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Missing Million A Tip-Off
by Ron Davis

Investors in a Georgia shopping center have recovered money they contend the center’s management fraudulently misappropriated.

The shopping center, Copeland Village in suburban Atlanta, is managed by the general partner of a limited partnership. The money at issue is the balance of a loan secured by the shopping center.

The limited partner investors learned a couple of years ago that the loan balance had increased in the past couple of years. The investors wanted to know why.

The general partner refused to permit them access to the partnership’s records, however. In response, the investors sued, seeking inspection of the partnership’s accounting and alleging “breach of fiduciary duty, fraud, and breach of contract.”

At trial, the investors furnished the testimony of a certified public accountant. She presented an analysis based on the partnership’s tax returns, lease documents, loan histories, mortgage records, balance sheets, and various other correspondence and documents. Her conclusion was that the general partner could not account for $1.1 million. She added that the net effect of such loss on the investors would be in proportion to their individual partnership interest (which was 12.5 percent each).

At no time during the trial did the general partner contend that the accountant’s figures were inaccurate. In fact, the general partner’s expert witness cited many of the same documents that she had used.

A jury awarded $177,500 to the investors on their claims of fraud and breach of contract. The general partner appealed, contending that the calculations of the investors’ accountant were “arbitrary and based on speculation and conjecture.”

A Georgia appellate court upheld the jury verdict, explaining, “A cash-flow analysis is a valid method upon which a jury may reasonably calculate the amount of damage attributable to a breach of contract. The jury’s award was well within the range of evidence and testimony presented by the investors’ expert.” (T.C. Property Management, Inc. v. Tsai, 2004 WL 1257717 [Ga.App.])

Decision: June 2004 Published: July 2004



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