China’s Dajia Insurance Group knew there were questions about the ownership of some US luxury hotels they put up for sale last year but did not tell more than a dozen first-round bidders, a lawyer testified in the trial over whether Mirae Asset Global Investments Co. can get out of the deal. Stephen Glover, one of the attorneys hired by Dajia to oversee the auction of a portfolio of famed hotels such as the Westin St. Francis in San Francisco and the Loews Santa Monica Beach Hotel, said in the Delaware Chancery Court trial his team wanted to “get their arms around” the problem of phoney deeds filed to the properties before they disclosed them. “We wanted to squash this as quickly and effectively as possible,” Glover told Judge Travis Laster Monday at the start of the trial over the busted-deal case. “It does not make sense to talk with buyers about the problem until you have” a plan to deal with it, the attorney added. Dajia informed the two final bidders, including Mirae, in August 2019, Glover added. Mirae, which bought the portfolio for US$5.8 billion the following month, cancelled the deal in May , arguing Dajia violated the agreement by withholding information about the alleged deed scam as part of a cover up designed to ram the deal through. Dajia, which assumed most of the assets of struggling Chinese insurer Anbang Insurance Group, says it satisfied all terms of the sale and that it should have closed in April as scheduled. The buyout is among nearly 20 transactions that have fallen apart so far this year, many of which cite the Covid-19 pandemic as one of the causes. Mirae also points to the coronavirus’ decimation of the hotel industry as another reason to pull out. “I think fundamentally, they got cold feet,” Glover said. “They were very nervous about this transaction in an environment where hotel business was suffering generally and financing had become more expensive,” he added. According to Glover, Dajia contacted 55 prospective buyers about the hotel portfolio, 17 of which actually submitted bids. Dajia winnowed that to a final group including Mirae. Glover said Mirae executives determined “it shouldn’t be an issue” after being notified about concerns over phoney title transfers. Mirae instead agreed to a “litigation plan” that succeeded in getting the phoney California deeds thrown out before the deal’s closing date. The hotel portfolio was assembled by Wu Xiaohui, ex-CEO of Anbang, as part of an US$18 billion buying binge starting in 2014. Wu, an ex-car dealer whose third wife was the granddaughter of former paramount leader Deng Xiaoping, was sentenced four years later to 18 years in prison for fraud and embezzlement of more than US$12 billion. Wu also had assets worth 10.5 billion yuan (US$1.65 billion) confiscated, including four villas. The Chinese government took over Anbang and injected 60.8 billion yuan to insure its solvency. Before his jailing, Wu signed an agreement empowering four Delaware shell companies to sue on his behalf if the hotels were expropriated by the government. Dajia contends the agreement is fictitious. China’s Anbang dismantling continues with new state-owned firm taking over insurance assets Zhongyuan Li, a Dajia executive involved in the hotel sale, testified Monday that the agreement wasn’t stamped by with the company’s official chop and said one person who signed it claiming to be a current director actually left the board in 2015. Dajia contends a group of “fraudsters” used a 26-year-old Uber driver to file phoney title transfers for the California hotels, then set up arbitration panels under a Delaware law that issued awards to the shell companies totalling US$936 billion over the hotel seizures. Laster later threw those awards out. On cross-examination, Mirae lawyer Andrew Rossman pointed out that, while Dajia officials alerted Mirae about the California title transfers, it never mentioned other details of the alleged scam. Dajia also did not say the Delaware companies were still trying to enforce the arbitration awards at the time, Rossman said. Mirae only learned that from lawyers at Goldman Sachs, one of the financial advisers on the deal. Dajia did not mention the Delaware litigation because it “was a sideshow,” Glover said. “It was another difficult-to-explain element to the fraudulent effort.”