PETERSBURG — The owner of the dilapidated Ramada Inn building in Petersburg faced a federal lawsuit last week related to his Model Tobacco project in Richmond. The lawsuit was filed on behalf of two investors in the project who claim Harrison tried to “dupe” them out of their investment and interest in the business.
The lawsuit alleges that for five years, Harrison engaged in bank fraud, wire fraud, mail fraud and money laundering “in an effort to gain control and increase his interest in the Model Tobacco project”.
Model Tobacco is a six-story art deco building located in the South End of Richmond. It was built as a manufacturing plant for U.S. Tobacco Co. in the late 1930s. Harrison worked with investors to turn the property into a 200+ unit residential complex.
Among the allegations from his business partners are allegations that Harrison attempted to fraudulently and secretly alter the terms of a development agreement signed by the three parties, misrepresent financial statements to entice his business partners to invest more money in the project and spending money from the project accounts without proper approval or proper documentation.
The 55-page lawsuit was filed in the U.S. District Court for the Eastern District of Virginia on behalf of Steven Snider and Michael Kuehn, owners of SS Richmond LLC and MK Richmond LLC, respectively. Harrison and three of his companies are listed as defendants – The CA Harrison Companies LLC, CAH Model Tobacco LLC and McKenzie Blake Development Company LLC.
The lawsuit seeks compensation for damages, punitive damages and triple the damages caused by the alleged pattern of racketeering. He also seeks to disassociate Harrison from the project.
In Petersburg, Harrison is known to own the old Ramada Inn building which sits right next to the city’s “gateway” at Exit 52. The dilapidated, graffiti-covered structure is considered a bad reception in the city.
His 2015 purchase of the former hotel was unveiled with excitement and expectation. Original plans called for 20,000 square feet of retail space, 125 hotel rooms and 100 residential units, with the hotel portion to be completed by June 2017. The project has stalled, facing delays until until it appears that the works may never begin.
Harrison’s purchase and subsequent construction of the Model Tobacco project left many Petersburgers wondering about the future of the old Ramada Inn.
The Saint Petersburg City Council has now declared the building a public nuisance and is engaged in a legal battle to wrest control of the building from the developer with the aim of demolishing it.
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Investors in Model Tobacco say they were initially won over when the project was described by Harrison as “shovel-ready” with funding secured and an expected completion date in late 2019.
The three agreed to create the Model Tobacco Development Group, which Snider and Kuehn were to invest at least $1.6 million each, and Harrison was expected to provide financial guarantees for any additional costs necessary to complete the project.
The case mentions that Snider and Kuehn first worked together on a residential project in northwest Washington DC. It says Harrison made the required payments on that property through early 2018, months after investors agreed to invest funds in the Model Tobacco project. They have since obtained summary judgment against Harrison by the Superior Court of the District of Columbia for a total of $1.4 million, which is believed to still be unpaid.
One of the lawsuit’s main charges is that Harrison attempted to “steal” Snider and Kuehn’s interest in Model Tobacco by fraudulently altering the development group’s operating agreement. New terms would have shifted the obligation to fund Harrison’s “excess development costs” to SS Richmond and MK Richmond without their knowledge.
Another claim disputes how Harrison withdrew approximately $3.8 million from the development group’s TD bank account through 34 different transactions for use on the project. The lawsuit says he sent those funds to accounts belonging to his other businesses without having the approval of both parties – both of which would be violations of the operating agreement. The case further claims that many of these withdrawals were made without any corresponding expense, or that the expenses recorded were for amounts less than the actual amount withdrawn.
The lawsuit also claims that Harrison covered up these fraudulent activities, and others, with misleading accounting records that ultimately “induced” Snider and Kuehn to continue investing in the project. They now claim to have invested a total of $4 million each following misrepresentations about funding for the project.
An email sent to Harrison last week seeking comment on the allegations was not returned.
Keith Forst, an attorney for the plaintiffs, said Harrison received the documents last week and would have 21 days to respond to the filing.
“The lawsuit is really a last resort where our clients have entered into an agreement in hopes of bringing tremendous development and a successful project to the City of Richmond with the belief and confidence that Chris could make it happen,” Forst said. . “Unfortunately, time has shown that it cannot, and unfortunately we have to take this step to ensure the project will succeed.”
In addition to everything detailed in the current status of the lawsuit, Forst said it’s possible that other parties involved in the project may join the lawsuit against Harrison.
One such case is a claim where a third party was enticed by Harrison to invest $50,000 in the Model Tobacco project. However, the lawsuit claims that instead of being offered equity in the project, this individual was offered equity in a completely bogus business.
The Model Tobacco building appears to be nearing completion. A ribbon cutting and grand opening for the building is scheduled for June 10. During the Christmas season, the developer staged a grand illumination of the iconic lettering atop the building’s facade.