The developers of a long-stalled resort project in south DeKalb County have agreed to pay almost $4.6 million to settle accusations that they spent investors’ money on shopping sprees and night club carousing.
Last year the U.S. District Court in Atlanta ordered an emergency asset freeze after federal investigators alleged that the trio of developers were trying to raise money through a fraudulent $1 billion bond issue.
In a settlement filed this week in the the court, two Atlanta men, Matthew E. White and Rodney A. Zehner, and a third in Miami, Daniel J. Merandi, agreed to pay back $4,447,675 in profits and interest from the scheme, according the the U.S. Securities and Exchange Commission.
Merandi also agreed to pay a $150,000 civil penalty, and a company also accused by the SEC, M&M Financial, agreed to turn over a brokerage account containing about $124,000 to the agency.
The three men and six companies accused by the SEC of running a fraudulent investment scheme did not admit or deny guilt. In court documents, the men denied the accusations.
However, federal investigators said in court filings that the trio of developers had a long history of trying to develop a $675 million resort project near Lithonia that stalled a decade ago, most recently called the Grand Empire Palace and Resort.
In the most recent attempt, they pocketed $5.6 million from out-of-state investors that they diverted to personal use, according to the SEC.
“The defendants used investor money to fund lavish shopping sprees at Saks Fifth Avenue, Gucci, Louis Vuitton, Prada, Versace, and Republic of Couture. The defendants also used investor funds to pay numerous personal expenses and provide gifts to family and friends,” the SEC said in court filings.
In the settlement, the developers agreed not to engage in fraudulent investment or securities schemes.
This is not the first time investors and lenders have lost a lot of money on the project, which was initially called Fun World Palace and Resort.
White, Zehner and their Atlanta development company, Top Flight Development Group, landed in bankruptcy court in 2006, barely a year after announcing grand plans for a 6,500-seat arena, an indoor amusement park, water park, hotel, retail shops and other construction on more than 100 acres near I-20.
After emerging from bankruptcy, the developers created a new company and refinanced the property with new backing, but landed in bankruptcy again in 2008. The developers never got beyond clearing the land.
Fallout from the failed project helped push former NFL star Jamal Lewis into bankruptcy in 2012. Lewis, who is from Atlanta, retired in 2009 after nine seasons with the Baltimore Ravens and Cleveland Browns.
He was not named in the SEC complaint, which concerns the developers’ actions after the project’s second failure.
Along with White, Lewis had personally guaranteed a loan for the project from a New York investment fund.
In 2013 the developers tried to raise $1 billion through a bond issue but raised only the $5.6 million, according to the SEC, from investors in Canada, California and the United Kingdom.
In other DeKalb County news:
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