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- Bu səhifədəki naviqasiya:
- PARTIES, JURISDICTION AND VENUE
- THE INDIVIDUAL DEFENDANTS ESTABLISHED YICK BO AS WORLDWIDE DREAMS’ PURCHASING AGENT
- THE INDIVIDUAL DEFEDANTS FRAUDULENTLY STATED THAT WORLDWIDE DREAMS WOULD PAY ITS OBLIGATIONS TO YICK BO
- THE INDIVIDUAL DEFENDANTS FRAUDULENTLY INDUCED SUPPLIERS TO SELL TO YICK BO ON CREDIT
- THE INDIVIDUAL DEFENDANTS CONTINUED TO COMMIT FRAUDS AGAINST THE CREDITORS DURING THE LIQUIDATION
- COUNT I: VIOLATION OF THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT (RICO) AGAINST THE INDIVIDUAL DEFENDANTS FOR CONSPIRACY TO
- DEMAND FOR JUDGMENT ON COUNT I
- COUNT II: BREACH OF FIDUCIARY DUTY AGAINST GIMBEL AND FELDMAN FOR LOOTING AN INSOLVENT YICK BO
- ALLEGATION CONCERNING PUNITIVE DAMAGES
- COUNT III FOR REIMBURSEMENT (Against Worldwide Dreams)
- DEMAND FOR JUDGMENT ON COUNT III
| U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK ____________________________________
) Teras International Corp.,
)
Plaintiff,
)
) v.
) Case No. 13 Civ. 06788 (VEC)
) Roger Gimbel, Allan Feldman, Steven ) Brookner, Mark Kastenbaum,
)
Norman Abramson and
) Worldwide Dreams LLC,
)
Defendants.
) ____________________________________ )
Defendants, as follows: NATURE OF CLAIM 1.
This is an action by Teras, the assignee of the liquidator of Yick Bo Trading Limited (in liquidation) (“Yick Bo”). Yick Bo is a subsidiary of Worldwide Dreams LLC (“Worldwide Dreams” or “WWD”), a New York‐based corporation in the business of importing apparel and accessories from the Far East. 2.
were sophisticated businessmen. As detailed below, the Individual Defendants’ scheme caused Yick Bo to incur millions of dollars in debts, driving the company into liquidation. 3.
the U.S. wires to facilitate them, this action is properly brought pursuant to the Racketeer Influenced and Corrupt Organizations Act (RICO). Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 1 of 21
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PARTIES, JURISDICTION AND VENUE 4.
In May 2013 Teras was assigned Yick Bo’s claims by its Hong Kong liquidators. 5.
Teras is incorporated in the British Virgin Islands and has its principal place of business in Singapore. 6.
7.
Allan Feldman (hereafter “Feldman”) is a citizen of New York. 8.
Steven Brookner (hereafter “Brookner”) is a citizen of New Jersey. 9.
Mark Kastenbaum (hereafter “Kastenbaum”) is a citizen of New Jersey. 10.
Norman Abramson (hereafter “Abramson”) is a citizen of New Jersey. (The foregoing are hereafter referred to as “the Individual Defendants” to distinguish them from Defendant Worldwide Dreams, which is a Defendant only in Count III.) 11.
New York. 12.
This Court has jurisdiction of this case as a federal question pursuant to 28 U.S.C. § 1331 and 18 U.S.C. § 1964(c), RICO’s civil damages provision. Additionally, the Court has supplemental jurisdiction of the remaining Counts as they arise from the same nucleus of facts. The Court also has jurisdiction under 28 U.S.C. §1332(a)(2), due to diversity of citizenship and the amount in controversy exceeds $75,000, exclusive of interest and costs. 13.
This Court has personal jurisdiction over all Defendants as they conducted their business and the racketeering activity from their offices in this district. Additionally, Gimbel and Feldman reside in this district and are amenable to service here. Venue is proper in this Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 2 of 21
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Court pursuant to 28 U.S.C. § 1391(b)(2) and RICO’s venue provision, 18 U.S.C. § 1965(a) and (b). THE INDIVIDUAL DEFENDANTS ESTABLISHED YICK BO AS WORLDWIDE DREAMS’ PURCHASING AGENT 14.
In 1997, the Individual Defendants established Worldwide Dreams as a supplier/wholesaler of women’s accessories to large U.S. retailers, including Target Stores and Kmart. 15.
New York, New York. 16.
The Individual Defendants also created Yick Bo as a wholly‐owned subsidiary and purchasing agent of Worldwide Dreams. 17.
Although Yick Bo had an office in Hong Kong where its employees made purchases from Chinese apparel suppliers, the Individual Defendants made all of Yick Bo’s corporate decisions from their New York offices. 18.
to WWD, NYC” or “WWD LLC Yick Bo Trading Ltd.” Yick Bo’s purchase orders were processed in an apparel manufacturing software system in Worldwide Dreams‐Yick Bo’s combined New York office 19.
The suppliers would typically then invoice Worldwide Dreams. However, consistent with the agency arrangements between the two companies memorialized in a written agreement, a copy of which is attached as an Exhibit, Yick Bo actually would pay the invoices and then Reddy Chu, Yick Bo’s Chief Financial Officer, would issue weekly invoices from his Hong Kong office to Abramson, Worldwide Dreams’ Chief Operating Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 3 of 21
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Officer, for reimbursement. Abramson would then authorize Kastenbaum, Worldwide Dreams’ Chief Financial Officer, also in New York, to pay the invoice by wire transfer from a U.S. bank. 20.
directors of Yick Bo, Gimbel and Feldman should have either demanded repayment or terminated the agency agreement. THE INDIVIDUAL DEFEDANTS FRAUDULENTLY STATED THAT WORLDWIDE DREAMS WOULD PAY ITS OBLIGATIONS TO YICK BO 21.
Consequently, from that point on, Yick Bo was insolvent, that is, it could not meet its obligations as they became due. But as detailed, infra, the Individual Defendants took elaborate steps to conceal this fact from Yick Bo’s auditors and creditors, resulting in the demise of the Company.
22.
In preparing Yick Bo’s 2008 financial statements in New York, in early 2009, Directors Gimbel and Feldman faced a dilemma. Either they could disclose the fact that Worldwide Dreams was failing to reimburse Yick Bo for its purchases, thereby making the obligation “bad debt” in accounting terms, or they could falsely represent to Yick Bo that the reimbursements would be made in the normal course of business. The latter representation would enable Yick Bo to use the “going concern” method of accounting, which it had done since its inception and meant, for accounting purposes, that its exposure to bad debts was not significant. Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 4 of 21 5
22. The latter method would also allow Yick Bo to continue purchasing on credit from its Chinese suppliers, which in turn would allow Worldwide Dreams to continue selling the merchandise to customers in the U.S. 23.
York, Gimbel and Feldman signed false financial statements for Yick Bo representing that, based on their assessment of the current creditworthiness of Worldwide Dreams, Yick Bo only traded with recognized creditworthy third parties (i.e., Worldwide Dreams) and that, as a result of their ongoing monitoring of Worldwide Dreams, Yick Bo had no bad debt from Worldwide Dreams. Accordingly, Gimbel and Feldman represented that the outstanding obligations to Yick Bo would be paid in full and would be paid in sufficient amounts in the then current year so that Yick Bo could remain solvent. But as officers and directors of both companies, Gimbel and Feldman knew Worldwide Dreams would not do so. 24.
The false financial statements were agreed to by the other Individual Defendants after they had read the documents. 25.
At Gimbel and Feldman’s request, the false financial statements were emailed from Yick Bo’s New York offices, to Reddy Chu in Yick Bo’s Hong Office and to Yick Bo’s Hong Kong auditors, Mazars CPA Ltd. Mr. Chu was a director of Yick Bo and its Chief Financial Officer. 26.
Thus, all of the Individual Defendants entered into a conspiracy to commit fraud on Yick Bo by misleading director Chu by concealing Yick Bo’s true financial condition from Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 5 of 21 6
him so that he would not interfere with their plans for the company by demanding repayment of the debt from Worldwide Dreams. 27.
Had Reddy Chu known the truth, he would have been obliged to stop making purchases on behalf of WWD and to stop making promises of payment to suppliers because Yick Bo could not assume more debt without timely repayment from WWD. This would have effectively shut down Yick Bo. 28.
Additionally, had the auditors known that the obligation from WWD would not be repaid to Yick Bo in the regular course of business, it would not have certified the financial statements prepared by the Individual Defendants. The certification stated: The validity of the going concern basis [of accounting] depends upon the holding company’s [WWD] ability to make continuous settlements to the Company [Yick Bo] to enable it to operate as a going concern…The directors of the Company considered that the holding company has the ability to make continuous settlements to the Company to enable the Company to operate as a going concern.
29. But, the directors did not really “consider” that WWD had the ability to repay the obligation to Yick Bo. 30.
Had the auditors known this, they would not have certified the financial statement. And had that occurred, Reddy Chu would also have been obliged to so inform Yick Bo’s suppliers. This would similarly have shut down Yick Bo. 31.
to make more than $6 million of purchases from Chinese suppliers in 2009 for WWD, deepening its insolvency. Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 6 of 21
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The 2009 Financial Statement Fraud 32.
Gimbel and Feldman made new false statements in completing Yick Bo’s 2009 financial statements in New York, which they signed on June 30, 2010. They distributed these statements to the other Individual Defendants that day. The Individual Defendants knew once again that Worldwide Dreams would not reimburse Yick Bo in the normal course of business. As described above, because of the fraud, Reddy Chu would be kept in the dark and keep on making purchases from suppliers that could not be paid. 33.
By falsely claiming Worldwide Dreams would make timely reimbursements to Yick Bo in its 2009 financial statements, the Individual Defendants committed a new fraud against Yick Bo by deepening its insolvency. 34.
for 2009, on or about June 30, 2010, to Reddy Chu in the Hong Kong office and to the auditors in Hong Kong by email. 35.
suppliers in 2010 that Worldwide Dreams would not and did not pay for. Yick Bo incurred the debt, while Worldwide Dreams received the merchandise to sell in the U.S. iii. The 2010 Financial Statement Fraud 36.
In 2011, the Individual Defendants repeated the false statements, even as Yick Bo was on the brink of bankruptcy and desperately needed the obligations from Worldwide Dreams to be paid. Gimbel and Feldman signed Yick Bo’s 2010 financial statements on May 30, 2011, in New York which falsely listed the amount due to Yick Bo from Worldwide Dreams as an asset and stated that it would be paid in the normal Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 7 of 21
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course of business to enable Yick Bo to use the “going concern” method of accounting. The other Individual Defendants read and agreed with these false financial statements, and on or about that day, they were emailed to Reddy Chu at Yick Bo’s Hong Kong office and to its Hong Kong auditors. 37.
The Individual Defendants were at that point certain that Yick Bo was headed for liquidation. On May 17, 2011, Worldwide Dreams’ C.F.O. Kastenbaum conceded to Reddy Chu that he did not want to “inform the auditors” of his plan to “reorganize” Yick Bo. Reddy Chu finally began to learn that he was being misled and resigned from Yick Bo shortly thereafter. 38.
of $2.45 million worth of purchases from Chinese suppliers in 2011. 39.
Yick Bo incurred the debt while Worldwide Dreams once again received the merchandise to sell in the U.S. 40.
The three‐year scheme caused Yick Bo to be left with approximately $8.7 million in claimed unpaid debt from its suppliers, while Worldwide Dreams was enriched by selling the merchandise in the U.S. By October 2011, the Individual Defendants had stripped Yick Bo of all its assets, while leaving it with claims of unpaid debt of $8.7 million and unpaid amounts due to it from Worldwide Dreams of $14.67 million. 41.
July 2011, they sold Worldwide Dreams’ assets. Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 8 of 21 9
42. And in October 2011, with no material cash or other assets, but with $8.7 million worth of claimed unpaid debt against it and $14.67 million of debt due to it from Worldwide Dreams, the Individual Defendants put Yick Bo into liquidation. THE INDIVIDUAL DEFENDANTS FRAUDULENTLY INDUCED SUPPLIERS TO SELL TO YICK BO ON CREDIT 43.
In 2011, as Yick Bo was insolvent, its suppliers demanded payment. 44.
suppliers from New York, including Tano Chan of Chun Lam Co., and promised to resume payments. Brookner knew at the time that Yick Bo could not, and Worldwide Dreams would not, ever pay the suppliers. He was fraudulently inducing them to continue producing and shipping orders to both companies based upon goodwill developed over several years. 45.
Relying on these false assurances, suppliers, including Chun Lam Co., continued to ship supplies. 46.
Chun Lam Co. and other suppliers never did get paid and have been defrauded. Their claims total $8,683,374.48. (Teras is not seeking to recover on behalf of these suppliers but is pleading these schemes to establish a pattern of related frauds.) 47.
U.S.C. § 1343, as they were made to foreign suppliers in order to defraud them. THE INDIVIDUAL DEFENDANTS CONTINUED TO COMMIT FRAUDS AGAINST THE CREDITORS DURING THE LIQUIDATION 48.
Chun Lam Co., as well as Wang Tai Handbag Mfg. Co. and Youjin Leather Limited, two other suppliers, filed separate collection actions in 2011 in the New York State Courts in Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 9 of 21 10
New York County for payment of substantial unpaid invoices. Chun Lam Co. sued both Yick Bo and Worldwide Dreams. Chun Lam Co. alleged, correctly, that Yick Bo was Worldwide Dreams’ agent. Under principles of agency law, that made the undisclosed principal, Worldwide Dreams, responsible for the debts of its agent. 49.
The Individual Defendants agreed to move to dismiss the suit on the theory that Yick Bo was not Worldwide Dreams’ agent. All of them knew this was false. In order to perpetrate this fraud on the Court and Chun Lam Co., the Individual Defendants agreed in October 2011, pursuant to emails between New York and Florida, that Kastenbaum would complete and submit a sworn affidavit to the Court in support of Worldwide Dreams’ Motion to Dismiss. This affidavit was essential to the Motion to Dismiss in that it tried to explain away the inferences of agency expressed on the purchase order and invoices attached to Chun Lam Co.’s complaint. In reality, as has been detailed, supra, there was a written agency agreement in effect at the time, precisely as Chun Lam Co. had alleged but did not have a copy of. This was the latest in a series of four such agreements entered into between the companies from 1998 to 2008. 50.
Accordingly, in October 2011, Kastenbaum, on behalf of all Individual Defendants, caused Worldwide Dreams’ lawyers to file the false affidavit in support of the Motion to Dismiss. 51.
separately sued Worldwide Dreams for payment of debts of $305,000 and $813,988.62 respectively, in the Supreme Court of New York in New York County. Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 10 of 21
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Worldwide Dreams brought Motions to Dismiss the suits on the ground that there was no legal basis for “ascribing liability” to it for purchases made by Yick Bo. Again, this was a fraud perpetrated on the Court per agreement of all the Individual Defendants pursuant to emails between them in New York and Florida. They agreed to this strategy of denying any legal liability for Yick Bo’s purchases, which included most significantly, the denial that Yick Bo was Worldwide Dreams’ purchasing agent, which they all knew was the case. Accordingly, to perpetrate this fraud, Kastenbaum completed four sworn affidavits in support of Worldwide Dreams’ Motions to Dismiss these actions. Two affidavits were filed in November 2011 and two in January 2012. Before filing these affidavits Kastenbaum communicated with the other Individual Defendants in New York and Florida by email to agree on a course of action with respect to each creditor’s lawsuit. 52.
Accordingly the Individual Defendants used the wires to carry out additional schemes on Wang Tai Handbag Mfg., Youjin Leather Limited and Chun Lam Co. in 2011 and 2012.
53. The preceding paragraphs are incorporated herein as though fully set forth below. 54.
detailed supra. This conspiracy began in 2009 and continued into 2012. They agreed to commit the frauds to the detriment of Yick Bo as directors of the company and/or otherwise had responsibility to run it. This conspiracy violated 18 U.S.C. § 1962(c) in that it consisted of a pattern of racketeering activity (wire fraud, made a form of Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 11 of 21
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racketeering activity by 18 U.S.C. § 1961(1)(B)), committed through an enterprise affecting interstate or foreign commerce, Yick Bo, a corporation which they operated from New York. 55.
56.
Therefore, Teras asserts claims against each Individual Defendant for damages it suffered by reason of the Individual Defendants’ violation of 18 U.S.C. § 1962(d). The Individual Defendants’ scheme caused Yick Bo to make purchases from 2009 through 2011 that it would not have made, deepening its insolvency, had the Individual Defendants not falsely indicated that Worldwide Dreams would pay Yick Bo for these purchases. 57.
Alternatively, Teras also asserts a RICO claim against the Individual Defendants for perpetrating the scheme to defraud Yick Bo through an association‐in‐fact enterprise of themselves plus Karen Chan, Tonya White and Tonya King. 58.
Worldwide Dreams and Yick Bo from the New York office and also for committing the illegal activity detailed supra. The Individual Defendants delegated tasks to themselves and the other members of the association‐in‐fact enterprise and succeeded in running both businesses and in committing the frauds for three years through their close cooperation. Thus, this is an “association‐in‐fact” enterprise pursuant to 18 U.S.C. § 1961(4) as it affected interstate commerce and enabled the Individual Defendants to commit their racketeering activities. Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 12 of 21 13
59.
of 18 U.S.C. § 1962(d), pursuant to 18 U.S.C. § 1964(c), for at least $14,678,362.45, the amount of unpaid debt incurred by Yick Bo (including the amount of money Yick Bo paid out to suppliers) and the amount of unpaid commission earned by Yick Bo, as a result of the Individual’s Defendants false statements that Yick Bo would be paid by WWD. COUNT II: BREACH OF FIDUCIARY DUTY AGAINST GIMBEL AND FELDMAN FOR LOOTING AN INSOLVENT YICK BO 60.
Plaintiff Teras incorporates ¶¶1–20 herein as though fully set forth below. 61.
and WWD. 62.
At all relevant times, Yick Bo was insolvent. 63.
Worldwide Dreams’ failure to pay its obligations to Yick Bo. Specifically, as of December 31, 2007, its current liabilities were $6.73 million, but it had current assets (excluding the unpayable Worldwide Dreams receivable) of just $206,000. As of December 31, 2008, its current liabilities were $9.43 million, but it had current assets (excluding the unpayable Worldwide Dreams receivable) of just $154,000. As of December 31, 2009, its current liabilities were $8.08 million, but it had current assets (excluding unpayable Worldwide Dreams receivable) of just $309,000. As of December 31, 2010, its current liabilities were $10.56 million, but it had current assets (excluding the unpayable Worldwide Dreams receivable) of just $2,500. Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 13 of 21 14
64. During this same time period, Yick Bo had no material assets other than its receivable from Worldwide Dreams, which was not an asset for accounting purposes because it could not be repaid in the ordinary course of business. 65.
purchase supplies on behalf of Worldwide Dreams that were delivered to Worldwide Dreams and then sold by Worldwide Dreams to its U.S. customers. While those customers paid Worldwide Dreams, Worldwide Dreams did not pay Yick Bo and Yick Bo was left with the debt. 66.
duties to Yick Bo, imposed by §717 of the New York Business Corporation Law (BCL), and otherwise, to perform their duties in good faith because Yick Bo’s principal place of business was in New York. BCL §1317. Accordingly, New York law applies. 67.
At all relevant times, Gimbel and Feldman knew that Yick Bo was insolvent. It could not pay its suppliers and depended on WWD to do so, which Worldwide Dreams did not do. By failing to obtain payment of Worldwide Dreams’s obligations to Yick Bo, they breached their fiduciary duties to Yick Bo. 68.
Had Gimbel and Feldman fulfilled their obligations to Yick Bo, by ensuring the repayment by Worldwide Dreams of its obligations, Yick Bo would not have become insolvent. Instead, Gimbel and Feldman decided to loot Yick Bo’s assets for WWD’s benefit. Their breach of fiduciary duty to Yick Bo caused Yick Bo to lose its assets without any compensation or repayment from WWD. Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 14 of 21
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69. These breaches of Gimbel and Feldman’s fiduciary duties violated BCL § 720. (To reiterate, this claim is predicated upon the looting/dissipation of Yick Bo’s assets, not a false statement to it.) ALLEGATION CONCERNING PUNITIVE DAMAGES
70. Gimbel and Feldman acted in all respects maliciously, intentionally, and wantonly, and consequently are liable for punitive damages.
71.
Plaintiff Teras demands judgment against Gimbel and Feldman for damages they caused to Yick Bo by giving its assets and agency services to WWD without receiving payment. Teras also seeks punitive damages, and, pursuant to BCL § 720(b), seeks an accounting for any gains Gimbel and Feldman personally obtained as a result of their respective breaches of their fiduciary duties. COUNT III FOR REIMBURSEMENT (Against Worldwide Dreams) 72.
Plaintiff Teras reincorporates the allegations in Count II herein as though fully set forth below. 73.
Yick Bo has become indebted to suppliers and has paid suppliers without being reimbursed. As all of these purchases were made at the request of Worldwide Dreams in executing Yick Bo’s role as its purchasing agent, Worldwide Dreams is legally responsible to reimburse and indemnify Yick Bo for these obligations under the Agency Agreement and New York common law. Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 15 of 21
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74. Additionally, Yick Bo is entitled to commissions on these purchases pursuant to ¶ 3 of the Agency Agreement (Exhibit to Complaint).
75. Plaintiff Teras demands judgment against Defendant Worldwide Dreams for $14,678,362.45, and any other relief deemed just and proper.
Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 16 of 21 17
Dated: June 5, 2014 By:
/s/Howard W. Foster
Howard W. Foster Matthew A. Galin Foster PC 150 N. Wacker Dr., Suite 2150 Chicago, IL 60606 Telephone: (312) 726‐1600 Email:
hfoster@fosterpc.com
Law Offices of Clifford James Clifford James 260 Madison Avenue, 17th Floor New York, NY 10016‐2401 Telephone: (212) 532‐6333 Email:
cjames@cjtoplaw.com
Attorneys for Plaintiff Teras International Corp.
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Exhibit Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 18 of 21 Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 19 of 21 Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 20 of 21 Case 1:13-cv-06788-VEC Document 66 Filed 06/06/14 Page 21 of 21 Yüklə 279,49 Kb. Dostları ilə paylaş:
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