Calling the verdict largely “unexceptional,” a federal
appeals court has upheld the bulk of a jury’s $23 million verdict against a
billionaire and the company he owns, saying the billionaire was at the heart of
actions to swindle a former associate of convicted campaign financier Tony
Rezko out of millions he should have earned under a contract governing the
division of proceeds from the sale of a huge undeveloped South Loop parcel.
On June 20, a three-justice panel of the U.S. Seventh
Circuit Court of Appeals in Chicago delivered a decision to affirm much of the
jury verdict award to investor Semir Sirazi from both billionaire Nadhmi Auchi
and his company, General Mediterranean Holdings, reducing the total by about
The court’s decision reinstated the verdict against Auchi,
which the federal district judge presiding in the case had vacated in
While the appellate justices opted not to reinstate the jury’s
finding that Auchi owed Sirazi $5 million in punitive damages, they said the lower
court judge was “incorrect” to conclude Auchi should not share in the judgment
“Auchi is not only the chairman of GMH but also the company’s
100 percent owner,” wrote Judge Richard Posner in the court’s opinion. “He had
been kept fully informed of, encouraged and been centrally involved in
approving the fraud against Sirazi, and as the owner of GMH he was enriched by
his conduct – unjustly.”
The verdict was appealed in 2015, after the federal jury found
about a year ago that Sirazi had been cheated following the transfer of the
property between 2006-2010 from Rezko to Auchi and GMH.
Sirazi had first filed suit against Auchi, GMH and others in
2010 in Cook County Circuit Court, claiming the defendants intentionally
ignored a contract Sirazi had with Rezko for a cut of the proceeds from the
sale of the land at Roosevelt and Clark streets.
According to court documents, that contract had been reached
between Sirazi and Rezko in 2006 to settle about $7.7 million in debt owed by
Rezko, who had come under legal scrutiny for his role in connection with
raising campaign money for former Ill. Gov. Rod Blagojevich, and also owed
large debts to Sirazi and his companies. At the time of the deal, court
documents said Rezko had one remaining, large unencumbered asset to leverage
against his debts – his interest in the South Loop property.
However, Rezko also owed large debts to Auchi and his
companies, the court documents said. To cancel those debts, Sirazi’s lawsuit
said Auchi and his associates moved to transfer Rezko’s rights to the South
Loop parcel to themselves – but doing so in a way that left Sirazi in the dark
on what was happening, and taking his cut for themselves.
The jury found Auchi and GMH had wrongly interefered with Sirazi’s
contractual interest in the property, and had wrongly taken money that should
have gone to Sirazi. They awarded $23 million, including $5 million in punitive
damages each from GMH and Auchi.
On appeal, Auchi and GMH argued the jury award was too high
because most of the purported payment to Rezko for his stake in the South Loop
land came in the form of debt forgiveness, and thus not “proceeds” from which
Sirazi could extract his take.
However, Posner wrote debt cancellation does confer “some
benefit on Rezko.” And since Sirazi presented an expert witness who asserted
Rezko’s $31.8 million property stake “should be treated as proceeds” - and
Auchi did not offer such a witness – the appellate judges found “the jury was
entitled to treat the entire $31.8 million as proceeds.”
The judges also upheld the $5 million in punitive damages
awarded to Sirazi from GMH, saying GMH interfered with Sirazi’s rights by “deflecting
to itself money owed Sirazi” and “conspired with Rezko to transfer his property
to it without paying anything to Sirazi, thus further deflecting to GMH money
The judges said the punitive damages against Auchi was
incorrect, however, as the jury had “exonerated him of tortious interference
(also of civil conspiracy), and therefore Sirazi was not entitled to punitive
damages from him.”
Judges Bauer and Williams concurred in Posner’s opinion.
As the federal appeals have played out, Auchi and GMH have
also sued their lawyer, Joseph D. Ryan, of Highland Park, alleging missteps by
the attorney led to the verdict against them. Specifically, in the complaint
filed in March, they alleged Ryan handed documents to Sirazi’s legal team,
giving Sirazi’s lawyers an edge they should not have had in litigating their
claims against GMH and Auchi.
That case is pending in Cook County Circuit Court.
Ryan has since responded, asking the court to dismiss the
action and arguing GMH and Auchi cannot prove he did anything improper, or that
what he did influenced the outcome of the case – and particularly so since the
jury in its decision never cited the documents GMH alleged Ryan improperly
supplied to Sirazi’s attorneys.