Two Mexican entities, Desarrolladora La Ribera, S. De R.L. De CV and Administradora de Desarrollos Costa Palmas, S.A. de C.V., along with their America parent Company, Irongate, have come under scrutiny both in the United States and in Mexico in connection with their development and sales of luxury homes in Costa Palmas, Cabo San Lucas, Mexico. Irongate, through these Mexican affiliates, owns and operates the 1,500 acre resort, which includes the Four Seasons Restort & Residences, the Amanvari Resort & Residences and Casa Blake. Costa Palmas is marketed, primarily to wealthy Americans, as Mexico’s premier destination for luxury travel and paradise living. Several home buyers in Costa Palmas, however, have found the opposite of paradise.
Rumors are legal proceedings are underway in both the United States and in Mexico. Sources with knowledge about Costa Palmas, Irongate and its Mexican subsidiaries repeatedly lied to buyers of multi-million properties in Costa Palmas about Irongate, the development itself, and the “soon-to-be built” homes that buyers purchased. As limited examples, some buyers were told that Costa Palmas was the brainchild of Jason Grosfeld, Irongate’s Founder and CEO, and he used his own money to purchase the land for the resort, only to later learn that Jason Grosfeld borrowed millions of dollars from Miliken and others to purchase and develop Costa Palmas. Some buyers claim that Irongate’s representatives promised numerous buyers their homes would be completed within 12-18 months in order to induce them to sign purchase contracts when Irongate knew it had no ability or intent to actually complete construction within that time frame. Some homes are still not complete more than 3 years after purchase contracts were signed and millions of dollars were paid for construction. Buyers also claim Irongate provided knowingly false and inaccurate construction budgets that hugely underestimated actual costs and/or charged buyers for costs and materials that Irongate did not actually incur for the buyers’ homes. And other buyers say they were victims of bait and switch tactics, as Irongate’s representatives showed them lots or units that they were supposedly buying only to find out after the money was paid that they in fact had purchased less desirable or less valuable properties.
Even more shocking, it appears Irongate may not have obtained the necessary permits from Mexican authorities for the Costa Palmas development, including permits relating to construction, safety, beach access, and environmental regulations. Irongate may also have failed to obtain required authorization from the Mexican Ministry of Agriculture and/or the Ejido Authority to legally transfer properties to some buyers, even though Irongate received millions of dollars for such properties. Such failures, if true, place properties in Costa Palmas worth hundreds of millions of dollars at risk.
Many home buyers further complain they are scared to complain or take any action against Irongate to seek redress for the harm they have suffered because Irongate threatens to punish them and uses intimidation or similar acts of extortion. Two recent filings against Irongate and others in California appear to confirm these threats, as the buyers there state that immediately after they filed lawsuits against Irongate and its affiliates, Irongate terminated their valuable memberships in Costa Palmas’ exclusive private beach club.
Sources reveal criminal investigations are underway in both the United States and in Mexico as to the Costa Palmas enterprise and what may be a pattern and practice of fraudulent, extortionate, or other criminal conduct targeting American buyers. We are advised that Mexican authorities have already issued at least one subpoena for Irongate and certain of its representatives, including Jason Grosfeld, to appear in connection with these investigations. Others may soon follow.
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