Michigan Pension Fund Faces Lawsuit Over $80M Loss in Failed Hawaiian Coffee Venture
December 7 - 2025
Coffee Geography Magazine
A major Michigan public pension fund is accused of fraudulently misleading a lender to secure loans for a failing Hawaiian coffee farm project, culminating in a lawsuit and at least $80 million in losses.
The Municipal Employees’ Retirement System of Michigan (MERS) was the principal investor in Kona Hills LLC, a venture launched in 2018 to create one of the largest coffee farms on Hawaii’s Big Island. MERS, which manages retirement plans for over 150,000 public servants across approximately 1,000 municipalities, held a 99.5% stake in the project through investment vehicles. The farm was established on a combined 1,900 acres, described as Kona's largest coffee farm and backed by institutional investors.
According to a lawsuit filed in Florida by agricultural lender AgAmerica Lending LLC, the project was plagued from the start by "significant and material" environmental, legal, permitting, and construction problems. The suit's central accusation is that MERS and other defendants concealed these pre-existing issues to fraudulently obtain two loans from AgAmerica totaling $40 million between 2022 and 2023.
The lender claims that after providing an initial loan of nearly $30 million in 2022, it discovered a "stark reality": a significant portion of the funds was used to address the undisclosed environmental and permitting violations instead of developing the coffee farm. AgAmerica alleges it was then misled with "positive updates" to approve over $10 million more in 2023 in an attempt to salvage its investment.
The venture collapsed in early 2025. AgAmerica states it was surprised to learn in January of serious harvest problems and a need for tens of millions in additional capital. At that point, MERS and its new asset manager stopped financially supporting the project, leading to a loan default and a foreclosure action by AgAmerica in June.
Total losses are substantial. The lawsuit states that MERS and its former asset manager, Domain Capital, invested about $95 million in the development, with at least $80 million coming from MERS. AgAmerica's CEO, Brian Philpot, publicly expressed shock "that MERS, a fiduciary for thousands of Michiganders... would lose over $100 million in a start-up coffee farm".
MERS CEO Kerrie Vanden Bosch has categorically denied the allegations, calling the lawsuit's claims "baseless and without merit". In its public defense, MERS seeks to contextualize the loss, emphasizing that the Kona Hills investment represented less than 0.5% of its total investment portfolio and that the loss was "more than offset by strong gains in other Private Market investments". Vanden Bosch added that MERS's overall portfolio had grown 15% in 2025.
Despite this defense, the lawsuit puts a spotlight on the pension fund's due diligence and risk management practices. MERS is a fiduciary responsible for the retirement security of public employees from hundreds of municipalities, including the cities of Flint and Saginaw.
The case is proceeding in Florida Circuit Court. The litigation will determine whether MERS and its partners are liable for fraudulent misrepresentation and conspiracy, as alleged. For the thousands of Michigan public servants whose retirement funds were invested, the outcome will clarify the full impact of this failed venture and test the oversight of their pension system.