A civil suit concerning the operation of the University Place (UPlace) complex located on University Avenue in Sunnyside was filed by the West Virginia University Board of Governors on Jan. 12 in Monongalia County Circuit Court.
Defendants in the lawsuit include a series of limited liability companies (LLCs) including WV Campus Housing (WVCH), Downtown Campus Parking Associates (DCPA), Falcon Services, Westridge Corporate Park, Toro Equities, and Ryan Lynch, owner of the aforementioned LLCs.
The court document also names any “John Doe” entities that are presently unknown as well as BDO USA, a Delaware-based limited liability partnership that provides tax and advisory services, including audit services.
WVU claims that over a period of several years, unbeknownst to the university, certain defendants have been “secretly diverting money from the payments made by students who reside at UPlace and other parties and intended for the financing, operation, and maintenance of UPlace. Defendants have actively concealed this fraudulent scheme from WVU.”
In the 40-page lawsuit, WVU makes numerous claims against the defendants including breach of contract, fraud, promissory fraud, tortious interference with contract, conspiracy, aiding and abetting a tort, conversion and negligence regarding the UPlace complex.
UPlace is a mixed-use housing, retail and parking facility where Seneca Hall — a popular residence hall for WVU freshman — is located. The property provides 256 residential units with 979 beds and 29,650 square feet of retail space, portions of which are used by WVU and its affiliates. The parking garage provides around 500 parking spaces and another 12,000 square feet of retail space.
The complex, opened in 2015, is a WVU Public-Private Partnership with WVCH and DCPA.
The partnership includes a series of contracts and agreements collectively referred to in the suit as the “UPlace Agreements,” including a longterm lease, subleases and an operating agreement.
The lawsuit states that under the UPlace Agreements, WVU manages and operates the residential part of UPlace as on-campus housing, collects revenues from the garage and housing, provides all student services, and maintains, manages, and pays for all maintenance and operating costs and obligations associated with the residences and parking garage.
WVCH was supposed to operate the retail portion of UPlace and pay the debt service and utilities. However, according to WVU’s complaint, the university is now paying the debt service and utilities for the retail premises from their collected funds.
The joint operating agreement requires all gross revenues from UPlace, including those from WVU and WVCH, are to be deposited into an operating account. WVU is then reimbursed monthly for operating expenses and a yearly management fee no higher than 4% of the facilities’ gross revenues.
“While WVU does not have access to the operating account, WVCH warranted under the UPlace Agreements that all disbursements from the operating account would be used exclusively for UPlace and the parking facility project expenses,” the suit states.
WVU claims in the suit that by 2017, WVCH, DCPA and Ryan Lynch “had stopped paying operating expenses, management fees, and other amounts owed to WVU and advised WVU there were insufficient funds to make these payments to WVU.”
WVU agreed to work with Lynch’s companies and Bank of America to restructure the project loan, which included WVU’s agreement to close Arnold Hall, another residence hall, in order to convert 400 beds to UPlace’s Seneca Hall.
In conjunction with the loan restructuring, amendments were made to the UPlace Agreements, which are collectively referred to in the suit as the “April 1, 2017 Amendments.”
One of these amendments restated that WVCH would use funds in the operating account solely for expenses related to the operation of UPlace and the parking garage.
Another was the establishment of a “waterfall” system which dictated the order in which operating account funds are to be disbursed — first the debt service to Bank of America was to be paid for the project loan, then WVU was to be paid current operating expenses, followed by payment of past due amounts to WVU if funds are available in the account.
WVU claims that Lynch and his companies “had no intention” of using the operating funds solely for UPlace or of disbursing the funds in accordance with the waterfall.
“WVCH, DCPA, and Ryan Lynch made these false promises regarding the Operating Account funds to induce WVU to assist them with the restructuring of the Bank of America loan. This included WVU’s agreement to close Arnold Hall, and though WVU has not paid additional residential rents, it agreed to potentially pay additional rents, and to enter into the April 1, 2017 Amendments.”
According to WVU, unbeknownst to it, Lynch and WVCH began improperly transferring money into and out of the operating account to other entities owned by Lynch and possibly others. The lawsuit alleges that Lynch and company took active measures and made multiple misrepresentations to WVU in order to conceal the improper transfers.
WVU states it never received timely reimbursement from WVCH for monthly operating expenses and failed to make payments pursuant to the waterfall, which Lynch gave a “variety of false and misleading administrative reasons for why payments were delayed.”
Upon receiving a payment in June 2022 for less than the amount owed, WVU noticed that WVCH and Lynch had wired the money to WVU from accounts other than the Operating Account.
At that time, WVU states it demanded that WVCH and Lynch pay all amounts currently owed under the waterfall and UPlace Agreements within 30 days. The university said Lynch did not respond but did send another partial payment that did not come from the Operating Account.
An audit report for fiscal year 2022 brought further evidence after the report established that WVCH was owed $3,633,68 from “related parties” which suggested that at least that amount of money had been improperly transferred from the account to undefined parties.
Because of the diversion of funds for non-UPlace purposes, the Operating Account was left with a cash balance of only $22,000 on June 30, 2022. The balance the previous year was $2.2 million.
The audit report led to WVU discovering WVCH has also failed to collect over $785,000 in rent from one of UPlace’s commercial tenants, which the suit states is owned by one of Lynch’s family members.
According to WVU, the report also showed that Lynch and the Lynch entities repaid the over $3 million missing from the Operating Account, but it believes as soon as the audit was completed that money was immediately diverted back to Lynch.
The remaining defendant, BDO USA, prepared the annual audit reports of WVCH.
WVU alleges that BDO knew or should have known that WVCH, DCPA and Lynch were diverting funds from the Operating Account to the other Lynch companies and failed to report the improper and suspicious nature of the multiple, unexplained transfers of substantial amounts of money from the Operating Account in their audit reports.
WVU claims to have suffered significant damages and requests all damages allowed by law including compensatory, punitive and specific performance under the contracts as well as interest, court costs and attorney fees.
The Dominion Post was unable to reach Lynch for comment.
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