Victorville Settles $33 Million CMB Suit

ctorville City Council on April 13, in closed session, approved settling the $33 million lawsuit brought against it by CMB Investment Group. According to officials, the suit will be closed out by means of a $200,000 payment to the company.
That money will come on top of roughly $400,000 in legal bills the city has already accrued in fighting the suit.
In December 2008 CMB filed suit against the city, citing eight causes of action, which alleged fraud, breach of contract and unfair competition on the part of  Victorville, councilman Terry Caldwell and former city manager Jon Roberts.
The lawsuit grew out of events that transpired during a trade mission trip Caldwell and Roberts made to China in the company of Buck Johns, a long time consultant to the city, and several CMB corporate officials in April 2008.
The purpose of that trip was to seek out foreign investors interested in providing capital for the expansion of Southern California Logistics Airport
While in Shanghai, Caldwell, who was then Victorville’s mayor, signed a memorandum of understanding with CMB that provided for fees to be paid to the company in exchange for its assistance in bringing in as many as 200 Chinese and Korean investors who would provide a minimum of $500,000 apiece to be used in the development of Southern California Logistics Airport with the proviso that those investors would be extended green cards, i.e., legal visas pursuant to the cooperation of the city of Victorville under the federal EB-5 program.
Caldwell signed the memorandum of understanding three times – in his capacity as mayor, chairman of the city’s redevelopment agency and as the chairman of the Southern California Logistics Airport Authority – and in so doing committed the city to working exclusively with CMB on the EB-5 investor recruitment program for a period of two years and precluding the city from using any of the information or know how provided by the company without compensating it.
CMB is registered with the U.S. Government to act as a go-between for foreign investors and entities – both governmental and corporate – that want to take advantage of U.S. Citizenship and Immigrations Services’ EB-5 investor visa program. CMB is authorized by the federal government to offer investment opportunities to immigrant investors for projects within the boundaries of CMB’s established “regional center.” CMB’s center includes several closed military bases in California, including the former George Air Force Base that Victorville for more than a decade has been converting to civilian use as Southern California Logistics Airport.
Two months prior to the China trip, Caldwell, in his capacity as Victorville mayor in February 2008, signed a letter giving CMB authorization to raise capital for projects at Southern California Logistics Airport.
By the summer of 2008, Roberts had moved to disengage the city from its relationship with CMB, indicating the city would file with the federal government to pursue being designated as a regional center and recruit foreign investors on its own by sponsoring foreign applicants seeking visas under the EB-5 program.
CMB maintained that was a violation of the terms contained in the memorandum signed by Caldwell in Shanghai.
The city, through its attorneys, while acknowledging that Caldwell did sign the memorandum, maintained the document was not binding because Caldwell was not authorized to commit the city or any of its various sub-agencies to any contractual obligations without approval of the council in an advertised vote. CMB alleged that Caldwell’s signing of the memorandum and the subsequent disavowal of its terms constituted a “fraudulent scheme” to gain inside information and use it to “unfairly compete against CMB.” and to “gain access to CMB’s business model, know-how, key contacts and other confidential information — and use those assets and information to improperly and unfairly compete against” CMB.
Caldwell, an attorney, previously characterized the lawsuit as both “frivolous” and “unfounded.”
City officials, while yet maintaining that the city would prevail in the case if it had proceeded to trial as scheduled in June, nevertheless said reaching the settlement for the sum of $200,000 was preferable to the expenditure of $1 million or more in legal fees it would have required to see the case litigated to a conclusion.
“While the city has always maintained the lawsuit was frivolous, we believed it was more prudent to settle the case and save taxpayer dollars than to pursue vindication in court,” Mayor Rudy Cabriales said. “We’re committed to restoring the city’s fiscal position and are pursuing any all avenues to make that happen.”