UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 01-8060 Civ- Dimitrouleas; Johnson
GREGORY J. HALL
ARCADIA RESOURCES, LTD.
PLAINTIFFS
VERSUS
MARK COHEN, CREAI ACTION SERVICE,
CREAI ILE DE FRANCE, CREAI-COHEN, A JOINT
VENTURE, JEAN PIERRE MARTINEZ,
CHARLES H. WEAVER, SUMMERFIELD INTERNATIONAL
SERVICES, INC., MAJESTIC ROSE, INC., SENTRY
OVERSEAS (BAHAMAS) INC., T.M.I. GENERATING,
DEFENDANTS
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COMPLAINT AND DEMAND FOR JURY TRIAL
Plaintiffs allege upon information and belief, except as to those paragraphs relating to the Plaintiffs that are alleged upon personal knowledge, the following:
JURISDICTION AND VENUE
1. This Court has personal and subject matter jurisdiction over the action pursuant to Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. Sec.78aa and pursuant to 28 U.S.C. Sec. 1331.
2. Venue is proper in this judicial district pursuant to Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. 78aa, because acts, transactions, and occurrences alleged herein making up the violations occurred in this district, including the knowing and reckless employment of devices, schemes and artifices to defraud, the engagement in acts, practices, and a course of business which operated as a fraud and deceit upon Plaintiff investors, and the making of untrue statements of material facts and the omission to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. Venue is also proper in this judicial district pursuant to 28 U.S.C.1391(b)(2).
3. In connection with the acts, transactions, and occurrences referred to in Paragraph 2 above and described in detail in this Amended Complaint, defendants, directly and indirectly, used the means and instrumentalities of interstate commerce to wit: wire transmissions and telephone communications, and the mails.
THE PARTIES
PLAINTIFFS:
4. Plaintiff Gregory J. Hall is one of the Plaintiff investors who was offered investment contracts by Defendants and is a citizen of Canada, domiciled in Toronto, Ontario,
5. Plaintiff Arcadia Resources, Ltd. is an entity organized under the laws of the British West Indies that was formed by Plaintiff investors, many of whom are citizens of the United States, at the direction of Defendants and Co-Conspirators for the purpose of accumulating the funds of Plaintiff investors to purchase the investment contract offered and sold to Plaintiff investors by Defendants.
DEFENDANTS AND CO-CONSPIRATORS:
6. Defendant and Co-Conspirator Mark Cohen is a co-owner of Defendant and Co-Conspirator Summerfield International Services, Inc.. Cohen is a Special Director and a Special Financial Manager of Defendant and Co-Conspirator Creai Action Service. Cohen is domiciled Boca Raton, Florida. Cohen’s telephone number was 561-997-2484, and his fax number was 561-988-9694.
7. Defendant and Co-Conspirator Creai Action Service is an “affiliated Association” of Defendant and Co-Conspirator Creai Ile de France that was formed by Creai Ile de France. [See, Exhibit A, Minutes of Special General Meeting of Creai Ile de France.] To begin operations, Creai Ile de France transferred funds to “the new account of the new Association Creai Action Service.” [Id.] Creai Action Service was formed Creai Ile de France ostensibly to develop “humanitory (sic) projects in France and in foreign countries” but was, in fact, formed to offer investment contracts to investors and to receive funds from investors, including funds invested by Plaintiff investors and other investors not parties to this action. Creai Action Service is the alter ego of and is controlled by and its actions are directed by Creai Ile de France. Creai Action Service is presently holding the funds of Plaintiff investors, and other investors not parties to this action, who were defrauded by Defendants. Creai Action Service was to profit from the use of funds belonging to Plaintiff investors and other investors. Creai Ile de France created Creai Action Service and named the Officers and Directors of Creai Action Service. Creai Ile de France named Defendant and Co-Conspirator Jean-Pierre Martinez as President and Director of Creai Action Service. [See, Exhibit B, Minutes of Special General Meeting of Creai Ile de France.] Jean-Pierre Martinez is also the President, Controlling Person, and Director of Creai Ile de France. [See, Exhibits A and B.] Creai Ile de France named Mister Benzaid, General Inspector of Social Affairs of Creai Ile de France, as Director and Secretary of Creai Action Service. [See, Exhibit B.] Creai Ile de France named Mister Guerville, General Manager of Creai Ile de France, as Director and Treasurer of Creai Action Service. [Id.] Creai Action Service is domiciled in Paris, France.
8. Defendant and Co-Conspirator Creai Ile de France is a entity formed under the laws of France. Creai Ile de France formed Creai Action Service as its affiliate and alter ego. [See, Exhibit A.] Creai Ile de France transferred funds “to the new account of the new Association Creai Action Service.” [Id.] Creai Ile de France formed Creai Action Service as an “affiliated Association” ostensibly to develop “humanitory (sic) projects in France and in foreign countries” but, in fact, Creai Ile de France formed Creai Action Service to offer investment contracts to investors and to receive funds from investors, including funds invested by Plaintiff investors and other investors not parties to this action. Creai Ile de France controls the actions and directs the activities of Creai Action Service. The President, Controlling Person, and Director of Creai Ile de France is Defendant and Co-Conspirator Jean-Pierre Martinez. [Id.] Martinez is also the President, Controlling Person, and Director of Creai Action Service. [See, Exhibit B.] Mister Benzaid, the General Inspector of Social Affairs of Creai Ile de France, is a Director and Secretary of Creai Action Service. [Id.] Mister Guerville, the General Manager of Creai Ile de France, is a Director and Treasurer of Creai Action Service. [Id.] Creai Ile de France is domiciled in Paris, France.
9. Defendant and Co-Conspirator Jean-Pierre Martinez is the President, Controlling Person, and Director of Creai Ile de France. He is also the President, Controlling Person, and Director of Creai Action Service. Martinez exercises control over the actions of Creai Ile de France and Creai Action Service. Martinez is domiciled in Paris, France.
10. Defendant and Co-Conspirator Creai-Cohen, was a Joint Venture established by Defendants and Co-Conspirators Creai Action Service, Creai Ile de France, Martinez, Cohen, Weaver, and Summerfield to receive funds invested by Plaintiff investors and other investors, to transfer those funds to Creai Action Service, to permit Creai Action Service to profit from the use of these funds. It is domiciled in Boca Raton, Florida.
11. Defendant and Co-Conspirator Charles H. Weaver is a co-owner of Defendant and Co-Conspirator Summerfield International Services, Inc. Weaver is a Special Director and a Special Financial Manager of Creai Action Service. Weaver is domiciled in Raleigh, North Carolina. Weaver’s telephone number was 919-847-8768, and his fax number was 919-676-7025.
12. Defendant and Co-Conspirator Summerfield International Services, Inc. is a corporation organized under the laws of the commonwealth of the Bahamas. It was an investment-advisory and a broker-dealer that was unlicensed. Summerfield was owned by Defendants Charles Weaver and Mark Cohen. Summerfield was formed to receive funds invested by Plaintiff investors and other investors not parties to this action, to profit from the use of these funds, and to make “Ponzi” payments of so-called profits to investors.
13. Defendant and Co-Conspirator Majestic Rose, Inc. is a corporation organized under the laws of the commonwealth of the Bahamas. Majestic Rose was formed and owned by Defendant Cohen to receive the funds invested by Plaintiff investors and other investors not parties to this action and to transfer those funds to other Defendants.
14. Defendant and Co-Conspirator Sentry Overseas (Bahamas), Inc. is a corporation organized under the laws of the commonwealth of the Bahamas. It was formed and owned by Defendant Cohen to receive the funds invested by Plaintiff investors and other investors and to transfer those funds to other Defendants.
15. Defendant and Co-Conspirator T. M. I. Generating is a corporation organized under the laws of the commonwealth of the Bahamas. It was formed and owned by Defendant Cohen to receive funds invested by Plaintiff investors and other investors and to transfer those funds to other Defendants.
16. The Defendants named above conspired with each other and with others not named as Defendants to carry out the scheme to defraud described herein.
17. When Defendants entered into contracts and agreements with Plaintiff investors and when Defendants accepted the funds of Plaintiff investors and began transferring Plaintiffs’ funds to other Defendant entities for the benefit of Defendants, Defendants were fiduciaries of Plaintiff investors and, thus, owed Plaintiff investors a fiduciary duty not to make material misrepresentations to Plaintiff investors and not to make omissions of material facts to Plaintiff investors in reference to this investment contract Defendants induced Plaintiff investors to purchase and maintain with Defendants.
18. To induce Plaintiff investors to purchase this investment contract offered by Defendants, to induce Plaintiff investors into maintaining this investment contract with Defendants, and to induce Plaintiff investors to add additional funds to this investment contract, Defendants made a plethora of statements and representations to Plaintiff investors that were false and misleading and contained omissions of material facts. The misrepresentations and omissions were made by Defendants for the purpose of deceiving Plaintiff investors into purchasing this investment contract and for the purpose of lulling Plaintiff investors into believing that if their investment was maintained with Defendants that payments of profits and the return of their principal would be forthcoming when the trading ended.
FACTS COMMON TO ALL COUNTS
19. In February, 1998, a friend of Plaintiffs told Plaintiffs of the “major investment opportunities in bank debenture trading programs involving European banks.” He said that he had recently learned about the huge profits that can be earned by participating in these bank debenture trading programs at a seminar in Cancun, Mexico. That Defendant Mark Cohen sponsored these bank debenture trading programs and volunteered to put them in touch with Defendant Cohen.
20. Thereafter, a telephone conference call took place between Plaintiffs and Defendant Mark Cohen. Using the instrumentalities of interstate commerce, Cohen engaged in this conference call from his home in Boca Raton, Florida. Cohen advised Plaintiffs that he was a lawyer and described medium term bank debenture trading programs. Defendant Cohen said that after World War II, a plan was developed to rebuild Europe, the Marshall Plan. Part of the Marshall Plan, Cohen stated, was the quiet establishment of these bank debenture trading programs to aid the European banks. Cohen advised that after the war, the Catholic Church got involved in these trading programs and “word” of these trading programs spread. As a result, Cohen stated, the trading programs became available to “knowledgeable” people.
21. Defendant Cohen represented in this telephone conference call that he had sponsored and participated in these medium term bank debenture trading programs for the past five years, and that he had made a lot of money for his “friends and family.” These representations were false. Cohen had done no such thing. Cohen further described the “enormous” profits that he could earn in these trading programs and related, by way of example, that he had made the United States Diocese of the Greek Orthodox Church a 1000% profit on a $ 1 million investment the Diocese had made with him. Cohen’s representations were false. He had never earned enormous profits, or any profits, from such trading programs. Trading programs returning these kind of profits do not exist. Cohen went on to explain that he was able to do this by using the $ 1 million investment to lease $100 million for one year. This representation is false. Experts in international finance have testified in legal proceedings that this cannot be done.
22. During that telephone conference call, Defendant Cohen also represented that another investor had made so much money that he had been able to purchase a Coca-Cola bottling plant with the profits he derived from participation in one of Cohen’s medium term bank debenture trading programs. For the reasons stated above, this representation was false. Defendant Cohen told Plaintiffs that he would “permit” them and their friends to purchase an investment contract in medium term bank debenture trading programs that Defendants were offering. Cohen represented that Plaintiffs’ funds would always remain in an account in a AAA rated bank, or their investment funds would be placed in an banking instrument with a value equal to 100% of their funds. Cohen advised that he worked on a commission basis, being paid a percentage of the profits earned from the investment contract.
23. Defendant Cohen advised that, because the profits would be so enormous, all participants in his bank debenture trading program had to establish a charitable organization to receive a portion of these profits that would be earned from this investment contract. Cohen’s representation was false. Enormous profits from such fictitious programs do not exist. Cohen represented that although the Securities and Exchange Commission had no jurisdiction over these bank debenture trading programs, Defendants worked directly with the Federal Reserve, and that he, personally, had a contact within the “Fed” he referred to as “Uncle.” Cohen’s statement about Defendants working with the Federal Reserve in regard to these trading programs was false. The Federal Reserve denies the existence of these programs. Further, it has no jurisdiction over financial transactions in foreign countries. Cohen represented that these investment contracts could be “rolled over three times” before the Fed would place restrictions on Defendants’ trading. For the reasons stated above, these representations were false. Cohen represented that he had partners who worked with him in sponsoring and administrating these medium term bank debenture trading programs.
24. Defendant Cohen advised that he had graduated from the London School of Economics. He had later been hired by the U. S. S. R. to render a legal opinion on bank debenture trading programs. Cohen represented that the U. S. S. R. had introduced him to Barclay’s Bank in London, England, where he established a trading account to trade bank debentures.
25. Defendant Cohn convinced Plaintiffs that an investment contract in medium term bank debenture trading programs was an excellent investment that would return enormous profits for Plaintiffs. Cohen urged the Plaintiffs to contact their friends, many of whom are citizens of the United States, and tell them what Cohen had told them, and get their friends to purchase the investment contract that Defendants were offering. Defendant Cohen’s representations, described above, were false and misleading, and were made in reckless disregard of the truth since no such medium terms bank debenture trading programs that offered the enormous profits promised by Defendant Cohen existed. Cohen’s representations described above were replete with omissions of material facts that made those representations false and misleading and in reckless disregard for the truth.
26. Defendant Cohen, using the instrumentalities of interstate commerce, sent a document by wire transmission from his home in Boca Raton, Florida to Plaintiffs to forward to potential investors describing “possible investment opportunities.” In this document, Cohen described “numerous opportunities” available depending upon the “amount of investment.” The document established that profits from trading in medium term bank debentures would be apportioned 50% to the investors and 50% to Cohen and his partners, the Defendants.
27. As directed by Cohen, Plaintiffs talked to their friends, who later became Plaintiff investors, and repeated Cohen’s representations about medium term bank debenture trading programs that Cohen had made. Thereafter, using the instrumentalities of interstate commerce, Defendant Cohen, from his home in Boca Raton, Florida, engaged in at least a dozen telephone conference calls with Plaintiff investors. In these telephone conference calls, Cohen repeated his prior representations described above, and embellished upon them by describing his successes on behalf of other investors wherein he and his partners had earned enormous profits for them from their purchase of Defendants’ investment contract in medium term bank debenture trading programs. For the reasons described above, Cohen’s representations were false and misleading and made in reckless disregard for the truth.
28. During these telephone conference calls, Cohen elaborated upon his skills and experience and those of his partners in bank debenture trading programs. Cohen represented that they were currently involved in several medium term bank debenture trading programs and that “things were going very well.” Cohen represented to the Plaintiff investors that they had recently “completed another transaction with $ 2 billion placed and traded.” Cohen’s statements here were false. Cohen and his partners had not accomplished these things.
29. During these telephone conference calls with Cohen from his home in Florida, Defendant Cohen informed Plaintiff investors that they would be required to form an off-shore entity and accumulate their funds in the off-shore entity that was, in turn, to send the money to Defendants to purchase the investment contract from Defendants. Pursuant to Defendant Cohen’s instructions, Plaintiff investors formed Arcadia Resources, Ltd. in Nevis, West Indies.
30. On July 6, 1998, Defendant Cohen, using the instrumentalities of interstate commerce, sent a document by wire transmission from his home in Boca Raton, Florida, to Plaintiff investors entitled “Agreement.” The Agreement stated that Defendants had “access to certain financial investment opportunities” that they would make available to Plaintiff investors including “trading in medium term notes of ‘A+’ or better rated banking institutions as rated by Standard and Poor’s or Moody’s.” Defendants represented that they would be using Plaintiffs’ funds to trade in “medium term bank debentures.” The Agreement provided that profits from this trading would be split 50-50. The Agreement required that Plaintiff investors be bound by the “non-circumvention and non-disclosure provisions of the International Chamber of Commerce, Paris, France...and...the (p)arties...will not try to circumvent or contact the other’s referrals, banks, or other contacts without written consent.” The Agreement provided that Cohen and his partners could make “no investment or other distribution of the (f)und...unless...there is a guarantee at least equal in principal amount to the funds distributed or invested (the ‘Guarantee’)...All guarantees issued shall be from an institution rated a minimum of A+ by Standard and Poor’s or Moody’s Investment Services and issued by banks or institutions organized in Western Europe or North America....” This provision was supposed to assure the continued safety of Plaintiff investors’ funds. This Agreement constituted an investment contract and, thus, a security under the laws of the United States.
31. Using the instrumentalities of interstate commerce, from his home in Raleigh, North Carolina, Defendant and Co-Conspirator Weaver engaged in various telephone conference calls with Plaintiff investors during which Weaver represented that he had substantial expertise and experience in medium terms bank debenture trading programs. Weaver represented that he could do a number of trades each day. He assured Plaintiff investors that their funds would always be secure because “he always had a buyer before he trades.” Weaver represented that he would be the “trader” trading these bank debentures using Plaintiff investors’ funds. Weaver told Plaintiff investors that the United States Treasury and the “Fed” were involved in these programs. Weaver represented to Plaintiff investors that he could make a profit of one percent per day and would use the profits for trading since that would give their profits a compounding effect. Weaver’s representations were false and misleading and made in reckless disregard for the truth. Medium term bank debenture trading programs that offer these kinds of profits he described simply do not exist. The United States Treasury and the Federal Reserve System have advised that these programs do not exist. Thus, of course, they are not involved in these programs.
32. Although Plaintiff investors had become convinced of the legitimacy of and the enormous profitability of these medium term bank debenture trading programs by the representations of Cohen and Weaver described above, they asked for a face-to-face meeting with Defendant Cohen before an investment contract was purchased from Defendants. Plaintiff investors sought from Cohen the re-affirmation of Weaver and Cohen’s representations, along with answers to additional questions they had for Cohen about the trading programs. In a telephone conference call with Cohen from his home in Boca Raton, Florida, Plaintiff investors requested this meeting with Cohen.
33. In late June, 1998, two of the Plaintiffs traveled by air on a U. S. carrier to Cohen’s home in Boca Raton, Florida, and met with Defendant and Co-Conspirator Cohen. During this meeting, Cohen was convincing as to his expertise in bank debenture trading programs. Cohen repeated and embellished upon his prior representations described above, and, again, described the enormous profits that he and his partners could earn for Plaintiff investors in medium term bank debenture trading programs as a result of the expertise and experience of he and his partners. Cohen advised that he had “very powerful friends.” He told Plaintiffs that he made these trading programs available only to “friends and family.” Cohen represented that Defendants “knew this business” of trading in medium term bank debentures, that they “knew what was going on here.” Cohen described Defendants’ trading programs as “asset enhancement programs.” Because of the reasons stated above, Cohen’s representations were false, misleading, and made in reckless disregard for the truth.
34. Cohen represented that if Plaintiff investors could invest $100 million that Cohen “could walk you into the Fed tomorrow and you will be trading within seventy-two hours making 100% a week for a forty-week program.” Cohen advised that all bank debenture trading programs are forty-week trading programs. Cohen told Plaintiffs that “those who invested with him would be happy...if people left him they would always come back.” Cohen repeatedly indicated that anyone that was invited to invest in these trading programs was “very privileged.” Cohen represented that investing money with Defendants was the best investment Plaintiff investors could ever make. For the reasons stated above, Cohen’s representations, the same as made earlier, were false, misleading and made in reckless disregard for the truth.
35. Plaintiffs returned home and told the other Plaintiff investors what Cohen had represented during the face-to-face meeting. Plaintiff investors were now thoroughly convinced and, relying upon the representations of Cohen and Weaver, described above, they determined to purchase an investment contract from Defendants to trade in medium term bank debentures. Pursuant to the directions of Cohen, Plaintiff investors, many of whom are citizens of the United States, pooled $700,000.00 into Arcadia Resources, Ltd. and purchased the investment contract from Defendants.
36. Using the instrumentalities of interstate commerce, Plaintiff investors had engaged in a plethora of telephone and wire communications with Defendant and Co-Conspirator Weaver from his home in Raleigh, North Carolina, and with Defendant and Co-Conspirator Cohen from his home in Boca Raton, Florida, pertaining to the purchase of this investment contract. Conspiring together and with others to defraud Plaintiff investors, Defendants made material misrepresentations and omissions of material fact throughout the existence of this scheme to defraud. The Plaintiff investors relied upon these representations and omissions and their repetition in making their decision to purchase this investment contract and in later adding additional funds to this investment contract with Defendants, and in determining to maintain their investment contract with Defendants. The losses suffered by Plaintiff investors were directly caused by Plaintiff investors’ purchase of Defendants’ investment contract in reliance upon these representations and omissions and in determining to maintain their investment contract with Defendants.
37. On July 30, 1998, Defendant Cohen sent a wire transmission from his home in Florida to Plaintiff investors containing instructions as to the way Defendants wanted Plaintiff investors’ funds to be transferred to Defendants. Cohen directed Plaintiff investors to have Arcadia Resources, Ltd. send $700,000.00 by wire transmission to Suisse Security Bank & Trust, for credit to the account of Defendant and Co-Conspirator Sentry Overseas (Bahamas), Inc., account number 212745.0602.
38. In compliance with Cohen’s instructions, on July 31, 1998, Plaintiff investors had Arcadia Resources, Ltd. send $700,000.00 by wire transmission to Sentry Overseas (Bahamas), Inc. to purchase the investment contract offered by Defendants.
39. As Plaintiff investors learned just prior to this suit being filed, Defendants were operating more than one investment scam in medium term bank debenture trading programs. Because there were several investment scams going at one time, the Defendants initially segregated the funds of investors into separate bank accounts to keep track of them. The funds of Plaintiffs investors were transferred into an account denominated Majestic Rose, Inc.
40. On August 16, 1998, using the instrumentalities of interstate commerce, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that “everything is moving forward smoothly and we should get started [trading] in the very near future.” Three days later, Cohen sent a document by wire transmission from his home in Florida complaining that he had received only $699,980.00 from Plaintiff investors. Plaintiff investors immediately responded with a wire transmission to Cohen at his home in Florida that the $20 difference would be made up.
41. On August 19, 1998, Defendant Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that he “had already been approved to invest and am just waiting for us to hit the $10m mark for launch with the new friends and family program...So far up to $30m total has been pledged...” Cohen’s representation was false. These trading programs did not exist, and Cohen could not have been “approved” to invest in them. In fact, Defendants never invested any of Plaintiff investors’ funds in any medium term bank debenture trading program. It was part of Defendants’ scheme to defraud that Defendants repeatedly made misrepresentations of material fact, such as these, and omitted material facts, upon which Plaintiff investors relied and that also served to lull Plaintiff investors into believing everything was going extremely well with their investment contract. These representations and omissions upon which Plaintiff investors relied induced Plaintiff investors into maintaining their investment contract with Defendants, and induced Plaintiff investors into adding to their investment contract.
42. Defendant Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors on August 25, 1998, stating that he was “getting ready to launch the new program this week. Current negotiations are taking place to let us reserve our funds at a correspondent of SSBT [Suisse Security Bank and Trust] and possibly get 2 to 1 leverage...this way our funds never effectively leave the bank...” Cohen’s statements were false since there were no bank debenture trading programs to launch, new or old. Further, there was no program providing a 2 to 1 leverage of funds at any correspondent bank.
43. On August 28, 1998, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that “(w)e will get underway next week with funds reserved at a major bank since SSBT is unrated...The future looks very bright and I am very excited. Our funds should grow weekly and we can add to them as we desire....” Cohen’s statements here were false since trading in bank debenture trading programs providing these kinds of returns could never get underway since the programs don’t exist. Cohen’s statement “the future look bright” was not a forward looking statement under the Reform Act of 1995, since it was a fraudulent statement Cohen knew was not warranted under the facts. Cohen’s material misrepresentations and omissions upon which Plaintiff investors relied were made to convince Plaintiff investors that everything was going well, to induce Plaintiff investors into maintaining their investment contract with Defendants and to induce Plaintiff investors into adding to their investment contract.
44. Defendants’ scheme to utilize material misrepresentations and omissions of material fact to induce Plaintiffs investors into maintaining their investment contract with Defendants and into adding to their investment contract worked. On August 31, 1998, Plaintiff investors agreed to add $100,000.00 to their investment contract with Defendants. In a telephone conference call from his home in Florida, Cohen directed Plaintiff investors to have Arcadia Resources, Ltd. send $100,020.00 by wire transmission to Defendant Sentry Overseas (Bahamas), Inc.
45. Then, on September 2, 1998, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that “I will leave for London to open the account at a top British bank where our funds will be reserved...it looks like our venture will be better than dreamed.” Cohen’s statement here was false since Plaintiff investors’ funds were not reserved. Further, Cohen’s forecast had no basis under the facts and was, thus, fraudulent and made in reckless disregard for the truth.
46. Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors on September 4, 1998 to encourage Plaintiff investors to add to their investment contract: “we are 130k short of rounding up to the next million, which would increase profits, so if anyone wants to add to their investment Friday, it is OK with me. Otherwise profits are prorated over the whole group. This is all very exciting...we are ready to roll...contracts will be signed and dispatched by Monday at the latest.” Cohen’s statements here are false since no profits could be anticipated from the trading programs described by Cohen, since they do not exist. Cohen never signed any contracts with any bank for trading of bank debentures.
47. On September 10, 1998, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that we “should have a huge profit to get off the ground...funds sent in by tomorrow will be calculated in this situation for profit participation...will also meet with Ernst & Young...to set up their doing our accounting...was very ill...am glad to be back alive ...to...prosper with the rest of you.” Cohen’s statements here are false and misleading, since there were no huge profits, no accountants were ever retained, and no one prospered from these investment contracts except the Defendants.
48. Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors on September 14, 1998, stating “will start earning about 100% per week starting tomorrow with a compounding effect...Everything is looking up and all of my legal advisors seem happy.” Cohen’s statements are false. Cohen never had a contract to earn these trading profits on Plaintiffs’ investment contract. He had no basis in fact for stating that everything was looking up.
49. On September 16, 1998, Cohen sent a document by wire transmission to Plaintiff investors stating “will sign our contract tomorrow and start trading Monday...will be a one year contract...return should be better than mentioned...can accumulate profits and additional investment...the returns are substantial.” Cohen’s statements here are false. No trading ever occurred, and the returns were zero. Cohen’s statements were made to induce Plaintiff investors into maintaining their investment contract with Defendants and to induce Plaintiff investors into adding to their investment contract.
50. Cohen’s representations described above, as well as his latest, that he will “start trading Monday,” and “the returns are substantial” induced Plaintiff investors to add to their investment contract. On September 16, 1998, pursuant to Cohen’s directions, Plaintiff investors accumulated their funds into Arcadia Resources, Ltd. and sent an additional $200,000.00 by wire transmission to Defendant Majestic Rose, Inc.
51. Then, on September 17, 1998, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating “will have at least ten million dollars by the middle of next week...Charlie [Weaver] and two of my attorneys are signing up for what I faxed you about yesterday [See, para. 49, supra]...Net profit on the last program should net each of you a little better than 50% per week....” Cohen’s statements here are false. No profits were ever made.
52. Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors on September 18, 1998, stating that “program 1 will start trading at 12:30 pm on Monday...in a few months, after we have at least $100 m, we will probably just trade ourselves making investment of profits a simple matter...will...keep all of you happy.” Cohen’s statements were false. There was no basis in fact for Cohen to make these statements. Cohen never started trading.
53. Cohen sent a document by wire transmission to Plaintiff investors on October 7, 1998, stating that “the bank in England finally confirmed our funds to the trading bank today so we are on our way...they agreed to trade all $7,000,000.00...will have our profit start to be available to us between 11/15 and 11/20...For the next program that we can invest our profits and add money into I will set up an account in Israel...” [sic] Cohen’s statements here are false. There were no trading programs; there was no trading bank, there were no trading agreements, there were no profits that would be available between 11/15 and 11/20.
54. In October, 1998, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that “(g)ross profit [on the temporary program] should be 40% of $7,000,000.00...Those of you that did not make it in on time will participate next month. We should be doing actual trading and actually make a lot of money....” Weaver discussed Cohen’s representations with Plaintiff investors during a telephone conference call from Weaver’s home in North Carolina and Weaver told Plaintiff investors that Cohen’s representations were correct. However, Cohen’s statements and, thus, Weaver’s were false. There were no trading programs and no profits from trading programs.
55. Cohen had his wife send by wire transmission from their home in Florida to Plaintiff investors, on October 20, 1998, a document hand-written by Cohen stating “(w)e are there in better shape than hoped for...first profits will be compounded this Friday...will be able to add and compound...our future is solid...please keep knowledge about our program off the street...do not want to risk losing the opportunity of a lifetime. Fight the temptation to become richer-you will be rich enough.” Cohen’s statements here are false. There were no bank trading programs in which Cohen was involved; there were no profits to compound and his forecasts had no basis in fact and were false, misleading, and made in reckless disregard for the truth.
56. In November, 1998, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating: “(o)ur man handling the operation was in Raleigh working on the new program with Charlie [Weaver] and Mike but flew back tonight...he confirmed that we got 40% gross on our $7,000,000.00...I have been trying to get hundreds of millions in investment finished so that we can all enjoy its benefits in the new situation.” Weaver discussed Cohen’s representations with Plaintiff investors in a telephone conference call from his home in North Carolina and told Plaintiff investors that Cohen’s representations were true. However, Cohen’s statements and, thus, Weaver’s were false. There was no profit of 40% of $7,000,000.00. There were no hundreds of millions in investment Cohen was trying to finish. Cohen’s statements here were made to induce Plaintiff investors into maintaining their investment contract with Defendants and into adding to their investment contract.
57. Again, Defendants’ efforts to induce Plaintiff investors into adding to their investment contract were successful. In November, 1998, relying upon Defendants’ representations as to the success and profitability of these bank debenture trading programs described above, Plaintiff investors sent a document by wire transmission to Cohen at his home in Florida agreeing to add $ 1 million to their investment contract. On November 18, 1998, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors instructing them to place their funds into Arcadia Resources, Ltd. and send the $ 1 million by wire transmission to “my attorney’s trust account.” Cohen represented to Plaintiff investors that his attorney was a “new partner.” On November 19, 1998, Cohen sent his attorney’s “Vita” by wire transmission from Texas to Plaintiff investors.
58. On November 30, 1998, relying upon Defendants’ representations described above as to the success and profitability of these bank debenture trading programs Plaintiff investors were allegedly enjoying, and pursuant to Cohen’s directions, Plaintiff investors accumulated their funds into Arcadia Resources, Ltd. and sent $1,000,000.00 by wire transmission to Cohen’s attorney’s Iolta Trust account no. 88469-02359, Bank of America, Texas.
59. Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors on December 16, 1998, entitled “Monthly Earnings Report for Arcadia Resources, Ltd.” The document represented that through the month of November, 1998, the “Total Gross Profit” from Plaintiffs’ investment contract was $2,800,000.00. The document stated that for this same period the “Client Net Profit” was $142,560.00 These representations of Defendants contained in this document were false, since no profits had been earned from this investment contract.
60. Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors the following day stating, “if you need someone in an emergency...call Charles Weaver at 919-847-8768. The wires will go out as soon as the funds are confirmed into our account...we are getting ready for the funds to start making more money next week. It will be a very good year.” Cohen’s statements here are false. Defendants never made any profits for Plaintiffs trading bank debentures, thus, they could not “start making more money next week.” There was no basis in fact for the profit forecast that it will be a very good year.
61. The next day, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that “(c)onfirmation of the payment should be in Charlie’s [Weaver] hands by Tuesday.” Cohen’s statement here was false. No profits were ever earned for Plaintiffs by Defendants from trading, thus, no confirmation of the payment of profits could be forthcoming.
62. On December 28, 1998 Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors. Cohen stated that he had just returned from a cruise and that “(k)nowing that Charlie [Weaver] and (Cohen’s attorney) could handle things in my absence allowed me to finally relax...After the 6th I will be back full time once again. Until then Charlie [Weaver] is the man to speak with...(Cohen’s attorney) was in London until Christmas eve sorting out things there...Charlie [Weaver] said that the investor banks were not co-operative on the larger amounts so we had to arrange new friendlier bankers...we could not get our own trading kicked off before the end of the year but expect to start on the 11th of January. The person who will be selling us our paper asked if we would leave the funds in the temporary program until 1-6-98 which gives us at least two weeks of additional income...only those participating currently should earn December profits...disbursements will not go out until after the 6th of January. That was a tradeoff for the extra income and it was already so late that (Cohen’s attorney) and Charlie [Weaver] thought that it was the best thing to do and as a partner out of touch it was their call; which I agree with. We had expected that the profits were wired to us but they had the right to delay because of slow action of our bank and attorney in London...Happy New Year...I know that it will be a profitable one and all of you will share in the rewards.” Weaver discussed Cohen’s representations with Plaintiff investors in a telephone conference call from his home in North Carolina and told Plaintiff investors that Cohen’s representations were correct. However, Cohen’s representations and, thus, Weaver’s were false and misleading. Defendants never began trading bank debentures. There was no income being earned on trading because there was no trading. There was, of course, no real expectation of profits, since there was no trading. There was no basis in fact for the representations as to a “profitable” new year in which “you will share in the rewards.”
63. On January 6, 1999, Cohn sent a wire transmission from his home in Florida to Plaintiff investors in which Cohen described how he had made certain arrangements with First Union Bank to start “the new program” where Defendants “will be allowed only to reserve the [Plaintiffs’] funds, not remove them.” Cohen reported that this would be a “full 40-week program with profits of 1% per day.” Cohen represented “(t)his is a serious situation that will allow all investors to benefit by being part of much larger transactions...Earnings should be substantial.” Cohen reiterated to Plaintiffs that “only a select few got a chance for an investment like this...payout would be so large they would have to select a charity.” Cohen’s statements here were false. No banking arrangement was ever made by Cohen with First Union Bank for trading. All these representations describing the substantial profits Defendants were and would be making for the Plaintiff investors were made for the purpose of inducing Plaintiff investors into maintaining their investment contract with Defendants and into adding to their investment contract.
64. In a wire transmission to Plaintiff investors sent by Cohen from his home in Florida on the same date, Cohen reported that “(t)he temporary program ends today and those that placed funds...will start to earn profits. Those that earned funds at the end of November just earned some more.” Cohen’s statements were false. No profits were earned. There were no temporary programs.
65. Also on the same date, from his home in Florida, Cohen sent a wire transmission to Plaintiff investors instructing Plaintiffs to “call when you have the money to send and how much and I will decide which account to send it to. I am looking to about a billion dollars to process in the next month....” Again, Cohen is soliciting Plaintiffs to add to their investment contract. Cohen’s statement here was false since he never had any probability of having “a billion dollars to process.”
66. In a wire transmission to Plaintiff investors on January 8, 1999 from his home in Florida, Cohen reported that “First Union Bank has agreed to give our larger clients their own sub-account where they will be the only party able to remove funds from the bank...as our relationship with the bank is solidified we will...trade AA or better paper at the bank...will start earning our January profits...(a)nother banking situation that we will also be a part of will be set up at a major bank in Paris and Charlie [Weaver} will leave for that local [sic] as soon as it is set up and ready to receive funds.” Weaver discussed these representations with Plaintiff investors during a telephone conference call from his home in North Carolina and told Plaintiff investors that Cohen’s representations were true. However, Cohen’s statements and, thus, Weaver’s were false. First Union Bank never made any such agreements. Defendants never traded AA or better paper at First Union Bank, and had no probability of doing so.
67. In an effort to induce Plaintiffs to add to their investment contract, on January 12, 1999, from his home in Florida, Cohen sent a document by wire transmission to Plaintiff investors outlining various investor options available to them. The document was entitled “Current Options.” Cohen stated that the document was “for explanation purposes in case you want to increase your investment....”
68. In a wire transmission to Plaintiff investors from Cohen at his home in Florida on January 15, 1999, Cohen advised that “we have received written confirmation that we will be paid our profits on the 28th of this month...By next Wed. our new account will finally be opened at First Union Bank and we can start setting up sub-accounts. This is allowing us to bring in a great deal of funds which greatly increases our returns...The profits will be traded...The future looks very bright.” Cohen’s representations here are false. There were no profits and no written confirmation of being paid profits. Plaintiff investors were never paid any profits. These misrepresentations by Cohen, as well as those described above, were made by Defendants to induce Plaintiff investors into maintaining their investment contract with Defendants and into adding to their investment contract.
69. On January 22, 1999, relying upon the representations of Defendants described above, Plaintiff investors agreed to add to their investment contract. At the direction of Cohen, Plaintiff investors accumulated their funds into Arcadia Resources, Ltd. and wired $1,000,000.00 to Defendant Summerfield International Services, Inc., account no. 88465-05746, at the Bank of America, Texas.
70. Although Plaintiff investors had been convinced by Defendants that their “profits” should be reinvested, at this time, Defendants directed that a “Ponzi” payment of so-called “profits” of $25,000.00 be paid to Plaintiff investors through the transfer of $25,000.00 from Majestic Rose, Inc. to Arcadia Resources, Ltd.
71. Relying upon the representations of Defendants as to how well their investments were doing and as to the profits that were being earned, as well as the “Ponzi” payment, on February 2, 1999, Plaintiff investors agreed to add to their investment contract. At the direction of Cohen, Plaintiffs investors accumulated their funds into Arcadia Resources, Ltd. and sent $250,000.00 by wire transmission to Defendant Summerfield International Services, Inc., account no. 4025007505, First Union National Bank, Charlotte, North Carolina.
72. On the same date, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that “(o)ur new setup at First Union is working like a dream...the new setup has the bank guaranteeing the safety of funds...I expect there to be over $100m within another week...I have had several offers to go directly into and sign contracts with important banks. We will now have enough money to do this. The profits will be earned quickly and will be very substantial. These representations were false. No relationship was established with First Union Bank that contained these provisions. There were no profits earned from trading.
73. Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors relating his travel plans necessary to administer the trading programs: “flying to London to start the new program...will fly back...leave for Atlanta...leave for Paris...on to London to involve additional funds that will become available at that time. Charlie [Weaver] will be available to all while I am gone...I am very excited about what is happening for us in every corner...Charlie [Weaver]...will coordinate new contracts and banking while I am gone.” Cohen’s statements about his travels were true. The inference that his travels were in connection with successfully trading bank debentures was false. The statement as to Cohen’s excitement over his trading accomplishments had no basis in fact. Defendants were not coordinating new trading contracts and banking in Cohen’s absence or at any time.
74. On February 3, 1999, Cohen sent by wire transmission from his home in Florida to Plaintiff investors a document entitled “Monthly Earnings Report for Arcadia Resources, Ltd.” The document represented that in the month of December, 1998, the “Total Gross Profit” from was $1,400,000.00. The document represented that for this same period the “Client Net Profit” was $71,280.00. Defendants’ representations contained in this document were false. Defendants had earned no profits for Plaintiffs from trading. These representations were made by Defendants to induce Plaintiff investors into maintaining their investment contract and into adding to their investment contract.
75. Relying upon these representations and omissions, Plaintiff investors agreed to add to their investment contract. Pursuant to Cohen’s directions, Plaintiff investors accumulated their funds into Arcadia Resources, Ltd. and sent $200,000.00 by wire transmission, on March 4, 1999, to Defendant and Co-Conspirator Creai-Cohen, a Joint Venture, account no. 2622121474-44 CLE23, to C.I.C. Paris, France, for transfer to Defendant and Co-Conspirator Creai Action Service. Creai Action Service had been formed by Defendant Creai Ile de France to participate in and profit from these fraudulent transactions. Defendant and Co-Conspirator Jean Pierre Martinez, as President of Creai Ile de France and as President of Creai Action Service was instrumental in effecting this participation. In a telephone conference call from his home in North Carolina, Weaver told Plaintiff investors that they would make more money than they had made previously if they added to their investment contract at this time since Creai Ile de France would put $100,000,000.00 into a trading program, which would permit Defendants to engage in larger, and more profitable trading programs from which Plaintiff investors would profit. This representation initiated by Creai Ile de France and perpetuated by the other Defendants, was false. Creai Ile de France never put $100,000,000.00 into any trading program.
76. Cohen and Weaver were “Special Financial Managers” of Creai Action Service. They were also joint signatories with Defendant and Co-Conspirator Jean-Pierre Martinez, the President of Creai Ile de France and the President of Creai Action Service, on Creai Action Service’s bank account at CIC Paris. [See, Exhibit C, Minutes of Special General Meeting of Creai Action Service.]
77. Again, on March 5, 1999, relying upon the representations of Creai Ile de France described in Paragraph 75, Plaintiff investors agreed to add to their investment contract. Pursuant to Cohen’s instructions, Plaintiff investors accumulated their funds into Arcadia Resources, Ltd. and sent $250,000.00 by wire transmission to Creai-Cohen, a Joint Venture, account no. 2622121474-44 CLE23, to C.I.C. Paris, France, for transfer to Creai Action Service.
78. At about this time, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating “we have a contract-escrow agreement for review with IBJ-Whitehall which is part of the Industrial Bank of Japan...number 8 in the world...I will...start trading next week...”Cohen’s statement was false. There was no basis in truth for his statement that he would start trading next week. Cohen never traded and neither did Weaver.
79. Creai Ile de France named Creai Action Service as the entity that was “the trading vehicle” for the trading of medium term bank debentures to earn enormous profits using the funds of Plaintiff investors and other investors. [See, Exhibit D.] $ 9,000,000.00 was transferred into the Creai Action Service account at CIC Paris from the Creai-Cohen account at CIC Paris. Creai Ile de France transferred funds it was holding into CIC Paris on behalf of Creai Action Service. Cohen was named Treasurer of Creai Action Service. Included in this $ 9,000,000.00, was $3,700,000.00 of funds belonging to Plaintiff investors. [See, Exhibits D, E and F.] Creai Ile de France directed this transaction to permit Creai Action Service to obtain full control over this $ 9,000,000.00.
80. Then, Creai Ile de France had Creai Action Service direct that all of the interest earned on the $ 9,000,000.00 on deposit in CIC Paris, including the funds of Plaintiff investors, were to be paid monthly to Paul Morato, a protégé of the Defendant and Co-Conspirator Jean-Pierre Martinez, President of Creai Ile de France and President of Creai Action Service. [See, Exhibit C.] This action was part of Defendants’ scheme to defraud Plaintiffs, since a portion of this interest paid to Morato should have been paid to Plaintiff investors. Creai Ile de France and Martinez had Creai Action Service name Morato as Deputy Financial Manger of Creai Action Service with the authority to open up bank accounts of Creai Action Service in foreign countries.
81. Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors on March 13, 1999, representing that IBJ-Whitehall was “drawing up a contract for us that will guarantee to our investor-depositors that their funds are completely safe...We are being...treated very well because we were recommended to the bank by one of their attorneys that has represented Charlie [Weaver] for over ten years...Sunday I will go to France to sign all papers there so that I can get those funds among others into trading next week...Immediate profits will be generated and a disbursement made to those of you desirous of such...Then we will compound and keep trading...” Cohen’s statements here were false. No profits were being made by Defendants in trading. Defendants were not trading in bank debentures.
82. To dissuade Plaintiff investors from requesting a return of principal or a distribution of profits Defendants had represented that they had made from trading, Cohen continually made representations as to the additional profits Plaintiff investors were earning by allowing their profits “to compound” instead of withdrawing their profits. Cohen’s representations here were false. There were no profits from trading in bank debenture trading programs. Thus, there was no compounding. Cohen’s representations were made to encourage Plaintiff investors not to ask for the return of any of their funds. Defendants continually sought to have Plaintiff investors add to their investment contract.
83. Creai Ile de France and Martinez had Creai Action Service name Cohen and Weaver as “Special Director Representatives (hereinafter referred to as ‘Special Director’)” of Creai Action Service “to take all the necessary steps for the purpose of conducting General Investment Transactions.” Cohen and Weaver were made “signatories for the Corporation on all matters in connection with such Investment Opportunities...and that this authority shall continue as long as the Corporation is engaged in Investment Opportunities with Summerfield.” [See, Exhibit G.]
84. In a document sent by wire transmission on March 19, 1999, from his home in Florida, Cohen represented to Plaintiff investors that “(t)hings thus far have gone fantastically.” Cohen informed Plaintiff investors that their funds were at “CIC in Paris” Cohen reported that “trading of these funds along with all others...in place by Tuesday morning will take place by mid-week. There should be at least three hundred million involved next week. Cohen instructed Plaintiff investors “to place important calls” to Charlie Weaver, and, again, listed Weaver’s telephone and fax numbers. Cohen reported that Weaver “might be with me part of the time but someone will forward them.” In a telephone conference call with Weaver from his home in Raleigh, North Carolina, Weaver told Plaintiff investors that Cohen’s representations were correct. However, Cohen’s statements and, thus, Weaver’s were false. Defendants were not doing any trading. Cohen was never involved with three hundred million dollars, and things had not gone fantastically as far as Plaintiffs’ investment contract was concerned.
85. In this document Cohen also represented that “(o)ver a million dollars has been set aside in the Majestic Rose account for profit disbursement to those wanting some funds at the end of the month but I anticipate that most investors will want to compound their earnings.” Here, Cohen’s representations were made to entice Plaintiff investors not to request a return of any of their funds. Of course, there were no profits and if requested, Defendants would have had to return Plaintiff investors’ principal, calling it profits as Defendants had done previously with their “Ponzi” payment. Cohen, again, conveyed to Plaintiff investors their “privileged status” in having the “opportunity” to purchase this investment contract by telling Plaintiff investors “(p)lease do not solicit any friends or associates to join you in your relationship with us.”
86. On March 22, 1999, to insure full control of the Plaintiffs’ funds by Creai Ile de France, Cohen, as Financial Manager of Creai Action Service, gave Jean-Pierre Martinez, President of Creai Ile de France, “full power of attorney...to allow him under his own signature to transfer” Plaintiffs’ funds on deposit on CIC PARIS in the name of Creai Action Service to any bank “ of his choice...” [See, Exhibit H.]
87. The next day, Creai Ile de France and Jean Pierre Martinez transferred all of Plaintiff investors’ funds, as well as the funds of other investors, from CIC Paris to Banque Worms, Paris.
88. On March 23, 1999, there was $12,000,000.00 in investors’ funds on deposit at Banque Worms, Paris in the name of Creai Action Service, including $3,700,000.00 in funds belonging to Plaintiff investors. [See, Exhibit I.] Banque Worms listed Martinez as President of Creai Action Service and Cohen as Finance Director. The Account Balance Verification of Worms Bank Paris stated that the funds were under the control of Martinez and Cohen “as signatories of the Creai Action Service account. [Id.]
89. By April 1, 1999, there was $15,000,000.00 on deposit in the name of Creai Action Service in Banque Worms, Paris, including $3,700,000.00 in funds belonging to Plaintiff investors. [See, Exhibit J.] Banque Worms listed Martinez as President of Creai Action Service and Cohen as Finance Director. The Account Balance Verification of Worms Bank Paris stated that the funds were under the control of Martinez and Cohen “as signatories of the Creai Action Service account. [Id.] Since this time, a substantial portion of those funds have disappeared from this account. The whereabouts of these funds is unknown. This action constituted part of Defendants’ scheme to defraud Plaintiffs.
90. On April 4, 1999, from his home in Florida, Cohen sent a document by wire transmission to Plaintiff investors telling them that (e)verything is going well...had a problem with CIC bank...so had to transfer all of the funds to Banque Worms and start process over...we will start trading after I fly back on Tuesday...our funds and myself have been cleared for trading.” Cohen’s statements are false. The purpose of the transfer of the Plaintiffs’ funds from CIC bank to Bank Worms was for the convenience of Defendants. There was no trading. Cohen had not been cleared for trading.
91. Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors on April 22, 1999, representing that he “will also see the trader here in Florida that we did our $2.5B deal with that is now complete...(f)unds, banks and myself are approved...(t)hings are in great position.” Cohen’s representations were false. There was no $2.5 billion “deal...now complete.” Cohen’s representations as to his abilities to handle a transaction of this magnitude was made to lull Plaintiff investors into continuing to believe that Defendants knew how to administer Plaintiffs’ funds.
92. On May 7, 1999, Cohen represented to Plaintiff investors in a document sent by wire transmission from Cohen’s home in Florida that “trading will start within 72 hours.” Cohen reported that Plaintiff investors would have “ a return...of about 400%...principal must stay in the bank for a year...profits may be reinvested if you so choose.” Cohen’s statements are false. There was no basis in fact to represent that trading would start in seventy-two hours, nor was there any basis in fact for the representation that Plaintiff investors would have a return on their investment contracts of “about 400%.” Cohen’s statement that the “profits may be reinvested” was false, and only a ploy to lull Plaintiff investors into not requesting a return of “their profits.” Cohen’s statement that “principal must stay in the bank for a year” was false and was made for the purpose of lulling Plaintiffs into not requesting a return of their principal.
93. From his home in Florida, Cohen sent to Plaintiff investors a document by wire transmission on May 23, 1999, stating that IBJ Whitehall has finally approved everything and we can now move forward....Joe Krota will be in charge of all of the due diligence...investors...will deal with Joe [Krota]...once everyone’s funds are in then we will close the program...(i)f I am not here, call Charlie [Weaver]...(t)his should be the start of great things for all concerned.” Cohen established no bank trading relationship with IBJ Whitehall. There was no basis in truth for Cohen’s representation “this should be the start of great things.”
94. In late May, 1999, a second “Ponzi” payment of so-called profits in the amount of $50,000 was made to Plaintiff investors by Defendants.
95. On June 12, 1999, Michael Sweet, the agent of Martinez , sent a fax transmission to Cohen at his home in Florida and to Weaver at his home in North Carolina warning them that “no faxes are to be sent direct to Paul [Morato] in France in English. All communication is to London for translation and advice as Paul does not speak English and he worries that misinterpretation may occur if other parties view the fax. It is a very sensitive and volatile situation and we have had to work hard today to keep the lid on...the French are very focused on only their position.” [See, Exhibit K.]
96. Cohen represented to Plaintiff investors in a fax transmission from his home in Florida on June 13, 1999, that “(t)he current plan is a bank closing in New York on Tuesday and then on to London for another one Wed-Thurs...in case of emergency call Charlie [Weaver]. Cohen’s representation as to bank closings in New York and London were false. There were no bank closings in New York or London to be made in connection with trading.
97. In a document sent by fax transmission from his home in Florida to Plaintiff investors on June 28, 1999, Cohen represented that “everything is great. Normal trading could start as early as next week and the IBJ sub accounts are being processed for opening by Joe Krota.” Other than Cohen’s statement indicating Joe Krota’s involvement, these statements are false. There was no basis in fact for this representation that normal trading could start next week or that everything was great.
98. On June 30, 1999, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that he “will fly to London to finish at the bank Monday and Tuesday...Charley [Weaver] might be home or he might be with me. Joe Krota will be available for processing future investment information...” Cohen’s representation was false and misleading. Cohen had no business to finish at the bank in London that pertained to trading of Plaintiff investors’ funds.
99. On July 2, 1999, Cohen informed Plaintiff investors by wire transmission from his home in Florida that he would be in London “for the next ten days”...if you need me call Charlie [Weaver]...” Cohen’s suggestion that he had to be in London for the next ten days to conduct trading of the Plaintiff investors’ funds was false.
100. The next day, Cohen again sent a wire transmission to Plaintiff investors “asking everyone to please call Charlie [Weaver] at 919-847-8768 instead of my home...will send out a fax as soon as things finish.” Cohen was not in London conducting trading of Plaintiff investors’ funds.
101. On July 13, 1999, Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors stating that “(t)hings have been going very well..hope to finish at the Bank tomorrow...the return should make everybody happy and once profits are placed in the IBJ program, everyone should be ecstatic...am working my ass off for the benefit of all concerned and appreciate your patience and support.” These statements are false. There was no business at the bank involving the trading of Plaintiff investors’ funds and there was no IBJ trading program. There was no basis in fact for the statement that “everyone should be ecstatic.” Defendants were in possession of Plaintiffs’ funds, and these statements were made to continue to lull Plaintiffs into a false sense of security that they were making profits from their funds.
102. Cohen sent a document by wire transmission from his home in Florida to Plaintiff investors on July 21, 1999, stating that “(t)hings have been going extremely well...I will be able to share all the good news with you. Charlie [Weaver] is still not back and must go to Switzerland before coming home...the long wait was well worth it and the future is guaranteed to be exciting and prosperous...Charlie [Weaver] and I did not expect to be away so long and the...meeting schedule has made communication by phone difficult. Thanks for hanging in there.” Cohen’s statements about things going well, there is good news to share, the future is guaranteed to be prosperous had no basis in fact.
103. On July 27, 1999, from his home in Florida, Cohen sent a wire transmission to Plaintiff investors stating that “(e)verything has gone beyond expectation and come together perfectly...Charlie [Weaver], who got back Sunday, will be in Washington tomorrow and the next day.” During this time, in a telephone conference call with Plaintiff investors from his home in North Carolina Weaver discussed Cohen’s representations with Plaintiff investors and said that Cohen’s representations were true. However, Cohen’s representations and, thus, Weaver’s were false and misleading. The “beyond expectation” representation had no basis in fact as far as any actual profits from trading using the funds of Plaintiff investors. Cohen’s description of Weaver’s activities was false and misleading, as if Weaver was actively attending to trading on behalf of Plaintiff investors.
104. From his home in Florida Cohen sent a wire transmission to Plaintiff investors on August 3, 1999, in which he represented that “(w)e are definitely in a program and returns will be received this month, but substantial returns will start in September...everybody should be happy...Charlie [Weaver] will be in Washington and New York until Saturday and then he will go set up our bank accounts where profits can go next Tuesday in Europe.” Weaver discussed Cohen’s representations with Plaintiff investors during a telephone conference call from his home in North Carolina and told Plaintiff investors that Cohen’s representations were accurate. However, Cohen’s representations and, thus, Weaver’s were false and misleading. Representations that we are in a program, as well as descriptions about the returns and the activities of Weaver were false and misleading. There was no trading and no profits being earned from trading by Defendants to be placed in a bank.
105. On August 26, 1999, Plaintiff investors received a wire transmission from Defendants’ agent in New Mexico. Defendants’ agent represented to Plaintiff investors that: “1. Pre-contracts were signed yesterday (August 25). 2. Final contracts signed today (August 26). 3. The revised trading to commence on August 30th. 4. Gross returns of one hundred percent (100%) of principal weekly for forty (40) weeks. 5. Net returns of fifty percent (50%) of principal weekly for forty (40) weeks to my group. 6. First disbursement to be received to be wired to our account on Monday September 6, 1999.” These representations were false. No contracts for trading were signed. No trading was ever done. No contracts provided for returns of one hundred percent, nor fifty percent. No returns were ever paid. There was no basis in fact for such representations.
106. Cohen sent a wire transmission from his home in Florida to Plaintiff investors on August 27, 1999, representing that “Charlie [Weaver] and (Defendants’ agent) said that they have been in contact with most everyone [of the investors].” Cohen told Plaintiff investors in this wire transmission that “[w]e now have a great deal of funds and have started our ultimate goal of daily trading.” Cohen told Plaintiff investors that Plaintiff investors’ funds “are still with CREAI...[that] CREAI decided that rather than receive a lower return, they would increase their participation to over $100,000,000.00.” Cohen represented that “(t)heir funds are now assembled and Charlie [Weaver] will get the accounts and new agreements in place this coming week in Europe.” To forestall Plaintiff investors’ requests for a return of their funds, Cohen represented to them that “(w)e have been advised that you must stay a part of CREAI, but that we can advance profits to you against profits to be earned from our own profit share from other deals.” Cohen suggested to Plaintiff investors that if they wished to add to their investment contract they should contact (Defendants’ agent) “to see if you qualify and desire to participate in what is available.” These representations were false. Cohen representations that we have started “daily trading,” that Creai would put up $100,000,000.00 to be combined with Plaintiff investors’ funds for daily trading, that Plaintiff investors had to “stay a part of CREAI”, and that Defendants had earned profits “from other deals” were all false, misleading, and made in reckless disregard for the truth. There was no basis in truth for these representations. These representations were made by Defendants to assure Plaintiff investors that Defendants were successfully investing their funds in trading. Creai Ile de France’s representation to Plaintiff investors that it would put up $100,000,000.00 for daily trading was false.
107. To further assuage Plaintiff investors, Defendants represented to Plaintiff investors that Creai Ile de France agreed that if it did not put up $100,000,000.00 for daily trading, it would pay a penalty to Plaintiff investors of $2,000,000.00. Creai Ile de France never put up $100,000,000.00 for daily trading, and it never paid a $2,000,000.00 penalty to Plaintiff investors for failing to do so.
108. Cohn sent a wire transmission to Plaintiff investors on August 30, 1999, summarizing the current status by representing “(e)verybody will be happy as you will end up with much more profit plus the early return of your funds...” These representations were false. There were no profits, no early return of Plaintiff investors’s funds, and Plaintiff investors would not be happy.
109. On November 26, 1999, Cohen sent a wire transmission from his home in Florida to Plaintiff investors stating that “(Defendants’ agent) and Charlie [Weaver] are doing a wonderful job...” This representation was false. They were doing nothing that could be considered “a wonderful job” in connection with the investment contract purchased by Plaintiff investors.
110. On June 6, 2000, Defendants reported to Plaintiff investors that Weaver represented that “we’re days away” from paying Plaintiff investors their funds. This representation was false. Plaintiff investors have not been paid. The representation was made to lull Plaintiff investors.
111. As detailed above, up until the present time Defendants continually reassured Plaintiff investors that their funds were secure and were earning profits from their investment in medium term bank debenture trading programs. Plaintiff investors were continually reassured that their funds that were used to purchase their investment contract would be repaid to them along with the profits earned thereon.
112. Plaintiff investors have not received satisfactory answers from Defendants to Plaintiffs’ many inquires and requests for information about their investment contract. In response to Plaintiffs’ many inquiries and requests for information, Defendants have only repeated the representations and promises described above. Defendants have sought to fraudulently conceal their fraud and the true facts from Plaintiffs right up to the present time.
113. As of the date of the filing of this Complaint, other than the $75,000.00 in “Ponzi” payments of so-called profits to Plaintiff investors described above, Plaintiff investors have not been paid any of the profits Defendants reported had been earned with Plaintiffs’ funds. 114. As of the date of the filing of this Complaint, and despite demand, Plaintiff investors have not been repaid any of their $3,700,000.00 which represents the total funds invested by Plaintiffs in the investment contract sold to them by Defendants.
COUNT I
VIOLATION OF SECTION 10(b) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 10b-5
AGAINST ALL DEFENDANTS
115. Plaintiff investors incorporate by reference and reallege paragraphs 1 through 114 above as if set forth herein.
116. This claim is asserted by Plaintiff investors against all defendants and is based upon Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. sec. 78j(b) and Rule 10b-5 promulgated thereunder.
117. During the period described, the defendants, individually and in concert, directly and indirectly, through the instrumentalities of interstate commerce, to wit: wire transmissions, telephone communications and the mails, knowingly engaged and participated together in a continuous course of conduct to actively deceive Plaintiff investors and to conceal adverse material information from Plaintiff investors as described herein that included the following: Defendants knowingly and recklessly employed devices, schemes, and artifices to defraud and engaged in acts, practices, and a course of conduct which operated as a fraud and deceit upon Plaintiff investors and made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. Using the above means, Defendants offered and sold to Plaintiff investors this investment contract. Defendants used these same means to lull Plaintiff investors into believing up to the time this Complaint was filed that this investment contract was legitimate and the profits promised from this investment contract would be forthcoming.
118. Acting with intent to deceive and with reckless disregard for the truth, Defendants used devices, omissions, misrepresentations, acts, and practices to deceive Plaintiff investors into purchasing this investment contract and into believing in its legitimacy and certainty of full payment, as described herein.
119. Plaintiff investors relied upon the material misrepresentations and course of conduct of defendants described above in making their decision to purchase the investment contract offered by defendants.
120. Had Plaintiff investors known that Defendants’ material representations and statements were false or made in reckless disregard for the truth, had Plaintiff investors known of the materially adverse information that was not disclosed by defendants, had Plaintiff investors not been deceived by defendants’ devices, acts and practices, and had Plaintiff not relied upon these material misrepresentations, omissions, acts, and practices, Plaintiff investors would not have purchased this investment contract offered by defendants, and Plaintiffs would not have sustained damages resulting from their purchase of this investment contract.
COUNT II
VIOLATION OF SECTION 29(b) OF THE SECURITIES EXCHANGE ACT OF 1934
AGAINST ALL DEFENDANTS
121. Plaintiff investors incorporate by reference and reallege paragraphs 1 through 114 above as if set forth herein.
122. Defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder in offering and selling this investment contract to Plaintiff investors, as fully set out in this Complaint.
123. As a result, Plaintiff investors are entitled to the recission of their investment contract and return of their funds pursuant to Section 29(b) of the Securities Exchange Act of 1934, 15 U.S.C. s 78cc (b). The investment contract entered into by Plaintiff investors with Defendants is void pursuant to Section 29(b). Further, all contracts and agreements by and between Defendants or their representatives, agents, assigns, etc. and third parties 1) dealing with the funds of Plaintiff investors, or 2) transferring the funds of Plaintiff investors, or 3) depositing the funds of Plaintiff investors in any financial institution , or 4) holding the funds of Plaintiff investors, are void.
124. Pursuant to Section 29(b), Plaintiffs’ funds totaling $3,700,000.00 must be returned to Plaintiffs, along with all interest and profits earned thereon, by any person. entity, bank or financial institution or combination thereof that has possession and/or control of Plaintiffs’ funds.
WHEREFORE, Plaintiffs pray for judgment as follows:
A. A judgment declaring the conduct of Defendants to be in violation of the law as set forth in Counts One and Two of the Complaint.
B. A judgment awarding Plaintiffs compensation for the damages which they have sustained as a result of the Defendants’ unlawful conduct as set forth herein.
C. A judgment ordering the recission of all contracts made by Defendants and others concerning and pertaining to Plaintiff investors’ funds.
D. A judgment ordering the return of all of Plaintiffs’ funds to Plaintiffs.
E. A judgment awarding legal interest from date of judicial demand until paid.
F. A judgment awarding Plaintiffs all costs of these proceedings.
G. For such other general and equitable relief this Court may deem just.
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Respectfully submitted,
DONALD L. BECKNER & ASSOCIATES
By:_____________________________
Donald L. Beckner (La. Bar No. 02924)
Attorney at Law
5800 One Perkins Place
Building 7, Suite A
Baton Rouge, Louisiana 70808
Telephone: 225-769-7779
Fax: 225-769-7884
E-Mail: don@donaldbeckner.com
www.donaldbeckner.com
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