In a US$500 million lawsuit, the New York developer accuses Henry Cheng and Vincent Lo of a 'staggering breach' of duty Real-estate developer and reality television star Donald Trump has sued Hong Kong business partners Henry Cheng Kar-shun and Vincent Lo Hong-sui for US$500 million, alleging 'a staggering breach' of fiduciary duty in the proposed US$1.76 billion sale of a massive property in New York City. The lawsuit, filed in a United States court on Monday, claims the Hong Kong investors declined to entertain several counter-offers as high as US$3 billion for the 92-acre development, of which Mr Trump owns 30 per cent. The suit - a copy of which was supplied to the South China Morning Post along with other documents - alleged that the Hong Kong investors were either grossly negligent, self-dealing or had conflicts of interest in their refusal to accept a higher price. 'There's absolutely no rational basis for their behaviour and logic dictates that there must be some improper motive - and we're going to find out what it is,' said Michael Bowe, partner at Kasowitz, Benson, Torres & Friedman, which is representing Mr Trump. According to a June 1 New York Times report, the Hong Kong investors had agreed to sell the property to the Carlyle Group and Extell Development for US$1.76 billion - a low price that immediately generated interest from other potential buyers, according to Mr Trump. New World Development, of which Mr Cheng is the chairman, refused to speak about the case. 'The investment is not related to New World Development or any of its listed subsidiaries, so we are not in a position to comment,' a New World spokesman said. Mr Lo, chairman of Even Shui On Holdings, did not return calls seeking comment. Also named in the suit is David Chiu Tat-cheong, deputy chairman of Far East Consortium International, which has an effective 3.5 per cent stake in the project. Far East also declined to comment. The dispute is a lesson for fans of Mr Trump's television show, The Apprentice: retain majority control of an investment or else be left in the dark. The suit claims the Hong Kong investors, known as the Hudson Waterfront Association, failed to report US$19.66 million in distributions made to Mr Cheng, Mr Lo and others. 'The Cheng group misrepresented to Trump the amount of partnership distributions they had made to themselves, provided false records to conceal their misrepresentation, and resisted Trump's requests for documents that would have revealed the fraud,' the suit said. In addition, the Hong Kong investors allegedly attempted to force Mr Trump to reinvest his share of the proceeds from the sale into another property project of 'unknown investment quality, in an unknown location', so they could avoid paying taxes in the United States and Hong Kong. But perhaps the most explosive charge is that Mr Cheng took logic-defying steps that at best indicate 'extreme gross negligence' and, at worst, were 'motivated by self-interest and self-dealing'. In 1998, Mr Cheng wanted to sell the property but Mr Trump convinced him to wait, believing market prices would rise. This prediction proved correct, and late last year, Mr Cheng again was interested in selling the property, but this time, he did not inform Mr Trump. The real estate mogul did not learn of the plan until April this year, when Mr Cheng told Mr Trump about a sale agreement with Gary Barnett, who is backed by the Carlyle Group. Mr Trump believed the timing was right but the price was wrong. In an April 28 letter to Mr Cheng, he recommended the property be opened to bidding, which would generate buying interest and attract a higher price. 'Bidding wars are going wild now in New York City and I truly feel that our property would be worth substantially more than the number being discussed if it were opened up to other bidders,' he wrote. Mr Cheng, in a response dated May 4, said the investors had already held discussions with a number of parties. In any case, the group had given Carlyle exclusivity and no other negotiations were permitted, he said. But as news of the pending deal began to spread in New York's real estate circles, rival offers poured in. Thomas Barrack, chief executive of Colony Capital, offered US$2.9 billion in a May 18 letter. Mr Barrack called the Hong Kong investors several times but those calls were left unreturned. In a May 20 letter, Mr Trump wrote to inform Mr Cheng that real-estate developer Richard LeFrak had bid US$3 billion. 'Obviously, the market is beginning to hear the property is for sale,' Mr Trump said. 'If in fact the land and rental buildings are worth more than US$3 billion, you are making a tragic mistake in selling them for US$1.75 billion.' But Mr Cheng did not follow up these and other offers. According to the suit, Mr Cheng indicated to Mr Trump that he knew the real estate was worth considerably more. 'Cheng did not dispute this fact,' the suit said. 'To the contrary, he acknowledged it by admitting that he expected Barnett to immediately flip a portion of the property to another buyer at a substantial profit.'