A $40 million lending venture tied to a Hawaiian coffee plantation has prompted a lawsuit against the Municipal Employees’ Retirement System of Michigan (MERS), a pension fund administrator managing more than $16 billion in assets. Florida-based lender AgAmerica alleges that MERS and affiliated entities misrepresented the status of the project to secure funding, ultimately leaving the lender with millions in losses.
The lawsuit, filed in Polk County, Florida, claims that between 2022 and 2024, AgAmerica contributed nearly $40 million in loans, believing the funds would be used to purchase and cultivate coffee trees at the Kona Hills plantation. Instead, the lender alleges, the money was directed toward fixing construction defects, sanitation violations, and environmental and permitting issues totaling $16 million in necessary corrections.
According to the filing, MERS oversaw Domain Capital Advisors, a private equity firm that managed Kona Capital, the company operating the plantation. The suit contends that MERS and its affiliates failed to disclose the project’s significant problems, including flooding, drainage issues, and other legal and regulatory violations identified by state public works and health inspectors in 2021 and 2022. AgAmerica alleges that it issued an initial loan of nearly $30 million based on fraudulent financial projections, followed by a second tranche exceeding $10 million after MERS brought in Ospraie Real Assets as the new asset manager in an effort to salvage its investment.
AgAmerica claims that despite the additional funding, ongoing issues with the coffee harvest and project operations required tens of millions of dollars more, at which point MERS and Ospraie exited the venture. Kona Capital subsequently defaulted on its loans, and AgAmerica foreclosed on the property.
MERS CEO Kerrie Vanden Bosch called the allegations “baseless and without merit.” In a statement, Vanden Bosch said, “While this specific investment experienced a loss, it was more than offset by strong gains in other private market investments. We are confident that the facts will come to light through the court process. We remain dedicated to our mission and to the long-term financial security of those who serve Michigan’s communities.”
AgAmerica is seeking a jury trial and damages for an unspecified amount.
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From: BenefitsPRO
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