Japanese Investor Claims Houston "Space Law" Expert's Private Space Flight Company Was a Scam
Excalibur Almaz website
Takafumi "Horiemon" Horie, the Japanese entrepreneur who founded the tech company Livedoor and later spent time in jail for securities fraud, is suing a Houston "space law" attorney, along with a number of related corporations, for allegedly duping him into investing $49 million dollars in a defunct space travel company, using Russian-made Almaz spacecraft as bait.
The lawsuit, filed in Harris County on Tuesday, alleges that Art Dula claimed he and his company could set up a commercial space flight program for Horie -- whose dba was "Japanese Space Dream" -- because Dula was a "space attorney" and had all the right contacts to get an orbital space transport business off the ground.
But ultimately, according to the suit, the whole space travel company turned out to be a "complex scheme" to take Horie's money.
The details, at least according to Horie, are indeed complex. The lawsuit's account of the failed company is filled with tales of Russian spacecraft and shady offshore accounts.
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According to the lawsuit, this all started when Dula sought out Horie, who wanted to "fulfill his dream of building a private commercial space company," as an investor. (We would tell you when exactly this happened, but the lawsuit doesn't specify, and Horie's attorney, James Pierce, wasn't sure either.)
Horie says in the lawsuit that he trusted Dula, whose in-depth knowledge of spaceflight projects, and whose position as a trustee with the Heinlein Prize Trust (yes, that Heinlein), indicated he might know a thing or two about spaceflight projects.
Dula told Horie, according to the lawsuit, that he even had connections with a Russian aerospace company, NPO Mashinostroyenia, which could help the company get the hardware needed for a commercial space flight program. But in order to fund the commercial space program, Dula needed Horie to wire just over $49 million to a Houston-based trust.
The money, Dula told Horie, would be used to buy "space hardware" and intellectual property, which came from a "Soviet-era secret space program," according to the suit. The space hardware would need modifications, but Dula told Horie there was a key advantage to going through the Russians: the equipment would have been rigorously tested and flight-worthy.
Dula, according to the lawsuit, would also use his connections to help set up things like "space agreements" and NASA contracts in order to make this space enterprise entirely legit.
While the lawsuit acknowledges that Dula did indeed buy some space equipment from the Russians -- four Almaz spacecraft capsules and two space stations, to be precise -- the purchase contracts for the spacecraft had to be approved by the Russian government. Those contracts, Horie alleges, explicitly barred Dula and his company from making any updates or alterations to the spacecraft, effectively rendering them nice museum toys that were useless for space travel.
Horie's lawsuit claims Dula conveniently neglected to tell investors that little detail. Sometime during the course of setting up his company, Dula transferred Horie's $49 million investment from the Houston trust to an offshore account associated with Dula's company, Excalibur Almaz Limited, on the Isle of Man.
Horie says he only learned of Dula's alleged scam when he read an article by an arts writer that noted Dula had auctioned off one of the space capsules that had been purchased, at least in part, with Horie's money. To Horie, the article was sign that Dula was liquidating the fledgling space-flight company's assets, he says in his lawsuit. It was also then that Horie first realized, according to the lawsuit, that the spacecraft he helped buy would only be suitable for a museum display, not space flight.
Given the equipment's uselessness for Horie's "Japanese Space Dream," Horie is now claiming Dula defrauded him out of the $49 million he invested in the company.
So, okay fine. Dude wanted to explore space and take people up in ancient Russian relics that were modified to not explode or otherwise crumble under pressure.
Before investing in a space flight company gone bust, Horie had his own brush with fraud -- the securities type -- and even spent 21 months in a Nagano prison for violating securities laws.
Horie and his fellow senior executives at the internet service provider company Livedoor were accused in 2006 of falsifying corporate accounts and spreading false information about an acquisition to boost the company's profits. The Tokyo Stock Exchange was even forced to halt all trading at one point because of panic selling in what came to be known as the "Livedoor shock"; the company, which Horie founded, was worth about $9 billion at its peak.
Given Horie's own history and brush with trouble, it's unclear why he wasn't more skeptical before jumping in and investing millions with Dula. Especially considering Dula had already been involved in at least one other space lawsuit, this time over asteroid mining.
That lawsuit, filed in September 2012, alleges that Dula scammed a woman named Donna Beck out of $300,000 after she invested in a supposed asteroid mining project. And while all parties agreed to dismiss that lawsuit in January 2014, the details in Beck's initial claim and Horie's allegations are eerily similar. Some key details even appear to overlap at points. According to Beck's lawsuit, Dula told her he'd already raised $50 million for his company, Excalibur Almaz, the same company in which Horie invested nearly $49 million. And like Horie, Beck makes mention of Dula's Almaz spacecraft in her lawsuit -- it was supposed to be used to test the special rocket engine needed for the asteroid mining project, she claims.
So Beck and her late husband cut Dula a check for $300,000, which somehow, according to the 2012 lawsuit, ended up in a bank account in the Isle of Man.
And, like Horie's account, nothing ever came of the asteroid mining project, according to Beck's suit. No spacecraft were ever modified or built, according to the suit. Beck's suit says the money was instead spent on travel to conferences and to court other investors.
We spoke to one of Horie's attorneys, James Pierce, about the lawsuit. Pierce confirmed that yes, the lawsuit is pretty much over a whole lot of money and a whole lot of useless (for space flight, anyway) spacecraft.
A representative at Dula's office declined to comment, saying they hadn't yet been served.
Whatever the outcome, it does seem that someone in this equation now owns a fair amount of Russian space relics. And while those Soviet-era crafts may not be flight-worthy, they definitely still make for one hell of a story.
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