Lawsuits fly after land deals falter

In suits filed in Georgia, Florida and California, Shailendra, chief executive of the Shailendra Group, is accused of taking investor cash for his own use, mismanaging and co-mingling funds and selling property at times to other entities he controlled without authorization and pocketing much of the proceeds.

The suits revolve around property intended for a shopping center in Henry County, as well as land investments in Midtown Atlanta and Florida.

Simon Bloom, who is representing Shailendra, strongly denied the allegations in the investors' suits and said Shailendra is the victim of a campaign to destroy his reputation.

“It’s purely malice,” said Bloom, adding the investors aim “to kill Mr. Shailendra in a death by a thousand cuts.”

The legal wrangling follows the collapse of the Georgia and Florida real estate markets, which has wiped out many speculators and developers who turned to real estate with dreams of massive profits.

The suits pit successful Indian-American businessmen and trusts they control vs. Shailendra, who immigrated to the United States from India in the early 1970s with little to his name and became a real estate-built millionaire and behind-the-scenes political mover-and-shaker.

Among the plaintiffs: Atlanta physician Dr. Ishtiaq A. Khan and his brother-in-law, Rahim Sabadia, chief executive of a Sabtech Industries, a California firm that supplier to the military, according to court filings.

Shailendra came to Atlanta as a Georgia Tech student and eventually got rich developing midrise office buildings and investing in real estate after a career as a transportation engineer in Clayton County.

Shailendra Group also is known for a planned Midtown Atlanta hotel, condo and office project at 17th and West Peachtree streets that was ultimately stalled by the economy. That project is not tied to the litigation.

He is well connected politically. He was a major support of Atlanta Mayor Kasim Reed, and federal campaign finance records show that Shailendra and his family members have been big supporters of Democrats and the Democratic Party in the past. He also has worked on various civic causes, and he is on the board of the Hindu Temple of Atlanta.

According to 2004 business plans included in the lawsuits against Shailendra, the investing partners sought to build a $1 billion empire, with each partner increasing his net worth by $100 million over a decade.

Shailendra would control the daily operations. While the plaintiffs are accomplished in their own fields, the lawsuits claim Shailendra traded on his reputation to draw in passive investors who would not question his moves.

The partners bought a major tract in Henry County off Jodeco Road in anticipation of development of a major shopping center, property for future development in Florida and in Midtown Atlanta.

One Georgia suit claims Shailendra never deposited two members' investments, of $450,000 each, into the company’s accounts and instead used the money himself. Shailendra or companies he controls also took unjustified consulting and other fees, the suit contends.

In one instance, Shailendra is accused of selling a portion of land owned by one company he owned to another that he and his wife Kiran controlled, without approval of the investors. The property, they claim, was sold to the second company at below market value.

The suit claims Shailendra treated the assets of one of the investment funds "as his personal cash machine."

Carlene Kikugawa, a forensic accountant hired to conduct an investigation for the plaintiffs, said Shailendra’s actions “exhibit classic elements of a real estate Ponzi scheme,” where early investors recouped big returns paid for by investments made by later partners.

Kikugawa, a partner with Singer Lewak in Los Angeles, said her analysis has found at least $25 million has been invested and lost by named plaintiffs and others, and that investors are saddled with at least $55 million in personal guarantees on defaulted loans.

Total losses, she said, could be much higher.

Bloom, Shailendra's lawyer, said investors who bet heavily on real estate have been stung by the economy across the country. He said dozens of investors from Atlanta’s medical and real estate communities have made millions investing with Shailendra and support him still.

Khan, one of the plaintiffs, started investing with Shailendra in 1992 and profited for many years, according to Shailendra’s representatives. He later brought in Sabadia, they say.

Shailendra claims that at one point he made several cash injections into the partnership for Khan, who was going through a contentious divorce at the time, and that Khan never settled his obligations to the investment group.

Shailendra claims in his suit that Sabadia and Khan, after reducing their cash support for the enterprises, authorized him to obtain nearly $9 million in loans to fund various investments. Shailendra contends he made millions payments from his own pocket on the loans as the economy worsened and income from real estate investments dried up.

Shailendra claims the plaintiffs are trying to hurt him financially by buying loans from the banks and then foreclosing on properties.

Shailendra’s suit includes an affidavit filed by Khan's ex-wife. In it she said the investors set up the partnership giving Shailendra oral power of attorney to act on their behalf, and vouched for Shailendra’s claims in his suit about how the partnership was set up.

B.K. Mohan, a Jonesboro cardiologist, has known Shailendra for 32 years and calls him “very principled, down-to-earth.”

Mohan has invested in real estate deals with Shailendra, some going back two decades and some still active. He said has not been defrauded.

“I don’t think he’s someone who would scheme that way,” Mohan said.

-- Bob Keefe and Bill Torpy contributed to this report