In the wake of TSD Loreto Partners, S. en C. por A. de C.V.’s June 6, 2009 announcement that it had suspended all operating and construction activities on the Loreto Bay project, I decided to perform an informal internet-based investigation on the companies involved in the development of the project.
At the top level appears to be The Trust for Sustainable Development, a Canadian non-profit corporation. According to its website, the Trust first identifies and provides seed financing for sustainable projects. It then creates a for-profit company to develop each project. The Trust has developed (or commenced the development of) projects in Canada, the U.S., and, of course, Loreto Bay, Mexico. We did not investigate the projects the website says were developed in connection with the Trust.
The Trust created several affiliated for-profit entities to develop the Loreto Bay project. TSD Loreto Partners, S. en C. por A. de C.V., a Mexican partnership, is the principal Mexican development entity.
The Loreto Bay Company, an Arizona corporation, appears to have initially been the principal U.S. sales and marketing arm for the project. Based on public records obtained from the Arizona Secretary of State, Mr. David Butterfield (who is discussed below) served as Chairman of the Board of the Loreto Bay Company, Mr. James Grogan served as Director and President & CEO, and Mr. David J. Shreene served as Senior Vice President and Secretary.
In January 2007, the Loreto Bay Company was merged into Baja Developments, LLC, a New York limited liability company, the Manager of which is The Trust for Sustainable Development. Upon the merger, Baja Developments, LLC likely became the principal U.S. sales and marketing entity for the Loreto Bay project.
Another entity indirectly involved in the project was a British Columbia entity named Baja Developments Limited Partnership, which was probably Mr. Butterfield’s holding company for his investment in TSD Loreto Partners and/or Baja Developments, LLC.
One or more of Baja Developments, LLC, Baja Developments Limited Partnership, and the Loreto Bay Company likely controls a portion of TSD Loreto Partners, but there is no public document by which we could confirm the ownership structure of TSD. The formation documents of TSD filed in the Public Registry of Commerce in Mexico located in its state of organization would show only the initial partners of TSD and not any subsequent changes in ownership structure (we have not sought to obtain copies of TSD’s Public Registry documents).
Based on the press release discussing the formation of a joint venture between the Loreto Bay Company and Citi Property Investors to develop the Loreto Bay project, we speculate that the remaining portion of TSD is owned by Citi and other persons. However, we would have expected that Citi would have preferred to make its equity investment in the Loreto Bay project through a U.S. joint venture entity, such as Baja Developments, LLC, in order to avoid the difficulty of enforcing joint venture obligations under Mexican law.
The Trust for Sustainable Development is led by Mr. Butterfield, whose LinkedIn profile is available here. The profile indicates that Mr. Butterfield is a Director at Arizona State University’s Global Institute of Sustainability and the President of ICC Power, Inc., which the profile says was formerly International Composting Corporation. The Institute’s website no longer names Mr. Butterfield as a Director and ICC Power, Inc.’s website is under construction. International Composting Corporation has a website, which may or may not be the same International Composting Corporation that Mr. Butterfield is referencing on his LinkedIn profile, but we did not find any mention of Mr. Butterfield on that site. Mr. Butterfield probably has not recently updated his LinkedIn profile.
(Note: Loreto Bay’s developers have taken down the original project website, which may now be viewed via the Wayback Machine.)
According to NAFTA Works, a website published by Mexico’s Ministry of the Economy’s NAFTA office, Mexico will reduce the time to “open a new business” from 30 days to 2 hours under its new Fast Opening Business System (FOBS). A June 22, 2009 NAFTA Works press release claims that the FOBS program will, in connection with such time reduction, reduce the number of new business regulatory requirements from 16 to 3.
Other than the limited information provided above, the press release did not discuss the specific ways in which FOBS would achieve its ambitious objectives; accordingly, I remain skeptical, but hopeful, that FOBS will function as advertised.
One of the most significant problems in finalizing the formation of a new business entity in Mexico is the lengthy time period required for the Public Registry of Commerce in the jurisdiction of formation to issue the registered copy of the formation deed, which can take up to 2 months or longer. Although a certification from a Mexican Notary Public that the deed is in the process of registration in the Public Registry is generally sufficient evidence for third parties and other governmental agencies that the entity has been formed, upgrade of the information management systems at the Public Registries that would expedite the formation deed registration process is a much-needed reform.
Antonio “Tony” Garza, U.S. Ambassador to Mexico from November 18, 2002-January 20, 2009, has joined ViaNovo, a Austin, Texas-, Washington, DC, and Monterrey-based management and communications consulting firm. ViaNovo’s press release on the matter is available here.
Ambassador Garza also announced he would also join the law firm of White & Case, LLP, as Counsel in its Mexico City offices.
Both appointments are effective June 23, 2009.
On April 23, 2005, Ambassador Garza married Maria Asuncion Aramburuzabala, heiress to a significant portion of the Grupo Modelo brewing company.
The University of San Diego Law School – Procopio International Tax Institute Conference will be held October 19-20, 2009, at the law school’s lovely campus in San Diego.
Topics include:
The conference agenda includes speakers from both government and private practice.
Disclosure: Mexico Law Blog is a sponsor of this conference.
In a July 24, 2008 post, Mexico Law Blog questioned the viability of the ambitious 6,000-unit Loreto Bay tourist development project called Loreto Bay, located on around 8,000 acres adjacent to the hamlet of Loreto on the east coast of the Baja peninsula. Although the project, particularly its goal of self-sustainability, is impressive, its timing is unfortunate.
The San Diego Times has reported that the project developer, TSD Loreto Partners, S. En C. por A. (”TSD“), has sold fewer than 800 units and suspended construction and operations. The report also said that Fonatur, Mexico’s tourism development agency, was asking for “custody” of the project so that it could reopen a golf course and a hotel while TSD searches for a buyer. The principal lender for the project is Citigroup Property Investors. Whether TSD has breached its loan covenants is unknown, but highly probable.
StarkSilverCreek.com reports that TSD is subject to a lawsuit in Arizona, in which Baja Developments, LLC, a New York limited liability company, alleges breach by TSD of a services agreement and seeks damages in excess of $7,000,000. According to a detailed article about the Loreto Bay project in the Phoenix Business Journal, Baja Developments, LLC was a company formed by The Trust For Sustainable Development (note the “TSD” initials), a Canadian non-profit, federally chartered land and community development corporation, that arranged financing for the Loreto Bay project.
The U.S. Commercial Service in Guadalajara, Mexico has issued a report discussing opportunities for foreign companies in Mexico’s agribusiness industry. A copy of the report is available here.
The report says that there are opportunities for foreign companies seeking to sell products and services in the following areas of Mexico’s agriculture sector:
Volume 17, Number 2 of The California International Law Journal (available here) contains three articles on Mexico as follows:
I recently wrote a very short article for a newsletter published by the Greater Hispanic Chamber of Commerce of Austin, Texas discussing a few of the key issues businesses should consider when contracting with sales representatives and distributors in foreign markets. An excerpt from the article is below:
Many businesses successfully expand their international sales of goods and services by contracting with sales representatives or distributors in foreign markets. These arrangements involve special considerations.
Know Your Partner. Before drafting any contract, research and investigate prospective foreign business partners’ expertise and financial capability to perform the duties under the contract. Is the prospective business partner a good citizen? A thorough inquiry enables many companies to avoid disastrous international business relationships.
Be Specific. The contract should clearly specify the duties to be performed by the sales representative or distributor as well as the rights and obligations of both parties. For example, it should include comprehensive provisions regarding protection of intellectual property, confidentiality, purchase orders, manner and method of payment for goods or services (e.g., letters of credit), shipping and risk of loss of goods, compliance with local laws, warranties and disclaimers of warranties, management of customer warranty claims, breach of contract and remedies for breach, termination, dispute resolution, governing law, and other provisions.
Understand Your Remedies. If a business partner is located in a foreign jurisdiction, enforcement of contractual rights and guaranties may be limited by law, expense, time, or other factors. The only practical remedy in certain situations may be to terminate the contract.
The U.S. Commercial Service in Mexico City has released a market research report on the Mexican apparel industry, a copy of which is available here.
The report discusses market size and demand drivers, Mexican apparel manufacturing companies, market prospects, barriers to entry, trade events, and provides other useful apparel industry information.
Mexican investors are estimated to have held approximately US$1.4 billion of certificates of deposit and other supposed investments in the alleged US$8 billion fraud at Stanford Financial Group Co., according to David Cibrian, a partner at Strasburger & Price, LLP who is representing numerous Mexican investors in their claims against Stanford Financial Group and its affiliates, including Antigua-based Stanford International Bank.
On February 17, 2009, the U.S. Securities and Exchange Commission filed a lawsuit against Stanford in the U.S. District Court for the Northern District of Texas accusing Stanford of running a multibillion-dollar fraud. The Dallas Court has frozen Stanford’s worldwide assets and appointed Ralph Janvey as a receiver to act on behalf of investors in recovering assets from Stanford. Certain Stanford investors filed separate lawsuits against Stanford in the U.S. District Court for the Southern District of Texas.
On March 16, 2009, Janvey and the SEC filed a motion with the Dallas Court opposing the requests of investors to join the SEC’s action against Stanford in the Dallas Court. They also asked the Dallas Court to reject the request of Stanford investors for appointment of an examiner to oversee Janvey’s work and to bar Stanford creditors from filing liens against its assets until Janvey had filed a plan to accomodate all claims against Stanford’s estate. The Dallas Court has not yet ruled on the motion.
Cibrian said that Strasburger would work to support the efforts of Janvey as he pursues claims against Stanford in the Dallas Court, which the judge has ordered be the exclusive forum for claims against Stanford. He said that investors who filed lawsuits against Stanford in the Houston Court or other courts will probably need to transfer or remove them to the Dallas Court before they can proceed, although Janvey is now trying to prohibit interventions in the SEC action due to the enormous distraction it would create.
Cibrian, who was one of the lead attorneys among those who pursued claims of Mexican and other investors in a similar investment fraud action by the SEC against InverWorld, Inc. and its affiliates said that “although the investment amounts inthe Stanford case are larger than in Inverworld, the legal concepts will be equally complex. The Stanford matter will take a long time to resolve and the receiver needs to be aided, not distracted, by law firms advising their clients.”
Bloomberg has reported that Janvey has obtained approval from the Dallas Court to release US$4.6 billion from about 28,000 frozen brokerage accounts to Stanford customers and that about 62 percent of Stanford brokerage customers seeking to join the SEC’s case had been given access to their money. The report also said that Janvey was working on a plan that would allow Stanford customers whose accounts are frozen to submit online applications to request their money. However, if a customer’s account contained fraudulent proceeds, the account would not be unfrozen and the customers would have the option of participating in non-binding mediation or appealing their claims directly to the judge.
Disclosure: I regularly work with David Cibrian on cross-border and other transactional legal matters.
Copyright © 2008 by John Dorsey
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