The tone of "The Case of Liberty Cove," (Jan. 3) suggests malfeasance or mismanagement at the project I headed and continue to steer in Puerto Libertad, Sonora. I write to correct factual information and also provide my opinion to refute that perception.
Lost in the details is one overarching fact: The men who sold the property to us in 2004, Donald R. Diamond and Mort Freedman, never had the standing to do so. We believed that we were protected from any title issue because of their personal written warranties—warranties on which they subsequently reneged upon. These title ownership violations were not born by Mexicans as most perceive but by U.S. sellers Donald R. Diamond and Mort Freedman who knowingly concealed information and reneged on their personal guarantees and even duped First American Title Insurance a $2.8 billion company.
As to the particulars:
Donald Diamond's failure to provide his E&O Insurance: Donald Diamond represented that he had a $50 million Errors and Omissions Insurance policy however he has refused to provide me and the investors with the insurer's name. This could to satisfy all investors' claims. I speculate that fraud is not covered in such policy.
Donald Diamond and Mexican Criminals: "[Diamond] A tenacious dealmaker who once visited a Mexican jail to close a sale with an inmate,..." quoting a New York Times article in 2008 discussing Diamond's litigation and manipulative ties to Senator John McCain at Fort Ord a U.S. Naval Base preferential price.
Past activities of Morton Freedman: Morton Freedman is not new to fraud claims as published in CORONADO DEVELOPMENT CORP. v. SUPERIOR COURT (1984) - "They argue that Mr. Freedman "perpetuated the original lie and thereby concealed [their] cause of action for fraud,..."
Perpetuating a fraud: The law firm of Fennemore Craig was accused of perpetuating a fraud etc. and had full knowledge of Diamond and Freedman using deceased people powers of attorneys to transfer title, wire fraud and the violation this had on 200 REIT investors PPM agreements. Written notification was made both to Managing Partner Tim Burg and their insurance company ALAS, Inc. yet they chose to pursue. The attorneys Benjamin Bauer, George O. Krauja and Scott D. McDonald commenced in concert.
The Pima County court case: The reporter had not prior to publication analyzed the May 26, 2011 decision by Pima County Superior Court Judge Kenneth Lee in favor DF-MX Holdings LLC, et. al., wholly owned by Donald R. Diamond and Mort Freedman. There is no question in my mind that these new "alter ego" entities were set up specifically to separate these men from allegations of fraud. Secondly, Benjamin Bauer at Fennemore Craig Attorneys held an auction on our Mexican stock while the assets remained in litigation in Mexico leaving its value highly questionable. This Mexican stock sale sham is nothing less than a second separation of fraud in my opinion. The buyer of that stock has been withheld.
The casualties and consequences: Matt Mickley, who killed himself as a result of the controversy surrounding this project, was a friend and a hardworking family man. Diamond, Freedman and Fennemore Craig whom perpetrated this fraud, have blood on their hands, in my opinion. They should all be ashamed. Mickley will never be able to participate in restitution. In my opinion after knowing Diamond for 11 years The Diamond's Children Hospital sign is an embarrassment for duped Tucsonans. Bernie Madoff and Lance Armstrong are not monuments for our children.
Our track record: Our proven track record of success led to executed agreements from two governments—Korea and Viet Nam—to develop environmentally-based projects of similar magnitude. Institutions such as New England Mutual Life Insurance and First Nationwide Bank along with numerous private wealth individuals have been key investors and partners of mine over the last 40 years. This article is insulting to my reputation; we delivered as per the PPM.
The amount of money with which we worked: The article states that $21 million was raised from investors. The combined funding was approximately $18.3 million, all of which was spent in accordance with the information stated in the Private Placement Memorandum, (PPM), provided to—and signed by—every investor. The PPM stipulated that the first offering was not for construction but for an interest reserve pay-back, brokerage fees, legal, engineering, land planners, consultants and years of overhead for obtaining entitlements and other requisites. This is a nominal amount to design a city on 72 square miles with development estimates in excess of $25 billion and to deliver a building construction permit on a first phase.
The second PPM: The second PPM was for construction as stated, yet was halted as a result of title disputes. Construction however did commence contrary to article. The permit was paid and issued by the State of Sonora and the property was staked in accordance with our engineered specifications. Earthmoving equipment was purchased. At one point the development was ahead of schedule and under budget. Secondly, the well-recognized global recession halted most every development around the world. Such a risk was properly disclosed within the PPM.
Interest rates: Comparing interest rate today to that of nine years ago is misleading in the article. The interest rate provided at 10 percent matched the range of the standard of norms for development projects at that time and stage of development.
Deed of trust: Conclusive statements made in the article that the investor have "lost their money" is not correct. A first deed of trust for $25 million is in place and offers a guarantee to investors that their investment is secure, even if they have not received interest. The outcome of this security remains in the courts.
Personal investment: I have been personally funding the continuation of these many years of legal fees and overhead.
Investor communication: Communication access has never left the project's web site as erroneously stated in the article. Investors have received responses to every phone call or email within 24 hours. This was a common article misrepresentation investors have let me know.
Investors settlement: The article implies that a settlement was reached of $582,000 with the lawsuit to Rockingham. No settlement was ever made. The legal defense funds were demanded and paid by Diamond and Freedman to quiet actions to protect them and not Rockingham and its investors. Diamond and Freedman were the ones responsible for the fraudulent title transfers and not Rockingham.
Loss of our records: Accounting and record keeping was impeccable under the guidance of Robert Chernick. Responsibility to make payments for storage of Rockingham records was rested by Mr. Freedman, who never fulfilled his word. The reporter failed to confirm with prior employees that fact and implies that it was our fault. There was no better way to destroy the records and to destroy investment evidence and deflect the malady back onto Rockingham.
First American Title Insurance: First American Title, our insurer was notified in accordance with our policy to represent us as the insured. They refused to support any necessary legal defense in the United States to protect us and subsequently filed a law suit against us as the insured. Diamond was contacted even as late as last month and continues to refuse to support the litigation with First American to the benefit of the REIT investors. Litigation between the insured and First American is ongoing.
Accountability: Foremost, I represent the face of a $25 million mortgage with about 200 accredited investors who have experienced a broad range of hardship due those mentioned that have misbehaved. I will continue to hold accountable those whom have created that hardship.
Mexico remains a great place to invest with a 3.9 percent economic growth about twice that of the U.S. and Canada. Ford Motor last year expanded their investment of $1.3 billion in Sonora. Costco, Walmart and an innumerable number of companies continue. I would continue to invest there.