A Pierce County jury has found that the lead developer of a $1 billion real estate project straddling Tacoma and Ruston violated state securities law by repeatedly making “a material misrepresentation or omission” to an investor in another deal.
Resolving a civil lawsuit, the jury last week found that Mike Cohen, the driving force behind the Point Ruston project, is liable for damages of more than $2.3 million to Pierce County resident William Newcomer.
The total award against Cohen could balloon to $4 million with interest and attorney’s fees, Newcomer’s attorney, Russell Knight, told The News Tribune on Wednesday.
A hearing before Superior Court Judge Phil Sorensen is scheduled for Oct. 9 to finalize the judgment.
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“While Newcomer and the other investors lost all the money they invested in this project, Cohen made significant money in management fees, interest to him and related entities, and other unexplained payments,” Knight wrote in pre-trial pleadings.
In court, Cohen didn’t deny that Newcomer and other investors lost money on his Apex project — a luxury apartment and condominium development near the Tacoma Mall — but he blamed market forces and the Great Recession, not inappropriate behavior on his part.
“As the global economy sank deeper and deeper during the Great Recession, so too did the Apex project,” Cohen said in a sworn affidavit filed in July as the case headed to trial.
Loren Cohen, Mike Cohen’s son and legal adviser to the family business, told The News Tribune on Wednesday that the six investors in Apex, including his father, lost their money.
Only Newcomer sued, Loren Cohen said.
“We are confident the verdict will be reversed by the judge or on appeal,” he said.
Newcomer sued Mike Cohen in January 2014.
In pleadings filed in August, Newcomer contended Cohen misrepresented or failed to disclose several “material facts” that Newcomer had a legal right to know before investing $2.3 million of his retirement savings into the Apex project between 2005 and 2009.
They included an allegation that Cohen hid the fact he “borrowed a significant amount of money from Point Ruston LLC” and funneled it into the Apex project, charging the apartment project as much as 20 percent interest.
Point Ruston is a 97-acre commercial-residential development being built on a Superfund site along Commencement Bay.
Point Ruston got its money back, plus the interest, while investors lost everything when Apex went sour, Knight said.
In addition, Newcomer contended Cohen did not invest the same amount of cash in Apex as Newcomer did, despite a stated commitment to do so, and that Cohen made detrimental decisions regarding Apex without consulting investors.
Newcomer lost his entire investment in late 2014 when Cohen sold the troubled Apex complex at a loss, Knight told the newspaper.
Newcomer swore out an affidavit in July stating he felt bamboozled.
“I would not have invested, and would not have lost, these funds, if I had known that Cohen failed to make the capital contributions he represented he made, or had I known that Cohen was borrowing funds that get repaid first from an entity controlled by Cohen,” Newcomer said.
Cohen countered in a Sept. 1 trial brief that Apex’s demise was out of his control.
“Shortly after both apartment buildings were fully operational, the Great Recession hit, and with a vengeance,” his lawyers, Travis Mahugh and Bradley Jones, wrote. “As a result, the demand for luxury apartments (and condominiums) plummeted.
“In addition, due in part to the success of Apex I, a competing upscale apartment complex was constructed within two blocks of Apex I.
“Compounding these matters, a large deployment of soldiers from Joint Base Lewis-McChord caused a significant number of vacancies at around the same time.”
Cohen also argued that, under the terms of the deal, he had no obligation to keep Newcomer informed of every decision he made on behalf of the Apex project.
“Cohen had ‘full and complete authority, power and discretion to manage and control the business, affairs and property of the company,’ ” Mahugh and Jones wrote.
The jury heard three weeks of testimony before finding for Newcomer on all counts, court records show.