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Berger v. Zeghibe

October 13, 2010

BERISH BERGER, ET AL., PLAINTIFFS,
v.
RICHARD ZEGHIBE, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Schiller, J.

MEMORANDUM

Following a two-week trial, a jury found Defendants Ravinder Chawla and World Acquisition Partners Corporation liable for conspiracy to defraud Plaintiffs in connection with a series of real estate transactions. Chawla and World Acquisition Partners Corporation have filed a motion for judgment as a matter of law on Plaintiffs' civil conspiracy claim. The Court will deny their motion for the reasons discussed below.

I. BACKGROUND

This case arises from an unmemorialized investment relationship between Berish Berger, corporate entities associated with him (collectively, the "Berger Plaintiffs"), and Defendants including Chawla and World Acquisition Partners (collectively, the "Chawla Defendants"). The Berger Plaintiffs are comprised of Berger and the following five foreign companies: Ardenlink Limited; Bergfeld Company Limited; Busystore Limited; Kilbride Investments Limited; and Towerstates Limited (collectively, the "Corporate Berger Plaintiffs"). The Berger Plaintiffs accused Chawla of conspiring to defraud Berger via "deceitful transactions in Philadelphia real estate." (Compl. ¶ 1.) According to Berger, Chawla and his co-defendants obtained $36.5 million from the Corporate Berger Plaintiffs by inducing Berger to invest in two properties in Philadelphia: a parcel of land between JFK Boulevard and the Schuylkill River (the "River City Properties") and a five-story office building located at 2040 Market Street.

A. The River City Properties

Chawla and co-defendant Richard Zeghibe arranged to purchase the River City Properties from R&F Penn Center Associates ("R&F Penn") for $32.5 million. (Trial Tr. 3, July 19, 2010.) Chawla was already working on selling the property himself while the R&F Penn deal was pending. (Id.) After repeated attempts to find a buyer for the property, Chawla and Zeghibe struck a deal with Eli Weinstein in September, 2006, to sell the River City Properties to him for $62.5 million. (Id. at 4.) Chawla learned from his attorney around that time that a 125-foot height limitation then under consideration by the Philadelphia City Council would substantially reduce the value of the River City Properties. (Id. at 4-5.)

Chawla and his partners sought investors to raise money for the deal with R&F Penn. Chawla's architect, James Rappoport, prepared a presentation which Chawla showed to potential lenders and investors as part of this effort. (Id. at 5.) Despite the height restriction looming on the horizon, Rappoport's presentation depicted the River City Properties as a high-rise development featuring skyscrapers fifty to sixty stories tall. (Trial Tr. 53, July 26, 2010.) On December 1, 2006, Chawla and Rappoport showed the presentation to a lender, Kennedy Funding, which subsequently lent them $20 million. (Trial Tr. 5, 70, July 19, 2010.) On December 6, 2006, they showed this presentation to Berger at Rappoport's office. (Id.)

Chawla and Weinstein were present at this meeting with Berger. (Trial Tr. 66-67, July 26, 2010.) As before, Rappoport's presentation featured a number of skyscrapers on the River City Properties site. (Id. at 53.) No one told Berger that the impending height restriction ordinance would render Rappoport's plan impossible to fulfill. (Id. at 71-72.) Chawla then drove with Berger to visit the River City Properties in person. (Trial Tr. 77, July 19, 2010.)

Defendants continued to market the River City Properties to Berger after Berger returned to London following the December 6, 2006 meeting and site tour. Chawla had an appraisal of the River City Properties sent to Berger on December 8, 2006. (Id. at 19-20, 81.) This appraisal was based in part on a transaction between World Acquisition Partners Corporation ("WAP") and JFK Boulevard Acquisition Partners ("JFK BLVD"). (Id. at 15.) Chawla, who controls WAP, intended to use it as the vehicle to purchase the River City Properties from JFK BLVD for $50 million. (Id. at 7, 13.) JFK BLVD, controlled by Zeghibe, held the contract to purchase the property from R&F Penn. (Id. at 11.) On paper, Chawla was thus planning to purchase the site for $50 million from his own partner after they acquired the property for $32.5 million from R&F Penn. This $50 million sale was never consummated. (Id. at 13-14.) After the December 6, 2006 meeting, Chawla sent an appraisal of the River City Properties to Berger which referenced the $50 million contract between WAP and JFK BLVD. (Id. at 20.) Berger testified at trial that had he known Chawla was actually acquiring the property for $32.5 million, he would not have invested in the River City Properties. (Trial Tr. 37, July 22, 2010.)

At the time, however, the pitch was successful. On December 18, 2006, one of the Corporate Berger Plaintiffs, Kilbride Investments Limited ("Kilbride"), sent $12 million to Montgomery Abstract, a title company, for the purpose of acquiring the River City Properties from R&F Penn. (Trial Tr. 5-6, July 19, 2010.) Kilbride's $12 million was used in the closing that followed on December 21, 2006. (Id. at 102.) At trial, Chawla testified that he was unaware that Kilbride's money was associated with Berger. (Id. at 6.) Chawla said that he believed it had come from Weinstein and that Weinstein had "represented that was his money." (Id. at 86; Trial Tr. 48, July 20, 2010.) Chawla does not now dispute, however, that Berger in fact caused that $36.5 million to be wired to the United States for use in the transactions at issue, including the $12 million sent by Kilbride to Montgomery Abstract. (Trial Tr. 8, July 20, 2010.)

B. 2040 Market Street

Berger became interested in the 2040 Market Street project at the same December 6, 2006 meeting at which Rappoport gave his River City Properties presentation. (Trial Tr. 78, July 26, 2010.) The 2040 Market Street project involved selling the air rights above the existing five-story structure. (Id. at 100, 135.) Chawla and Zeghibe owned 2040 Market Street at that time through a separate entity controlled by them and their families. (Trial Tr. 80, July 19, 2010; Trial Tr. 19-20, July 20, 2010.) Chawla and Zeghibe acquired the property for $21 million. (Trial Tr. 19-20, July 20, 2010.)

Approximately one week after the December 6 meeting, Chawla's associate Mark Sahaya prepared a letter expressing the interest of "Ram Associates" in purchasing the air rights at the 2040 Market Street site for $28 million. Sahaya prepared the letter in Chawla's office, using one of Chawla's computers. (Trial Tr. 125, July 20, 2010.) The letter was dated July 21, 2006. (Trial Tr. 91, 93-95, July 19, 2010.)

Sahaya then prepared a second "Ram Associates" letter, dated December 21, 2006, in which the purported buyer increased its offer to $31 million. (Berger Pls.' Tr. Ex. 18.) Sahaya had the letter faxed "to the United Kingdom" and directed Chawla's office to "make sure you remove the fax trailer before you do so!!!" in a December 14, 2006 e-mail. (Trial Tr. 97, July 19, 2010; Berger Pls.' Tr. Ex. 116.) Berger, who resides in the United Kingdom, received this follow-up letter in early ...


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