Trouble brewing? Michigan retirement fund sued over coffee investment

By Max Reinhart, mreinhart@detroitnews.com

A Florida-based lender is suing a Michigan group that manages pension plans for presidency workers, claiming it deceptively satisfied them to contribute tens of tens of millions of {dollars} to an ill-fated espresso rising enterprise in Hawaii.

Within the lawsuit, filed Monday in a courtroom in Polk County, Florida, AgAmerica alleges that the Municipal Staff’ Retirement System of Michigan (MERS) conspired with member corporations between 2022 and 2024 to acquire tens of millions of {dollars} in loans to appropriate an extended checklist of development issues and sanitary violations at their Kona Hills espresso plantation.

AgAmerica claims the cash was thought for use solely to buy and develop espresso timber.

“…Quite than use the funds for the accepted objective of planting and growing espresso timber, they used a good portion of the funding to appropriate the undisclosed…points and violations of Hawaiian legislation,” the grievance states.

MERS CEO Kerrie Vanden Bosch known as AgAmerica’s allegations “baseless and baseless.”

“Whereas this explicit funding skilled a loss, this was greater than offset by sturdy beneficial properties in different personal market investments,” Vanden Bosch stated in an e-mail to The Information. “… We’re assured that the information will emerge by way of the courts. We stay dedicated to our mission and to the long-term monetary safety of those that serve Michigan communities.”

MERS manages pension funds for cities, counties and townships in Michigan.

In keeping with AgAmerica, MERS was on the prime of the company hierarchy and managed the Kona Hills venture. MERS is alleged to have overseen Area Capital Advisors, a personal fairness agency that oversaw Kona Capital, which operated operations on the Kona Hills espresso plantation, positioned within the Holualoa space of ​​Hawaii County, on the state’s largest island.

In 2021 and 2022, earlier than the defendants sought financing from AgAmerica, Hawaii’s public works and well being departments visited the Kona venture website, the place inspectors discovered flooding and drainage points, in addition to sanitation violations, together with unlawful cesspools and wastewater discharges onto the bottom, the grievance alleges.

Different points on the website included environmental, regulatory, allowing, stormwater, wastewater, flooding and development points, in keeping with the grievance.

The issues needed to be corrected earlier than the venture might proceed. Fixing every part would value about $16 million, AgAmerica claims.

When Area got here to AgAmerica to use for a mortgage, the corporate supplied deceptive monetary projections that didn’t consider the intensive issues with the positioning, the lawsuit alleges. AgAmerica stated MERS was additionally conscious of the violations.

Based mostly on the allegedly fraudulent info, AgAmerica made a mortgage of practically $30 million.

The issues on the Hawaii website weren’t disclosed to AgAmerica till MERS terminated Area as asset supervisor for the Kona Hills venture and changed them with Ospraie Actual Belongings, the grievance stated. Ospraie officers informed the lender that the venture was in monetary issue due to the issues.

AgAmerica then accepted a second tranche of greater than $10 million to attempt to salvage its funding.

In January 2025, the lender realized that there have been critical issues with the espresso crop and that tens of tens of millions of further {dollars} can be wanted to make Kona Hills profitable, in keeping with the lawsuit. MERS and Osparie subsequently deserted the venture, Kona defaulted on its loans, and AgAmerica foreclosed on the property.

Officers at Area didn’t instantly reply to messages looking for remark. Makes an attempt to succeed in different suspects weren’t instantly profitable.

MERS manages greater than $16 billion in plan belongings, the grievance stated. In keeping with the corporate’s web site, it manages the retirement plans for greater than 150,000 authorities workers from greater than 1,000 municipalities in Michigan.

Based in 2016, Kona Hills owns and operates roughly 1,983 hectares of espresso plantations in Hawaii and started planting espresso timber round 2018, in keeping with the grievance.

Mark McCormick of California and Carolyn Seabolt of Georgia are additionally named as defendants within the lawsuit. McCormick is recognized within the lawsuit because the president and CEO of Kamco Land Co., one other defendant who allegedly helped handle operations on the plantation; Seabolt is appointed Chief Working Officer of Area.

The lawsuit accuses MERS and the opposite defendants of fraudulent and negligent misrepresentation, in addition to conspiracy.

AgAmerica is looking for a jury trial and judgment for an unspecified quantity of damages.