Bussiness
Investors sue operator of Lake Wales business center, say company denied 48% ownership stake
Three investors have sued the company that operates a business incubator in Lake Wales, claiming that Florida Development Corp. is not acknowledging their roles as partial owners.
The plaintiffs — Lamar Dula, Michael Ross and Jim Landrom, all listed as Florida residents ― invested a combined $260,000 into the Florida Development Corp. in 2022, giving them a collective 47.9% ownership stake, according to the lawsuit.
The suit is related to the arrest in April of Charles Young Jr., FDC’s former chief financial officer, on allegations that he embezzled more than $250,000 from the company. The plaintiffs claim that FDC leaders have denied their requests for records since Young’s arrest and refused to recognize the investors’ ownership stakes.
The investors filed the lawsuit Dec. 18 in Circuit Court for the 10th Judicial Circuit, based in Bartow. The case has been assigned to Judge Jennifer Swenson.
FDC operates BizLinc, a facility based at 225 Lincoln Ave., in Lake Wales’ Northwest neighborhood. The city’s Community Redevelopment Agency in 2022 awarded FDC a three-year contract for $1.2 million to provide training, technical support and other services for small businesses in the Lake Wales area.
The idea of a business incubator for the economically challenged area arose from Lake Wales Connected, a long-term strategy adopted by the City Commission for revitalizing downtown and the Northwest section.
In the complaint, the plaintiffs say that FDC leaders approached them in 2022 and solicited capital contributions in exchange for equity interests in the company. The money would be used for real estate development projects in qualified opportunity zones, or distressed areas, in or around Polk County.
Dula invested the largest amount, $125,000, in exchange for 23% ownership, the complaint states. There was “a mutual understanding” that the plaintiffs were equity owners in FDC, and the company never disputed that ownership stake until Sept. 4, the lawsuit claims.
The complaint includes an equity summary from Feb. 4, 2024, signed by Young, identifying the plaintiffs’ ownership stakes. The chart lists FDC as owning 17.1%, having invested $92,910.
All or part of the investments from Dula, Ross and Landrom are shown as going to the BizLinc facility.
The plaintiffs received an email on May 1 from FDC’s remaining leaders, CEO Frank Cormier and Chief Operating Officer Derrick Blue informing them of Young’s arrest, the lawsuit states. On Aug. 20, the plaintiffs’ lawyer sent a letter to the FDC executives demanding access to certain books and records, citing a state law.
“By this demand, the Plaintiffs sought to assess the overall financial health of FDC, to confirm the use of the funds contributed by the Plaintiffs in light of the allegations of wrongdoing by Young, to review the status and use of the Plaintiffs’ investments in FDC, and to verify that the statements made by FDC regarding its financial condition were accurate,” the complaint states.
FDC responded on Sept. 4 and “for the first time and without basis in fact or law, improperly disputed the Plaintiffs’ status as owners of FDC,” the lawsuit claims. FDC declined to provide any information to the plaintiffs about their contributions or records relating to the company’s operations, the complaint says.
The complaint contains five counts, including accusations of unjust enrichment and breach of contract. The investors are seeking an award for monetary damages, plus interest and costs.
The plaintiffs want a judge to establish their ownership stakes in FDC and to order an accounting of FDC’s financial records. They also ask that the court place their respective equity ownership interests in a constructive trust.
In a letter included with the complaint, a lawyer for FDC stated that the only evidence of the investors’ equity stakes was a summary prepared by Young. FDC formally terminated Young’s authority to act on its behalf in September 2023, the letter says, and filed an amended annual report with the Florida Secretary of State indicating that Young had been removed as CFO.
As a result, Young’s authority had been rescinded before he produced the equity summary for the investors in February 2024, Tampa lawyer Daniel Etlinger wrote in the letter.
Etlinger demanded that the plaintiffs identify and retain any material relevant to the demand letter.
“While the Demand Letter has an adversarial tone, both the Funders and FDC are victims of Mr. Young’s actions,” Etlinger wrote. “We believe the Funders and FDC should work collaboratively to procure and share valuable background documents and information to facilitate a meaningful discussion as to a potential resolution.”
Blue, who serves as director of BizLinc’s operations, provided a statement by email.
“While we are aware of the recent lawsuit filed, we remain steadfast in our commitment to operating with integrity and transparency,” Blue wrote. “At this time, we will defer to our legal counsel, who will address this matter through the appropriate channels and provide statements as necessary. We are confident in the steps we have taken and trust that the process will bring clarity to any allegations.”
Etlinger had not responded by The Ledger’s deadline to a voicemail left Thursday morning.
Henny Shomar, the lawyer representing the plaintiffs, declined to comment Thursday on the lawsuit.
BizLinc has been a subject of some contention. The Lake Wales News raised questions last year about its performance and the status of some of its clients.
A review by the Orlando accounting firm Carr, Riggs & Ingram found that FDC failed to verify meeting some of its contractual obligations in its first year of operations, which ended July 24, 2023. The assessment reported shortcomings in the number of training seminars held and the hours of technical assistance provided.
The accounting firm reported that BizLinc surpassed most of its “deliverable” goals in its second year of operations. After a delay, Lake Wales released a third-year payment of $300,000 in October, following payments of $500,000 for the first year of the contract and $400,000 for the second year.
Gary White can be reached at gary.white@theledger.com or 863-802-7518. Follow on X @garywhite13.
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