A prominent Coachella Valley contractor has been found to have committed fraud during the construction of the troubled Kings Garden cannabis cultivation facility.
A Riverside County judge ruled in June the Palm Desert-based contractor Orr Builders charged and received millions of dollars from for work it knew had not been completed from Kings Garden landowner, Innovative Industrial Properties.
The judge awarded Innovative Industrial Properties, a San Diego-based real estate firm, $8.5 million in compensatory damages plus $4 million more in punitive damages.
Judge Manuel Bustamente said in his ruling Orr Builders “committed fraud through repeated false representations, concealment, and nondisclosure beginning in July 2022 through September 2022.”
IIP, which sued Orr Builders in late 2023, intends to seek additional financial penalties, which could increase the amount by another $2.5 million.
“To get this type of ruling from a bench trial requires a pretty egregious set of facts and circumstances and that’s what we had here,” said IIP attorney Drew Howell, referring to the type of court case where a single judge decides the outcome rather than a jury. “They stole $8.5 million, and they lied to us, up and down, over and over again for years, about taking that money from us.”
Orr Builders plans to appeal the ruling.
“We are disappointed with the verdict and we are appealing it,” attorney Daniel Katz said in an email to The Desert Sun. “As such, the matter is still pending and because of that, it is not appropriate for me to comment any further.”
Kings Garden had a troubled history
Kings Garden has had a tumultuous history since opening in 2017. The 9.4-acre industrial site had been converted from a FedEx facility to a cannabis cultivation site by brothers Michael and Paul King before going out of business amidst a bevy of fraud allegations.
Multiple lawsuits from investors who say they were jilted either remain ongoing or have stalled in court. Michael accused his brother in a lawsuit of falsifying records, filing a false police report, hacking email accounts of Kings Garden Investors and extorting him for millions of dollars.
Since 2022, when Kings Garden went out of business, both have disappeared from the public eye. Meanwhile, investors like IIP have attempted to recoup their losses.
IIP claimed millions were stolen
IIP owned the property, which Kings Garden operated under a triple net lease, which means the tenant pays all the property expenses.
As part of the lease, IIP agreed to reimburse Kings Garden up to $51.4 million for a planned expansion of their facilities shortly after they purchased the site in 2020. Kings Garden then entered into a subcontract with Orr Builders for those improvements, which were expected to cost around $36.7 million.
At the heart of the lawsuit was the claim that Orr Builders had purchased millions of dollars worth of steel for the project, when in actuality they only had purchased a fraction of that amount. IIP then paid Orr Builders for the steel, but when the company attempted to find out how much work had actually been done, the subcontractor deceived them, the judge’s ruling said.
The judge’s ruling states that in 2022 Orr Builders President and CEO Brian Orr verbally confirmed to IIP around $9.5 million worth of steel work had been completed. However, the evidence uncovered in the case showed far less had actually been spent.
IIP used Orr’s confirmation to settle their accounts with Orr Builders for $8.5 million, the amount awarded to them by the judge.
“As previously discussed, the misrepresentations were false and because of the inflated billing and the fact that they were repeated numerous times to a concerned plaintiff leads the trier to the only reasonable conclusion,” Bustamente wrote in his ruling. “Defendant intentionally made false representations with the intent to defraud.”
Although a ruling has already been issued, another hearing on additional damages has been scheduled for Aug. 18. IIP says they also plan to pursue a lawsuit against Orr for money they say he illegally transferred to personal accounts.
Sam Morgen covers local government for The Desert Sun. Reach him at smorgen@gannett.com.
This article originally appeared on Palm Springs Desert Sun: Palm Desert contractor linked to cannabis facility committed fraud
Reporting by Sam Morgen, Palm Springs Desert Sun / Palm Springs Desert Sun
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By Sam Morgen, Palm Springs Desert Sun | USA TODAY Network
