Trump Organization's Real Estate Partner In India Accused Of $147 Million Fraud

New Delhi: A real estate investment company that partnered with the Trump Organization on an office tower project in India has been accused of defrauding its foreign investors of at least $147 million, according to documents obtained by The Washington Post.

Two global investment companies based in New York and London that have invested nearly $300 million in the Indian real estate development company IREO filed a criminal complaint with New Delhi police last month alleging that the fund's Indian managing director, Lalit Goyal, co-founder Anurag Bhargava and others engaged in "large-scale fraud" by "illegally siphoning off" at least $147 million of investor money, although the actual sum could approach $200 million, they allege. Police in New Delhi said they have received the complaint but declined to discuss the matter further.

The two firms are the Children's Investment Fund Foundation, a charity of the British billionaire Christopher Hohn, knighted for his philanthropic work in 2014, and Axon Partners, an equity firm run by former Goldman Sachs executive Dinakar Singh.

Both firms declined to comment.

Goyal declined to comment on the allegations through an IREO spokeswoman. But in a March 13 letter to IREO investors he wrote that "as far as the allegation of fraud, diversion and misappropriation of funds is concerned, this is false, baseless and devoid of any merit."

Donald Trump Jr. called IREO "truly a fantastic group" when the companies announced the project in April 2016. Dusty, water-starved Gurgaon has seen rampant and largely unregulated growth in recent years of gated high-rise communities and soaring office towers that house multinational corporations.

The Trump Organization did not return emails or telephone calls requesting comment on the criminal complaint, which does not refer to the organization's partnership with IREO.

Trump Jr. visited India in February on a tour packed with glitzy events to promote his family company's other Trump-branded towers in the cities of Pune, Mumbai and Kolkata, as well as new residential towers just a few miles away from the planned IREO office tower. The visit was criticized by ethics watchdog groups after buyers of luxury apartment homes were offered "a conversation and dinner" with Trump Jr. in exchange for a $38,000 booking fee.

Trump Jr., the organization's executive vice president, did not actively promote the IREO project on that trip, although he told CNBC's Indian affiliate that the company has "five incredible deals that are all active," which would include IREO.

Goyal and Bhargava, a U.S. resident on the board of the University of Pennsylvania's engineering school, in 2004 founded the IREO group of funds, designed to inject foreign capital in what was then a relatively untested real estate market. It now manages over $1.6 billion from sovereign wealth and university endowment funds, a portfolio of 1,485 acres in the Delhi area and in the state of Punjab, and 18 million square feet of commercial and residential projects in development.

Bhargava did not respond to telephone calls or emails requesting comment on the criminal complaint.

Goyal said in an interview with The Post in the spring of 2017 that the company first approached the Trump Organization about partnering on a commercial real estate tower around 2013. An early deal fell through, but the two parties signed a licensing agreement in 2016 for the luxury office building that included use of the Trump name, "technical assistance" and a percentage of the lease income, Goyal said.

"We thought Trump would be the ideal partner," Goyal said. In a 2016 meeting on the project, Trump Jr. was "very focused on what the commercial building should be. The shape of the glass, what customers like. He was very businesslike," Goyal said.

According to a 2017 letter to investors, Singh and Hohn were growing increasingly frustrated that IREO's managers seemed difficult to reach and had shown no indication that they were going to return investor money as scheduled, along with what they promised would be significant profits.

They launched legal proceedings in the island nation of Mauritius - where the funds are based - and talks to restructure the funds to increase investor control and manager accountability.

"[A]fter roughly 10 years, we estimate that investors have received distributions of only $250 million, while management has collected over $300 million in management fees, and to this day management does not have a plan for returning out capital before the end of various funds' lives," they wrote to investors in April 2017.

In a Feb. 24 Barron's article, Goyal said that IREO had managed to weather the 2008 global financial crisis when others failed to survive.

"Our strategy, good and bad, preserved the investor money, and we are very hopeful they will get much more than what they invested back," he told the magazine.

Now, however, the Children's Investment Fund Foundation and Axon are alleging in the criminal complaint filed last month with the New Delhi police department's economic offenses wing that Goyal and others established a fraudulent web of companies and entities and phony charges to divert more than $147 million into their own pockets. In one case, they allege, a project in an undeveloped area in the state of Rajasthan - where no licenses or land certificates were ever obtained - was "nothing but a sham . . . to misappropriate about $62 million."

A former CEO of the company, Ramesh Sanka, alerted the investors to potential fraud. His statements and records form the basis of the investors' criminal complaint and as well as Sanka's own whistleblower complaints filed with police and the civil court in neighboring Gurgaon, also known as Gurugram.

In an interview, Sanka said he joined IREO in 2014 and grew concerned when he learned that a group of IREO home buyers went to the police and complained that their apartments had been canceled but their money had not been refunded. He began his own investigation, gathering documents from the area planning office and other government agencies.

He left the company in 2016, he said, "once I was convinced these frauds were true and deep-rooted."

In his March 13 letter to investors on behalf of IREO, Goyal says that the legal proceedings will discourage investors and buyers and are a "needless and unwarranted distraction" that will cause "significant damage and harm to IREO" at a sensitive time when it is in the midst of refinancing. The company has had a cash crunch due to India's moribund real estate market and the government's move to pull its higher value currency out of circulation to combat tax cheats, it has said. Some of IREO's land is also caught up in an ongoing court dispute and a probe by India's Central Bureau of Investigation, court records show.

Goyal also addressed Sanka's charges in the letter to investors, saying: "We find the timing of his alleged 'whistle blowing' curious and the manner suspicious to say the least. Mr. Ramesh Sanka has made unsubstantiated allegations without producing any concrete or direct evidence, he has resorted to conjectures and surmises coupled with ingenious drafting to give an impression of some alleged wrongdoing."

The letter also notes that Sanka was barred by India's regulator from the securities market for three years for alleged malfeasance at a previous job. That case was later set aside on appeal.

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The Washington Post's Swati Gupta in Delhi and Alice Crites in Washington contributed to this report.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)