A former business partner of Donald Trump’s hotel company can pursue allegations that the president’s firm evaded income taxes on a project in Panama and under-reported employee salaries there, a federal judge ruled.
U.S. District Judge Edgardo Ramos on Monday allowed the business partner, Orestes Fintiklis, and his fund, Ithaca Capital Investments, to amend their 2018 lawsuit against Trump International Hotels Management to add claims of fraud and breach of contract. Ithaca assumed control of the property after the Trump company withdrew from it in March 2018, and a feud ensued.
Fintiklis and Ithaca bought a majority of the units in the project, which began as a Trump-managed hotel in Panama City before the relationship frayed in 2017 over financial performance and other issues. It is now known as the JW Marriott Panama.
The dispute has since followed a tortured path, with several court proceedings and an arbitration before the International Chamber of Commerce. Ithaca initially claimed that Trump grossly mismanaged the hotel and asked for $15 million in damages.
Ithaca had more recently claimed that it faces millions of dollars in liabilities because Trump underpaid taxes on its management fees. Ithaca says the underpayments, which made the development’s finances look better than they were, were discovered after Panamanian authorities audited the project.
Ramos said Ithaca’s allegations of misconduct were weighty enough to move forward.
“Plaintiffs allege that they performed due diligence on the hotel’s financials provided by defendants, but that they later learned that those financials ‘artificially deflated the actual expenses of the hotel,’” the judge said.
Ramos rejected Trump’s argument that any misrepresentations were “merely nonactionable puffery,” noting the company repeatedly said the hotel was doing better than others in the Panama market. The judge also shot down the contention that the plaintiffs were sophisticated investors who wouldn’t have relied on any such statements.
The judge threw out Trump’s three counterclaims for fraud but allowed others, including an allegation of contract interference, to remain. Ramos noted Trump’s allegation that Ithaca had an improper motive to forcibly take over the hotel and did so through unlawful means such as forcible entry and burglary.
Alan Garten, chief legal officer of the Trump Organization, hailed that part of Ramos’s decision, saying it upholds the company’s right to pursue Fintiklis and Ithaca Capital and “hold them accountable for the flagrant breach of their contractual obligations, tortious interference and other unlawful conduct.”
Garten also claimed that Trump had won an ICC arbitration award of millions of dollars in damages in the same dispute. “The Trump entities look forward to confirming this award and aggressively pursuing all avenues to collect on our multi-million dollar judgment against Fintikilis and all of his associate entities and investors until the judgment is fully satisfied,” Garten said.
The arbitration award couldn’t be immediately verified. Ithaca Capital didn’t respond to an email seeking comment on the ruling.
The case is Ithaca Capital Investments v. Trump Panama Hotel Management, 18-cv-390, U.S. District Court, Southern District of New York (Manhattan).