This article originally appeared in slightly different form in the Connecticut Law Tribune.

NEW HAVEN, CT—A federal judge in Connecticut has awarded $10.6 million to Wells Fargo after the financial institution proved that a prominent developer shifted corporate assets to shell companies in an attempt to dodge a nearly $23-million verdict lodged against him in Maryland in 2005. The developer, Michael Konover, of Konover Development Corp., based in Farmington, is appealing Judge Alvin Thompson's ruling to the US Court of Appeals for the Second Circuit here.

Lawyers for both sides declined to discuss the case on the record. But according to court documents, Konover's various enterprises include the construction, development and management of commercial real estate throughout the United States. One of the properties developed by the Konover companies, more than 20 years ago, was a 26-acre shopping center known as Diamond Point Plaza in Baltimore. The plaza stood atop a hill, not too visible to the main thoroughfare and across the street from a sewer treatment plant.

The anchor tenant was a Sam's Club store, which is owned by Wal-Mart Stores Inc. In July 2002, Wal-Mart closed the Sam's Club in the plaza but kept paying the lease payments. It then opened another Sam's Club just three miles away, which violated the lease agreement with Diamond Point Plaza. The vacant warehouse store was then used as a setting of the HBO television series The Wire, which also was in violation of the lease agreement.

Konover had taken out a real estate loan on the shopping center. Wells Fargo served as the trustee and ORIX Capital Markets served as special servicer for the loan. According to Wells Fargo and ORIX, Konover had taken out the loan in 1988 with a large payment due in 2000. Konover covered that payment by taking out a new $15.4-million loan.

But Wells Fargo and ORIX contend that by the time Konover applied for the second loan, the developer knew the Sam's Club was planning to leave the plaza and failed to disclose that to the lenders. Due to business failures of the shopping center, Konover stopped making payments on the second loan.

Wells Fargo and Orix sued Konover, alleging fraud. The case went to trial in Baltimore County in 2005 and the court awarded roughly $23 million in damages. In a separate case, Wal-Mart Stores Inc. and Sam's Club were held liable for $1.3 million for breach of contract in violating the lease.

Following entry of the judgment in Maryland, the plaintiffs attempted to locate Konover's assets. The only known asset was the shopping center, which at this point was worth a lot less than the outstanding loan amount.

In time, the plaintiffs' attorneys said they discovered that Konover had made a series of money transfers to newly organized Konover companies. The plaintiffs claimed that Konover was using shell companies to avoid the creditors' claims from the 2005 judgment in Maryland.

So the plaintiffs again took Konover to court, this time in US District Court in Connecticut. They attempted to pierce the corporate veil by proving that the separate companies had no purpose other than giving the main Konover enterprise and Michael Konover a place to move assets and avoid creditors' claims.

The case went to trial before in Hartford from October 2012 until December 2012. The jury agreed with the plaintiffs, and stated that Michael Konover and his company is "personally and severally liable" for the Maryland judgment. The jury also ruled that punitive damages of legal fees and costs should also be awarded. It was then up to the judge to award those damages at a later time.

In a recent 45-page written ruling, Thompson awarded $10,601,355. Even though a sale of the Baltimore plaza helped pay a portion of the initial judgment, the combination of the two verdicts leaves Konover on the hook for more than $30 million, once interest from the 2005 case is factored in. In addition, Konover's own attorney fees and costs sit at about $15 million.

“Wells Fargo obtained this best possible result while expending less for attorney's fees and expenses than did the defendant,” wrote Thompson. “In fact, the defendant's own expenditures for attorney fees and expenses shows that the plaintiff's counsel were more efficient and more economical overall than the defendant's counsel.”

Wells Fargo and ORIX's team of lawyers were led by Jeff Joyce of Joyce, McFarland & McFarland in Houston, and John Nolan of Day Pitney in Hartford. Konover's legal defense team is led by James Shearin, of Pullman & Comley in Bridgeport, and William Murphy, of Murphy & Shaffer in Baltimore. All the attorneys cited the Second Circuit appeal as a reason for not discussing the case publicly.

According to Thompson's ruling, as of the date of the jury's verdict in Connecticut in late 2012, the litigation between the two sides had lasted seven years and produced a million pages in court documents, 223 motions, 44 depositions, 45 hearings, 24 trial days, 20 trial witnesses and 711 trial exhibits.

Christian Nolan can be reached at [email protected].