Intelligent Inv. Int'l LLC v. Emily Fu, Capital Inv. Int'l, Inc.

ORDER

This case comes before the Court on Defendants Jacob Fu and Joshua Fu's Second Motion to Dismiss [43]; Defendant Touchmark Nation Bank's Motion to Dismiss in Part [59]; ServisFirst Bank's Motion to Intervene [49];

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and ServisFirst Bank's Motion for Relief from Order on Motion for TRO [50]. After reviewing the record, the Court enters the following Order.

This case concerns Defendant Emily Fu's fraudulent real estate investment scheme. Emily Fu pled guilty to mail fraud for her role in this matter under 18 U.S.C.§ 1341 on July 12, 2018 and is currently in prison. See USA v. Fu, 2:18-cr-00023, Dkt. [18, 32] (N. D. Ga. July 12, 2018). She has a default judgment against her in this action. Her company Capital Investment International, Inc. and alleged associate Nina Xu are also in default.²

What remains to be determined is the civil liability of her sons Joshua and Jacob Fu, as well as Touchmark National bank, which provided loans for many of the properties at issue. As such, while the facts regarding Emily Fu's actions may still be in dispute insomuch as they relate to the remaining parties' involvement, the Court will focus on the facts as they pertain to these three parties.

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I. Factual Background

Between 2014 and 2017, Defendant Emily Fu, the sole owner of Defendant Capital Investment International, Inc. ("Capital Investment"), assisted groups of Chinese investors with purchasing and managing commercial real estate properties in the metro-Atlanta area. Each of the nine named Plaintiffs in this action is an entity created, with Emily Fu's assistance, for the purpose of purchasing a specific commercial property. For clarity, the Court provides the below chart:

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In late 2017, Plaintiffs grew suspicious that Emily Fu's prior

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representations regarding their commercial real estate properties were false. Plaintiffs subsequently discovered the fraud scheme that is the basis for this action. Plaintiffs allege Emily Fu defrauded them out of $20 million dollars through various fraudulent acts. Emily Fu admitted that she misappropriated approximately $930,000 from Plaintiffs' bank accounts for her personal use. Plaintiffs' members also discovered that Emily Fu took out loans from Touchmark for which the Shoppes at Brannon Crossing and Spalding Plaza were provided as security.

Emily Fu further deceived Plaintiffs by not purchasing Sugarloaf Center, North Atlanta Primary Care, and Eastside Building, on behalf of their respective LLCs, despite representing to members that she had. She also inflated the purchase price for Market Forrest Shops, Cooper Retail Center, and Peachtree Corners. Plaintiffs consequently believe Emily Fu converted the unused cash funds provided for those purchases to her own personal use.

Plaintiffs bring this action for recovery of the missing funds from Emily Fu, as well as her alleged accomplices: the Defendants in default, Defendants Joshua and Jacob Fu, and Touchmark. The Court will now detail the specific background facts as they pertain to the remaining Defendants.

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According to Plaintiffs, Emily Fu's sons, Jacob and Joshua Fu ("Fu brothers") acted as her accomplices in certain transactions that played a central role in the scheme. They were both members of Capital Investment during the fraudulent transactions, with Joshua as the company's registered agent, and Jacob as the CFO and secretary.³ Further, on more than one occasion, each brother failed to contribute agreed upon funds for certain real estate purchases and withheld that information from the other LLC members, while accepting profit distributions.

Specifically, Plaintiffs allege Jacob executed this scheme as a member of Johns Creek and Peachtree Med LLCs. Joshua did the same as a member of the Palisades LLC. As an LLC member, Plaintiffs allege, each brother agreed to contribute a certain amount of money for the purchase of a previously designated commercial real estate investment.⁴ Yet, neither brother contributed

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any money. Plaintiffs maintain the LLC members never knew about these missing payments and the brothers collected profits from the investments as if they had contributed funds. Further, Emily Fu never purchased any property for Johns Creek or Palisades LLC, despite telling members she had.

Plaintiffs allege Touchmark National Bank participated in Emily Fu's scheme as a strategic partner. The two had a symbiotic relationship, with Emily even describing Touchmark as her official "Strategic Partner" in a presentation to prospective buyers. This relationship, Plaintiffs argue, allowed Emily to take out the two unauthorized loans undetected and involved a fraudulent kickback scheme.

Emily's main contact was Stacy Cooke, a Vice President/Commercial Relationship Manager at Touchmark until his sudden death in 2017. Plaintiffs believe he facilitated the unauthorized loans taken out with the Shoppes at Brannon Crossing and Spalding Plaza as security. While Plaintiffs admit Emily made false representations and presented forged documents to

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Touchmark to obtain the loans, they maintain the bank is at fault because it failed to conduct a proper investigation into Emily's authority to take out the loan or the authenticity of the documents, despite what Plaintiffs claim was reasonable.

In fact, Touchmark did not follow it's own written procedures for confirming authorization of representatives. The Limited Liability Company Authorization Form was not completed properly. For the Brannon Crossing loan, Emily signed the document, but did not provide attestation by an LLC Manager or Designated Manager, as required. The Spalding Plaza loan lacked any attestation signature. She was not the Manager of either LLC for which she obtained the loans. Emily also requested loan notices be sent to her office, while the IRS notice submitted with each loan application had the LLC owner's local address. Plaintiffs argue this should have been a red flag.

Plaintiffs also allege that Emily and Touchmark engaged in an illegal kickback scheme in which Emily was an agent of Touchmark. Specifically, Plaintiffs claim Touchmark represented that the "loan/broker" fees were higher than they should have been. First, with the Mall of Georgia purchase loan, Touchmark represented that the "loan/broker" fee was 4% of the loan or

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$76,000. Second, for the Brannon Crossing unauthorized loan, Touchmark represented that the "loan/broker" fee was 2.5% of the loan or $150,000. Third, while less specific, Plaintiffs also claim Touchmark charged exorbitant fees in connection with the unauthorized Spalding Plaza loan and loans on Cooper Village, Peachtree Med, and Windward Market.

Plaintiffs, assert that Touchmark has represented that the normal range of fees for commercial real estate loans is 0.5% to 1%. (Touchmark's Resp. to TRO, Dkt. [23] p. 4.) They argue that Emily and Touchmark conspired to inflate the fees, with Capital Investment receiving the excess portion of the fee. As evidence, they point to Touchmark's admission that it kept only $60,000 of the $150,000 loan/broker fee for Brannon Crossing, (Id.) and that Touchmark did not disclose that it split the fee with Capital Investment. Further, neither Emily Fu nor Capital Investment is licensed in Georgia as a mortgage broker or otherwise authorized to receive loan fees.

III. Procedural Background

Plaintiffs filed this suit [1] on December 20, 2017, as well as a Motion for Temporary Restraining Order [4], the following day. The Court granted Plaintiffs a TRO [5] on December 27, 2017 and subsequently converted it to a

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Preliminary Injunction [10]. Plaintiffs then filed a First Amended Complaint [14], as well as a motion for a second TRO [20] soon thereafter. The Court granted Plaintiffs a second TRO [25], which is currently in effect, along with a discovery stay [80], until resolution of these pending motions....