Francis Suarez, Location Ventures under FBI investigation | Miami Herald

The FBI and Securities and Exchange Commission have opened parallel investigations into developer Rishi Kapoor’s business dealings in South Florida, focusing separately on his hiring of Miami’s mayor as a consultant on local projects and his raising of funds from investors, the Miami Herald has learned.

Sources familiar with both probes say the FBI’s criminal investigation centers on $10,000 monthly payments made to Mayor Francis Suarez from a subsidiary of Kapoor’s company, Location Ventures. Special agents with the FBI’s public corruption squad began questioning witnesses this week, according to sources, zeroing in on whether the payments constitute bribes in exchange for securing permits or other favors from the mayor for Location Ventures’ mixed-use project in Coconut Grove.

Meanwhile, the SEC confirmed that it is also looking into Location Ventures in a response denying the Herald access to public records related to the agency’s inquiry. Sources say its investigators are digging deeper into whether Kapoor and his company were selling investment contracts without registering them as securities, misrepresenting potential profits to investors or misappropriating funds for personal expenses. The regulatory agency’s probe has been under way since early this year.

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The heightened federal interest in Kapoor’s business and his relationship with the mayor comes after the Miami Herald exposed Location Ventures’ consulting payments to Suarez and detailed internal corporate records that indicated the mayor and his office helped Kapoor overcome a significant permitting hurdle threatening his $70 million Coconut Grove development. The Miami-Dade Commission on Ethics and Public Trust and the State Attorney’s Office have also opened inquiries.

The multiple investigations pose complications for Kapoor, an up-and-coming developer juggling pricey real estate ventures from South Dade to Fort Lauderdale, as well as for Suarez, who is expected to announce a campaign for the Republican presidential nomination this month.

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Kapoor and his lawyer did not respond to a request for comment. Suarez also did not respond to a similar query. On Friday, his lawyers said they were going to issue a statement on the mayor’s behalf, but did not follow through. Both Kapoor and Suarez have previously denied committing any wrongdoing in their business relationship.

Suarez, who corporate records show was paid at least $170,000 in undisclosed consulting fees by Location Ventures subsidiary URBIN dating back to September 2021, has denied using his office to help obtain permits for the developer’s Commodore Plaza project. The Coconut Grove project broke ground in January of this year after resolving a zoning dispute with the city.

A lawyer who as mayor makes $130,000 a year in salary and stipends, Suarez has regularly earned outside income by providing legal and private equity services. He has refused to disclose his client list and only acknowledged his consulting agreement with URBIN after the Herald confronted him about a lawsuit detailing the relationship. Suarez did not list his income from URBIN for 2021 on his most recent financial disclosure form, saying he wasn’t required to do so under the law because his earnings from the developer represented less than 5% of his total outside income.

Kapoor has said that Suarez helped his company with marketing and branding URBIN’S projects in Miami-Dade County and beyond, and that the mayor provided “programming” advice and insight on affordability, resiliency and sustainability. Suarez, however, has said he was paid to help bring investors into Kapoor’s projects.

Reached in the past week, the FBI and U.S. Attorney’s Office declined to comment about the existence of any criminal probe. A spokesperson for the SEC also declined to comment on whether the agency’s regional office in Miami was investigating Location Ventures.

But the SEC confirmed its interest in Location Ventures last week by declining to release to the Herald any documents in its possession about the developer, citing an ongoing investigation.

“This exemption protects from disclosure records compiled for law enforcement purposes, the release of which could reasonably be expected to interfere with enforcement activities,” the SEC responded earlier this month. “It is the general policy of the [SEC] to conduct its investigations on a non-public basis.”

The SEC investigation

Lawyer Ryan O’Quinn, a former SEC enforcement attorney and federal prosecutor in Miami, said the fundamental issue for the SEC is determining whether Kapoor’s company was selling individual “investment contracts” in real estate projects with expectations of profits that were securities subject to federal regulation. If that is found to be the case, he said, Kapoor and his company could be facing a gantlet of questions, including how he used investors’ money for the development deals or possibly something else, such as a personal home, boat or car.

“Once the SEC establishes it’s a security in the eyes of the federal government, then a number of things would flow from that decision that could lead to real trouble,” said O’Quinn, noting that SEC investigators typically work on a parallel track with the FBI on such cases.

O’Quinn said that in recent years the SEC has been targeting private companies that sell investments in real estate deals. He represented one of the SEC’s biggest targets in this field: Robert H. Shapiro, the former CEO of Woodbridge Group of Companies, based in Palm Beach County.

Shapiro pleaded guilty to federal charges accusing him of conspiring to orchestrate a $1.2 billion Ponzi scheme that bilked thousands of mostly elderly investors who sank their savings into Woodbridge’s real estate deals from Florida to California. In 2019, Shapiro was sentenced to 25 years in prison for his fraud conviction and settled with the SEC, requiring him to pay back his investors.

At this early stage, neither Kapoor nor any other Location Ventures executives have been accused by authorities of wrongdoing. But a former high-ranking executive in Kapoor’s company did accuse Kapoor of a number of “financial improprieties” in a now-settled lawsuit that could serve as a road map for investigators.

Greg Brooks, a former chief financial officer who worked at Location Ventures from August 2022 to March 2023, sued Kapoor’s company in May to collect $80,000 in allegedly unpaid bonuses for obtaining mortgages for URBIN’s Commodore Plaza project in Coconut Grove and a luxury single-family home project in the same community.

In his lawsuit, which Kapoor disputed, Brooks said he was fired after he raised a slew of concerns about the CEO’s handling of the company’s funds. Among the many allegations incorporated in the suit:

▪ Brooks highlighted URBIN’s’ $10,000 monthly payments to Miami’s mayor “for unknown services” with “no written agreement” and “no invoices for any services,” as previously reported by the Herald. Kapoor responded in a court filing that he had an agreement with Suarez that was “approved” by Miami’s city attorney, but the city’s top lawyer told the Herald that she did not review any agreement.

▪ Brooks accused Kapoor of using development funds to pay for his nearly $6 million Coral Gables waterfront home in Cocoplum, a $10,000-a-month private chef to cook on his yacht, which is kept at a nearly $700,000 marina slip, and a McLaren sports car — all without reporting the income to the IRS.

▪ Brooks also alleged that Kapoor “charged inappropriate and/or unauthorized fees to several projects in violation of the respective operating agreements” with investors, and then “paid himself significant sums of money from those fees with no disclosure nor approval from either the Board of Directors of Location Ventures or the investors in the appropriate projects.” He further accused Kapoor of collecting fees in this manner, totaling about $1.5 million in 2021 and more than $1.5 million in 2022.

▪ Brooks’ suit also alleged that Kapoor “repeatedly added debt to several projects,” including URBIN’s mixed-use commercial and residential development at Commodore Plaza in Coconut Grove, to cover payments that he owed to another investor whom “he had agreed to cash out” — despite the project’s operating agreement requiring the approval of other investors.

▪ His suit also claimed that last year Kapoor misused condo buyers’ deposits on pre-sold units from the Grove project totaling more than $1.5 million. Brooks alleged that Kapoor then took most of that money to help pay for costs in an unrelated condo project at 1505 Ponce in Coral Gables that Location Ventures had not yet obtained permits for or started construction on.

In effect, the ex-CFO accused Kapoor of violating his agreements with two different sets of investors by moving money between the two projects to cover his company’s overhead, including employees’ salaries, instead of construction costs, as required under Florida law.

“When Mr. Brooks informed Rishi Kapoor that Mr. Brooks would not sign off on the request to seek these [$1.5 million] funds from the title company holding them because no development work had been done on the [Grove] site yet, Mr. Kapoor’s response was ‘send me the form, I will sign it,’ ‘’ according the former CFO’s suit.

In addition, the suit says that as the CEO running Location Ventures, Kapoor categorized many regular corporate executives as independent contractors and “knowingly” failed to submit or pay employee payroll taxes for multiple time periods between 2017 and 2022 — even though he had reduced employees’ paychecks for such deductions.

This week, Brooks finalized a confidential settlement with Locations Ventures, which his attorney says addressed his bonus payments and his refusal to participate in what he believed to be financial improprieties at the development company.

“The issues have been resolved to everyone’s mutual satisfaction,” said Brooks’ lawyer, Brian Pollock.

Before the settlement deal, attorney Brian Goodkind, representing Location Ventures, said the former CFO’s allegations were false. “There is absolutely nothing inappropriate here,” Goodkind said in an interview.

The Investors

Kapoor, 39, a University of Miami graduate who founded Location Ventures in 2016, started making a name for himself by attracting wealthy people to invest more than $100 million in his company’s projects — including a signature development, Villa Valencia, a 10-story luxury condo building in Coral Gables. The developer, portrayed as a rising star in real estate publications, is now pursuing developments in Miami Beach, Fort Lauderdale and elsewhere.

Kapoor, who corporate records show holds about 25% of Location Ventures’ ownership, regularly promotes the company’s acquisition of land and property. However, only a portion of roughly a dozen projects listed on the company’s website actually include land or property owned by Location Ventures, according to corporate records.

About 60 investors either own a stake in Location Ventures or in individual projects, according to corporate records. Some of Kapoor’s projects also rely on loans provided by both institutional and private lenders.

Certain minority investors have been raising alarms for months and detailing warning signs in court filings.

Court records in a lawsuit brought last December by a group of minority investors against URBIN and Kapoor show that, to avoid foreclosure on URBIN’s Grove project, Kapoor obtained extensions on two loans that cost $150,000 in extra fees to one lender and about $132,000 to another lender. The group also complained in the suit that Kapoor obtained a $16 million loan for the Grove project without consulting them about taking on such substantial debt, as required by the operating agreement.

The investors suing Kapoor are seeking his removal as “manager” of the Grove project and millions of dollars in damages. The developer has denied the investors’ allegations.

Additionally, sources familiar with Location Ventures say one of the biggest investors in Kapoor’s business, Alex Kleyner, began pressuring him to return all of his principal last year.

Kleyner, a wealthy New Yorker who heads a company called National Debt Relief, invested more than $45 million into Location Ventures and its real estate projects, including the Grove development, according to sources. To date, Kleyner and his wife, Diana Ulis, who both sit on the Location Ventures board of directors, have been able to recover more than $20 million of the initial investment — but they still want Kapoor to turn over the balance of $25 million, according to sources familiar with their dispute.

Several sources said Kleyner is the investor mentioned in Brooks’ lawsuit whom Kapoor had to pay back, which he did by taking on $16 million in new debt from one lender in the Grove project and millions more from other Location Ventures’ investors.

Kleyner could not be reached for comment.

The Mayor

It’s unclear to what extent the SEC might be specifically interested in the mayor’s work for Location Ventures.

Suarez, through a spokeswoman, has said he “provided and participated in capital introductions and pitches as well as other forms of business development related to raising capital” for URBIN, the Location Ventures subsidiary pursuing projects in Miami, Coral Gables and Miami Beach.

As his relationship with Kapoor has become public fodder, there are strong signs that the mayor is preparing to launch a campaign for the Republican nomination for president. He met with donors Wednesday at a downtown event hosted by a super PAC, and is scheduled to deliver a June 15 speech at the Ronald Reagan Presidential Library outside Los Angeles, California.

Suarez has not spoken to the Miami Herald since a brief conversation last month outside his office, during which he criticized the paper’s coverage. On Friday, NBC Miami published excerpts from a sit-down interview with the mayor, in which he again denied doing favors for Location Ventures.

“I can assure the public that as mayor I’ve never used and will never use my public position to benefit a private party,” he said. “It’s never happened and it’s not going to happen.”

Miami Herald staff writers Joey Flechas, Sarah Blaskey and Tess Riski contributed to this story.

This story was originally published June 10, 2023 3:09 PM.