Investors Sue Trump Over Failed Resort

(CBS)  Dozens of angry investors last night sued Donald Trump, the high-profile real-estate magnate who lent his name to a failed hotel-resort in Baja, Mexico that went belly-up.

They were out millions of dollars, and now they want Trump to pay up, as CBS News correspondent Ben Tracy reports.

As the boss of the boardroom on his TV show "The Apprentice" and a real estate king in real life, Trump has earned a reputation.

As investor Guadelupe Mendoza put it, "How could you go wrong? You are investing in a multimillionaire who has proven himself in many real estate ventures."

She was talking about a luxury condo-hotel property on Mexico's Baja peninsula, which Trump talked up in a promotional video obtained by CBS News.

"That was the main reason we went ahead with this project because it was a Trump project," said Hamed Hoshyarsar, another investor.

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Hoshyarsar 's southern California family made a down payment of $165,000 to secure a one bedroom unit. With Trump's name and face all over it, they figured it was a sure bet.

Instead, it went bust.

"The money is gone. All they've told us is there is no money. That's it," Hoshyarsar said.

A hole in the ground is all that's left, and all there ever was, of the much-hyped project - a victim of the real estate and credit bubble bursts.

Investors poured $32 million into it and are now told they won't get a penny back.

"In the U.S. we have laws to protect the consumer to make sure their deposit is not being used for construction," said Delores Conway of the Marshall School of Business. "But remember, this is Mexico and laws are different."

It's not clear exactly where all the money went. The Trump Organization now says it was never the developer. It helped designed the product and lent the Trump name to the project.

"I am sorry for everyone but we are in the same boat," said Ivanka Trump. "We had to terminate our contract because our agreements weren't obligated either."

It's another blow to the Donald's carefully crafted image. His casino business, Trump entertainment resorts filed for bankruptcy protection last month. And he's been in a battle over debt payments at the Trump tower in Chicago.

Yet investors in the Baja project still can't believe they've lost everything.

"It's shocking and unbelievable that this whole thing happened like this," Hoshyarsar.

Especially shocking considering the brand name they thought they were buying.

[Number1ItGirl]

Taking a $125K investment suite and putting a $600K Trump name on it, is kinda like "pimping" your $8K Nissan by gluing a $85K Dodge Viper emblem on the hood. The Developer is responsible for his marketing strategy. You gotta have a car before the Donald can pimp it for you with his emblem. Go after the developer. I personally wouldn't be surprised to find out some of the SoCal investers are tied to the scammer developer, and suggested to hook Trump and set him up as the fall guy to cover up the real facts. It's what rich people do.

[Number1ItGirl]

American investors have just funded the "Punta" Mexican cartels, aiding the violence on our border. They just handed over millions of dollars to build up the economy (drug war) in Mexico, fooling Donald Trump into believing a resort would be built, hoping he would be the fall guy and cover their deviant foreign aid.

[Number1ItGirl]

Rich folk whining. Why stop at blaming Trump for the slowing resort economy in Mexico caused by the violent drug cartels and escalating murders. He offered his "Good Will" to try and help improve the profits BEFORE Mexican drug violence got plastered all over the news. Now the neighborhood has gone to hell. Just because no one feels safe traveling to your resort, you think you deserve a refund? NO. YOU DON'T. Mexico is not a good basket for your eggs right now. Why don't you sue the media for destroying your customer base by scaring off tourists with their honest coverage of mexican violence? Your poor judgement. You chose to scam tourists with Trump's name on a mexican generic hotel. Karma.

[isaacbe-2009]

It is funny how some people think there are no laws in Mexico. If laws are so good in the U.S. how did the Real estate and bank corruption happen without anyone noticing something was wrong? Here is the Big question? The contracts people have, are they mexican contracts?

Most likely they aren't!! If they are you need to sue immediately at the PROCURADURIA FEDERAL DEL CONSUMIDOR. But your contract needs to be Mexican and you should have signed in mexico.

People when you buy any property abroad there is a thing called TITLE INSURANCE. Why weren't you offered it? The Title insurance company would have checked out the project and if it wasn't sound, it would not insure it.

[veritas001]

The developer that made this deal is an American firm, Ironwood or something, they took the deposits in the US and deposited them in their accounts in the US. They paid for a small piece of beach property north of Rosarito some arquitectural rendering and the very inicial permits for the start of the development, a friend of mine did some work for them and got paid for some work but not all
CBSs video shows from the air a beach in the US close to the border, just south of Imperial Beach, this is about 12 miles from the Trump site.
The bubble burst for everybody but this rat is in the states, that could make it easier to sue or get some money back

[brainteaser2]

I have one thing to say to trump: You're fired!

[aziridine]

Why do so many people expect big returns with no risk? That's the cardinal rule of Finance, if you seek a big return there is commensurate risk. Let's see. If you are offered 5 times the risk free rate of return that means that there should be an 80% chance of default, in order to preserve the expected rate. Sounds like these folks signed on for about 10 times the risk free rate. So that would imply a 90% chance of default, Why are they complaining.

[wardoglrs]

Any one investing in real estate should of realized the economics of the Bankers and Neo Con's in charge in this phony economy since 1913 what the hell do they expect from fiat money and fake paper dollars. The Forefathers warned you all and you didn't pay attention. Return to honest money and get off your high horse we are bankrupt just like the rest of the world. If you all would have baought gold & Silver over the years you would be filthy rich and when the Comex fails gold will go through the roof. The IMF is a cartel just like the Federal Reserve.

"Blest paper-credit! last and best supply!
That lends corruption lighter wings to fly."

Anthony Trollope: "Credit is a matter so subtle in its essence, that, as it may be obtained almost without reason, so, without reason, may it be made to melt away."

[budshoes]

awww...Jeez. Cry me a ri-i-i-i-ver. Guess ol' Trump should have sued Rosie after all... Maybe then he could pay up on what he owes to the many. Mr. Trump...You're Fail. You're Fake. You are FIRED!!!

[credibility2]

If the contract didn't squarely put the responsibility of ownership on the development as that of Donald Trump, these folks won't collect anything. I agree with an earlier poster that it's not Trump's and maybe not even the actual developer who's at fault here, given the drug wars going on in major areas of Mexico. Why would anyone in their right mind want to build a luxury development given these circumstances? Sounds to me like a lot of investors that didn't perform due diligence and made too many assumptions.