Kiwi winery investment ‘worthless’

An American businessman’s love affair with New Zealand turned into a nightmare after his million-dollar investment in a winery was deemed worthless, a court has heard.

James Murren, along with fellow United States investor Daniel Lee, is suing Mahana Estates owner Glenn Schaeffer to recover the money they invested in the business.

Murren, the Nevada-based CEO of MGM Resorts International, invested US$1.6 million in the winery between 2002 and 2008. He gave evidence in the High Court at Nelson yesterday.

He told the court how he had been friends with Schaeffer for years, and that the investment in the winery, formerly known as Woollaston Estates, was one he was excited about.

‘‘This was an investment I was excited to make, in a country that I love.

‘‘It was well known to Mr Schaeffer that I love real estate, and I loved the idea of owning real estate here.’’

It is alleged that Schaeffer misrepresented the funds invested by Lee and Murren by treating the money as his own, which led Murren to believe the shares that represented his investments were in fact worthless.

Murren said that based on the agreements he signed, he believed he was investing in a company called Kiwi Ventures Ltd which owned real estate, property and a winery operation in New Zealand.

That belief was based on trust, his belief in the agreement, and ‘‘numerous conversations’’ with Schaeffer.

Like Lee, Murren claimed that Schaeffer misled him by making ‘‘false and misleading statements’’ about how his investment would be used.

Murren said he had taken legal action because statements and promises from Schaeffer he had relied on when making the investment, he had since found to be untrue.

Both men claim Schaeffer told them he would invest his own assets alongside but failed to do so.

‘‘It was only in 2013 when I started to discover a serious of shocking and very disturbing revelations.’’

Murren said that after he engaged lawyers to investigate, he learnt that Schaeffer owned around 80 per cent of the shares in both companies, and that Kiwi Ventures owned none of the Woollaston Estate assets.

‘‘I would not have invested if I had known the partnership was effectively a shell, or a ruse, and that Glenn would instead keep the money and would also keep his own assets and investments in Woollaston Estates in his own name.’’

Murren said this meant he and the other investors were unable to use the partnership rules to control or limit transactions. They were also unable to seek redress if the agreement was not honoured.

‘‘I and the other limited partners can not exercise these rights because Glenn owns the majority of the shares in his own name.’’

However, defence lawyer Andrew Shaw said there were documents that showed Woollaston Estates was more than 50 per cent owned by US shareholders, and its major shareholder was Kiwi Ventures Ltd.

Shaw said the agreement enabled Schaeffer, as general partner, to hold assets for Kiwi Ventures Ltd, and that he could acquire, purchase, renovate, improve, own or sell any asset in the best interests of the business.

Murren disputed that this was the case. He accepted that Schaeffer had ‘‘broad powers’’, but not that he could own assets on behalf of other investors.

The trial continues.

‘‘I started to discover a serious of shocking and very disturbing revelations.’’ James Murren