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Trump sues over luxury Mexican resort that has never been built

The move comes after dozens of property investors sued Trump and Los Angeles developer Irongate Wilshire, demanding return of $32 million of down payments they made in 2006 and 2007 for the planned luxury condos in Baja California that have never been built.

The 69 investors accuse Trump and Irongate of misleading buyers about Trump's role in the project, having described him as a co-developer when he had merely accepted a licensing fee to lend his famous name to the 525 unit project.

Now Trump is accusing Irongate principals Jason Grosfeld and Adam Fisher of failing to follow through on promises to build the five star Trump Ocean Resort, at which units sold for $275,000 to $3 million. Under the terms of the licence agreement they were required to protect and defend him from the buyers' claims, Trump said in a complaint filed in the federal court in New York. He is seeking $40 million in damages.

'Defendants, as the developers of the project, were entrusted with ensuring that the project would be constructed and developed in accordance with the buyers' purchase contracts and in keeping with the high standards of luxury, quality, reliability and dependability associated, throughout the world, with the Trump name,' the complaint says.

The development was to include three towers on 17 acres on an oceanfront plot about 10 miles south of the US border. Trump Ocean Resort Baja Mexico was intended to achieve a five-star rating, with a fine-dining restaurant, full-service spa, swimming pools, tennis courts and hiking trails.

Property investors lined up at a San Diego hotel in 2006 for the first opportunity to buy, snapping up 80% of the available units. Many units in a second tower were sold in 2007. Investors put down deposits of 30%.

Concerns about the project first appeared in the middle of 2008 as investors raised queries about lack of progress. In December Irongate's subsidiary, PB Impulsores, sent a letter to investors explaining that Trump had not actually invested in the project and had no management role. The company said it had spent all of the deposits and was unable to secure additional financing to complete the job.

In February Trump announced that he had withdrawn from the project because the developer had run out of money and was not able to complete the job. Then last month the developer confirmed that it was not going to complete the Baja development.