SOURCE: JMJ Development

June 13, 2013 16:52 ET

JMJ Development Sues Morgans Hotel Group for Alleged Fraud

DALLAS, TX--(Marketwired - Jun 13, 2013) - JMJ Development, LLC has filed suit in Istanbul, Turkey asserting breach of contract, tortuous interference with existing and prospective contracts, intentional misrepresentation, conversion, fraud, and conspiracy against a land owner, Zeki Coruk, Morgans Hotel Group and its executives in their corporate and individual capacities regarding one of Morgans' hotel projects.

JMJ Development secured an investment and development agreement with Mr. Coruk, in Istanbul in early 2011. According to the agreement, JMJ would partner with Mr. Coruk to develop a 5-star luxury hotel in Old Town Istanbul.

Per the agreement with Mr. Coruk, JMJ engaged a world-class international architectural firm to redesign the project to meet 5-star standards. Additionally, JMJ performed an exhaustive global search for hospitality operators and investors resulting in the selection of Morgans. After lengthy negotiations with Ana Nekhamkin, Director of Development, the parties agreed to a term sheet regarding management and investment in the project based on JMJ's investment and development plan. Shortly thereafter, Morgans underwent a restructuring which led to Mr. Ron Burkle's Investment Group, Yucaipa, taking control of the company. Simultaneously, Ms. Nekhamkin resigned and was replaced by Mr. Yoav Gery.

Morgans notified JMJ that it intended to move aggressively to finalize and secure this strategic location in Istanbul. Mr. Coruk further informed Morgans in writing that all negotiations were to go through JMJ. This precipitated a meeting in New York with Michael Gross, the CEO of Morgans. At that meeting, Mr. Gross and Mr. Gery gave assurances that this would be a great project with JMJ as the developer and Morgans as the investor and manager.

Without JMJ's knowledge or participation, Morgans and Coruk created a new Turkish company to own and develop the hotel, Morbel Hospitality, in which Michael Gross and Richard Szymanski, CFO of Morgans, are directors. According to a December 2011 press release, Morgans released $10 million to the new company under terms remarkably similar to the terms negotiated by JMJ. The parties conspired to circumvent the agreements to JMJ's detriment.

An investigation is underway to confirm potential evidence, which indicates part of the funds released by Morgans has been funneled through Mr. Coruk to expedite permits contrary to US law. Additional discovery and legal proceedings are forthcoming in the United States and Turkey, which shall uncover the full extent of fraud and potential bad acts of Morgans and its officers. 

JMJ has moved to protect its rights and interests in the Istanbul hotel project and to uncover why the officers of a U.S. public company controlled by investor/board member Ron Burkle would sanction the use of funds in such a manner.

The JMJ lawsuit was filed in the Istanbul 46th Commercial Court on December 17, 2012, File No. 2012/338 by JMJ Development, Inc vs. Bella Turizm Tourism and Trade, Zeki Coruk, Morgans Hotel Group, Richard T. Szymanski, Michael J. Gross, and Morbel Otelcilik.

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