the deal through.
Dajia’s lawyers say they learned about it only this year when the deal was about to close.
Dajia officials have said they didn’t know about the DRAA arbitration panels convened in July, November and December 2019 to decide how much compensation the shells deserved for the hotels’ seizures. People familiar with the case said Andy Bang recruited the panelists.
Most arbitrators are retired judges or lawyers but under the DRAA, parties can select anyone they agree upon. The Anbang panelists included pool cleaners, TV camera operators and a waiter at a Chinese restaurant, court filings show.
Three of the arbitrators live in a trailer park in San Raphael, California next to a car dealership. One served time on assault-weapons charges; others have minor criminal records, according to a report by Stephanie Douglas, a former FBI agent who investigated the arbitrators’ background for Dajia.
Guang Hui Dai, a waiter at Ming’s Chinese restaurant in nearby Tiburon, told Douglas he never attended an arbitration panel but signed a final award at the behest of “Boss Chou,” a regular customer.
The waiter, who speaks limited English, confirmed in an interview he went to “no meeting” about the dispute over the hotels and only recognized one name on the six-person panel on which he allegedly served.
The panels, which met in the office of Steve Nielsen, a lawyer based near San Rafael, awarded the Delaware companies a total of $810 billion in compensation over the loss of the hotels. It later grew to $936 with interest and escalator clauses. Nielsen declined to comment.
In his appeals court brief, Zhao criticizes Douglas for singling out arbitration panel members for being poor and living in a trailer park. He says the ex-FBI agent’s report is “prejudicial” and defamatory, and shows “bias and despises in apparent scornful mood.” Zhao also noted the arbitration law allows parties to choose their own arbitrators. “What his the relevance for DRAA arbitrators’ being poor?”
In August 2019, Mike Martin hired Delaware lawyer Williford for $20,000 and sought to use the DRAA to get payment. Williford noted all kinds of problems: “There is a possibility the awards might generate a great deal of unanticipated litigation and/or be not as helpful to you as you wanted,” he wrote.
Williford advised Mike Martin and Bang to translate the DRAA agreement, saying Laster wouldn’t approve any awards otherwise. They weren’t happy.
“We cannot translate stuff, otherwise we pay $180 billion. You pay for us?” Martin replied in a Sept 5, 2019 email. “Maybe Joe can fly over and show you the original stuff, you can check and see with yr own eyes just like cal attorney Steve did. Deal?”
By October, Williford had enough and dropped Martin, Bang and the shells as his clients. His request to withdraw wasn’t approved until December, however.
Martin and the shells then turned to Stamatios Stamoulis, of the three-man Wilmington law firm of Stamoulis & Weinblatt, who agreed to take the case for a $35,000 retainer. Last November, Martin indicated impatience with Stamoulis’s pace and emailed him, “WE PREPARE BIG BONUS for u” if the attorney would file the awards and get a court stamp. “PLEASE RUSH TO FILE NOW.”
Stamoulis and Nielsen warned Martin that submitting about $1 trillion in arbitration awards could draw undue attention. “I agree with Stam’s thoughts on not getting the awards too high,” Nielsen said in a December 13, 2019 email. Stamoulis declined to comment on his work for the shells.
Two days later, Stamoulis emailed Martin: “you now have six judgments accepted and on the docket in Delaware for a total of about $1 trillion dollars (936,000,000,000 to be exact.)”
In April, Judge Laster granted Dajia’s demand for a copy of the DRAA contract. He also OK’ed Stamoulis’s request to stop representing the shells. Stamoulis declined to comment for this article. Since no other lawyers have shown up at hearings for the Delaware LLCs, it seemed increasingly like the fraud argument could carry the day.
But things turned out to be not so clear. Last February, DLA Piper partner John Reed wrote to Stamoulis to say he’d been hired by the shell companies to look into the DRAA agreement.
Reed said his preliminary probe showed “many things do not add up if all of this is supposed to be some outright fraud.”
He noted Anbang’s litigation history with the Amer Group, that Chen proposed the pact empowering the shell companies and Wu’s signature on the agreement “appears to match the signatures on the Anbang Insurance’s trademark litigation.” Reed said it appeared the agreement “was specifically created to deal with the remedies to be implemented from the outcome” of the companies’ trademark fights. He also noted it “was negotiated and drafted by the parties without the assistance of lawyers, which is not unusual in China.” The lawyer wrote that he had colleagues in the firm’s Beijing office continuing to check the agreement’s legality. Then in May, DLA Piper quit as well. Reed declined to comment.
Meanwhile, Dajia launched actions to restore its title to the hotels and have the arbitration awards dismissed as fraudulent. Last month, Laster threw the awards out; the shells are appealing.
Laster’s decision to throw out the arbitration awards because the shells don’t have Delaware attorneys — or any lawyers — representing them amounts to a “ripping off” of the companies’ “due process rights,” Zhao said in his appellate brief. “Such an outrageous final judgement should be reversed and vacated for gross violation of appellant/petitioners’ property rights,” he added.
Mirae’s main contention is that Dajia violated the sales agreement by not informing them when they learned about the DRAA pact and the questionable title transfers. But Mirae Global has another problem. Covid-19 has killed business travel and halved the value of the hotel portfolio, their lawyers said in court filings. That alone could justify pulling the plug, they add.
Laster will rule on both questions.
–With assistance from Dingmin Zhang.
Top photo: The JW Marriott Essex House in New York. Photographer: Robin Marchant/Getty Images North America
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