The head of a company that owns a Tasman vineyard has been ordered to pay $3.32m to his former investors, whom he misled.
Photo: Supplied / Mahana Estates
The High Court found that New Zealand-based American businessman, Glenn Schaeffer, was liable for representations he made to James Murren and Daniel Lee, that led them to invest in Mahana Estates.
Mr Schaeffer is liable for action brought under the Fair Trading Act and the Nevada Deceptive Trade Practices Act.
The Las Vegas casino and hotel owner, who hosted Prince Charles and his wife Camilla at the winery during a Royal Visit to the region in 2015, owned 80 percent of the shares in the company that owned the winery.
Mr Schaeffer gained New Zealand residency in 2006 but continued to spend most of his time in the United States up until 2013.
He was president and chief executive of Fontainebleau Resorts, a hotel and casino company which became embroiled in financial and legal battles after the collapse of a significant construction project.
Years of litigation ensued, some of which involved Mr Schaeffer.
He and Mr Murren and Mr Lee have business and management interests in the Las Vegas casino and hotel industry.
In the decision released today, Justice Collins found Mr Schaeffer made negligent statements to the pair, who were his long-time friends.
He encouraged investment in the winery known formerly as Woollaston Estates, which was later found to have been in millions of dollars in debt, despite the pair's large capital contributions.
At its peak, the vineyard was spread over several sites and comprised more than 100 hectares of land in and around Moutere and Hope.
Mr Schaeffer was keen to encourage other investors in the vineyard after the former managing director left in 2009.
Glenn Schaeffer. Photo: RNZ / Tracy Neal
He knew a number of wealthy American businessmen, including Mr Murren and Mr Lee. The court found that while some of Mr Schaeffer's investment advice proved correct, especially that which related to land value and development costs at the time, the pair were misrepresented on other matters including whether or not a partnership agreement drafted in 2002 was genuine.
The decision showed that it remained unsigned by some of the partners, and it had not been registered with state authorities in Nevada.
By late 2005, Mr Lee had paid Mr Schaeffer $US102,000 ($NZ147,514) in response to the capital calls made under the 2002 Agreement.
Mr Murren has made several payments totalling $US1.4m ($NZ2m).
In early 2006, Mr Schaeffer sent the pair a new partnership agreement, soon after Mr Lee had learnt in late August 2005 that the 2002 Agreement had not been finalised.
The partnership continued to be called Kiwi Ventures, and unlike the 2002 agreement, it was registered with the Secretary of State of Nevada.
Mr Schaeffer, who became known in Nelson soon after his arrival through his offer to help fund restoration of the Suter Art Gallery, continued to maintain his interest in art.
It later transpired that the company known formerly as Woollaston Estates Holdings Ltd paid for a number of very significant sculptures located on the vineyard.
It was not until after 2011 that Mr Murren and Mr Lee started to become concerned about the financial affairs of the partnership and the absence of information from Mr Schaeffer.
In his evidence Mr Schaeffer maintained that Mr Murren and Mr Lee did not act with reasonable diligence, but Justice Collins said they had been friends, and had relied on him.
"Mr Schaeffer knew that they were relying upon him, particularly as Mr Murren and Mr Lee were at all times resident in the United States, and very rarely did they come to New Zealand."
Justice Collins said they had no reason to believe, until about 2013 that Mr Schaeffer was not observing the terms of the 2006 Agreement.
He said Mr Schaeffer had "acted unconscionably".
The order represented the sum of the pair's investment and included entitlement to interest.