Seventh Circuit upholds $18 million verdict vs billionaire Auchi, his company, over South Loop land deal

By Jonathan Bilyk | Jun 21, 2016

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 $5.5 million.

The court’s decision reinstated the verdict against Auchi, which the federal district judge presiding in the case had vacated in post-trial proceedings.

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 with GMH.

“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 owed Sirazi.”

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.

More News

The Record Network