South Florida Business Journal – by Paul Brinkmann
Developer Robert Falor swept into Miami as the recent real estate boom was gathering steam amid the buzz of celebrities and big business partners. But, as the boom lost momentum, he and his condo-hotel projects were besieged by lawsuits and allegations that he misappropriated money.
Now, the SEC has joined those voices of criticism, alleging in a federal lawsuit that Falor fraudulently offered and sold about $9 million of securities to 55 investors in the form of membership interests in various limited liability companies he controlled.
Too little, too late, said one Miami attorney who pursued Falor for business clients.
“Every so often, we have a guy come to Miami like this, and he moves around like a great white shark until people figure out what he really is,” said Andy Hall of Hall Lamb and Hall. “It was apparent to me that his behavior was reckless and indifferent to his partners, and he would do whatever he wanted to enhance his own circumstances. The authorities that could have done something about this earlier ignored it.”
Falor was a Chicago developer who became involved in several Miami Beach conversion projects, including the Tides and Royal Palm Hotel. Local developer R. Donahue Peebles was a business partner at one time, but later wrested control of the Royal Palm away from Falor and a third partner, Guy Mitchell.
Using investors’ money
According to the SEC complaint, filed in Illinois, Falor’s stated goal was to use the investors’ money to buy old hotels, convert them to condo-hotels and sell them at a profit. The promised returns ranged from 50 percent to 120 percent, according to the complaint.
However, Falor is alleged to have used the money to buy expensive cars, lease private airplanes, finance other unrelated real estate projects and pay off debts.
“In total, Falor spent at least $4.6 million of [investors’] funds for his own benefit, and for the benefit of relief defendant Jennifer Falor,” the complaint reads. Jennifer is Falor’s ex-wife.
“Falor’s misappropriation of investor funds contributed to the failure of the conversion projects because there were insufficient funds to complete the projects,” according to the complaint.
The SEC is asking the court for a permanent injunction against Falor, disgorgement with prejudgment interest, and civil penalties.
Several phone numbers for Falor Cos. were disconnected, and efforts to reach Robert Falor were unsuccessful. A call to Ariel Weissberg, a Chicago attorney who defended Falor in lawsuits, was not returned by press time.
Last year, Peebles sold most of his interest in the Royal Palm to Falor and Mitchell for $128 million. Peebles regained management control of the hotel in February after Miami-Dade County Circuit Judge Gill Freeman ruled that Mitchell committed “willful misconduct, fraud or breach of fiduciary duty.” Freeman ruled that Mitchell committed fraud by transferring $3.8 million out of the hotel in February 2008. In a phone interview at the time, Mitchell said he always acted to protect the assets of the Royal Palm.
Hall said the SEC’s action may still have some positive effect.
“Who knows how much money Falor has been able to hide,” he said. “But, until you tell me he’s going to jail, it’s like, ‘Thanks but I’m not interested.’”