Lawsuit accuses State College-area hospitality company of fraud, which CEO denies
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- Investors sue Shaner Hotel Group for alleged fraud over $1.75M hotel investment
- Lawsuit alleges Shaner refinanced loans without consent, raising payments
- Suit seeks more than $3M; Shaner CEO denies claims, calls case frivolous
A large State College-area hospitality company was accused in a lawsuit filed Tuesday of “outright fraud” by investors who claim they were misled into putting millions of dollars into the development of a new out-of-town hotel.
Shaner Hotel Group was alleged to have used rosy financial projections to secure an initial $1.75 million investment that went toward the construction of a Fairfield Inn & Suites about 10 miles west of Harrisburg.
R-Hotel, the Lancaster County-based LLC that said it’s a 50-50 partner with Shaner, further accused the company of “financing malfeasance” and self-dealing in connection with the 107-room hotel.
The hospitality company’s CEO Lance T. Shaner told the Centre Daily Times on Wednesday that the lawsuit “absolutely has no merit.”
“I owe these people nothing. They owe me several million dollars in unpaid capital calls,” Shaner said. “This is a frivolous lawsuit.”
Attorneys wrote in the lawsuit that Shaner was expected to provide annual distributions of roughly $250,000 and allow investors to exit after refinancing or a future sale.
The hotel opened in November 2020 during the coronavirus pandemic. The investors claimed no distributions were ever made and that the hotel has struggled financially since opening.
The lawsuit further claimed Shaner repeatedly refinanced the hotel’s construction loan without consent, increasing interest rates and monthly payments in violation of the hotel’s operating agreement.
Led by DJ Risk — whom the lawsuit describes as a construction contractor without experience in hotel management— the company alleged Shaner’s original financial and occupancy projections were unrealistic in a competitive market.
The suit seeks more than $3 million, as well as other relief. Founded in the 1970s, Shaner owns, operates and manages dozens of hotels in the U.S., Italy, Greece and the Bahamas.