Re: 7/23/04 - [IPMT] Complaint: ITSV Inc. vs. IPMT et al
In re:
R.J. Gordon & Company, Inc., a California Corporation aka,
ITSV, Inc.,
Debtor.
_____________________________________
HOWARD B. EHRENBERG, Chapter 7
Trustee for the Estate of ITSV, Inc.,
Plaintiff,
v.
CREDITCARDS.COM, INC., a California corporation, iPAYMENT, INC., a Delaware corporation, iPAYMENT HOLDINGS, INC., a California corporation, IPAYMENT HOLDINGS, INC., a Tennessee corporation, iPAYMENT MERGER SUB, INC., a California corporation, iPAYMENT TECHNOLOGIES, INC., a California corporation, ELECTRONIC COMMERCE NETWORK, INC., a California corporation, ELECTRONIC AUTHORIZATION SYSTEMS, INC. a California corporation, IT SOLUTION VENTURES LLC, a California Limited Liability Company, IT SOLUTION VENTURES, INC., a California corporation, CAYMAS HOLDINGS, an unknown business organization, GREGORY DAILEY, an individual CARL GRIMSTAD, an individual, RICHARD TORINO, an individual, RICHARD SCHUBERT, an individual, BROBECK, PHELGER AND HARRISON, LLP, a California Limited Liability Partnership, STEVEN N. HOLLAND, an individual, DAVID J. BROWN, an individual, MORGAN, LEWIS & BOCKIUS, LLP, a California Limited Liability Partnership, ARTHUR ANDERSEN & E & Y LLP., a Limited Liability Partnership, formed in Illinois, and Ernst & Young LLP, a Limited Liability Partnership, formed in Delaware,
Defendants.
_____________________________________
CASE NO.: LA 02-31259-EC
Chapter 7
Adversary No.:
FIRST AMENDED
COMPLAINT FOR:
1. FRAUD;
2. FRAUDULENT TRANSFER
[CAL. CIVIL CODE SECTION 3439.04];
3. CONSPIRACY TO DEFRAUD;
AND
4. VIOLATION OF CALIFORNIA BUSINESS & PROFESSIONS CODE SECTIONS 17200 ET SEQ
JURISDICTION AND VENUE
1. This adversary preceding is filed pursuant to Bankruptcy Rule 7001. This court has subject matter jurisdiction over this case pursuant to 28 U.S.C. 1334 in that this proceeding arises under Title 11 of the United States Code, and arises in and is related to the above-captioned case filed under Title 11 in the United States Bankruptcy Court for the Central District of California, Los Angeles Division, namely ITSV, Inc., USBC, Chapter 7 Case No. LA 02-31259.
2. Venue is proper in the Central District of California pursuant to 28 U.S.C. 1409 as the Chapter 7 case of ITSV, Inc., Case No. LA 02-31259 is pending in this district and the claims alleged herein arose in this district.
3. This is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(A), (b)(2)(E) and (b)(2)(H).
FIRST CAUSE OF ACTION
(Fraud)
4. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, R.J. GORDON a.k.a. RICHARD GORDON (hereinafter AGORDON@), was, and now is, an individual, residing in the City of Los Angeles, County of Los Angeles, State of California. Although not named as a party to this action he was the owner of and controlling shareholder of, those corporations and business entities named herein as indicated below, and therefore an alter ego of the same as indicated herein.
5. Plaintiff is informed and believes and thereon alleges, that all times herein mentioned, that R.J. GORDON & COMPANY, INC., (hereinafter AGORDON, INC.@), changed its name to Debtor ITSV on or about December 18, 1999. Plaintiff is unaware of the true capacity of said GORDON, INC. and whether it has a legal form and existence separate and apart from the Debtor herein.
6. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, CREDITCARDS.COM, INC. (hereinafter ACREDITCARDS@) , was, and now is a corporation, duly organized under and by virtue of the laws of the State of California, with its principal place of business located in the County of Los Angeles, State of California.
7. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, IPAYMENT, INC. (hereinafter AIPAYMENT@), was, and now is a corporation, duly organized under and by virtue of the laws of the State of Delaware, with its principal place of business located in the City of Nashville, State of Tennessee.
8. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, IPAYMENT HOLDINGS, INC. (hereinafter AIPAYMENT HOLDINGS-CA@), was, and now is a corporation, duly organized under and by virtue of the laws of the State of California, with its principal place of business located in the County of Los Angeles, State of California.
9. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, IPAYMENT HOLDINGS, INC. (hereinafter AIPAYMENT HOLDINGS-TN@), was, and now is a corporation, duly organized under and by virtue of the laws of the State of Tennessee, with its principal place of business located in the City of Nashville, State of Tennessee.
10. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, IPAYMENT MERGER SUB., INC. (hereinafter AIPAYMENT MERGER@), was, and now is a corporation, duly organized under and by virtue of the laws of the State of California, with its principal place of business located in the County of Los Angeles, State of California.
11. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, IPAYMENT TECHNOLOGIES, INC. (hereinafter AIPAYMENT TECHNOLOGIES@), was, and now is a corporation, duly organized under and by virtue of the laws of the State of California, with its principal place of business located in the County of Los Angeles, State of California.
12. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, ELECTRONIC COMMERCE NETWORK, INC. (hereinafter AE-COMMERCE@) , was, and now is a corporation, duly organized under and by virtue of the laws of the State of California, with its principal place of business located in the County of Los Angeles, State of California.
13. Plaintiff is informed and believes, and thereon allege, that all times herein mentioned, Defendant, ELECTRONIC AUTHORIZATION SYSTEMS, INC. (hereinafter AE-SYSTEMS@) , was, and now is a corporation, duly organized under and by virtue of the laws of the State of California, with its principal place of business located in the County of Los Angeles, State of California.
14. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, IT SOLUTIONS VENTURES, LLC (hereinafter AIT LLC@) , was, and now is a Limited Liability Company, duly organized under and by virtue of the laws of the State of California, with its principal place of business located in the County of Los Angeles, State of California.
15. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, IT SOLUTIONS VENTURES, INC. (hereinafter AIT INC.@), was, and now is a corporation, duly organized under and by virtue of the laws of the State of California, with its principal place of business located in the County of Los Angeles, State of California.
16. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, CAYMAS HOLDINGS (hereinafter ACAYMAS.@), was, and now is an unknown business organization, organized under and by virtue of the applicable and appropriate laws of the State of California, with its principal place of business located in the County of Los Angeles, State of California.
17. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, GREGORY DAILEY (hereinafter ADAILEY@), was, and now is, an individual, residing in the City of Nashville, State of Tennessee. .
18. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, CARL GRIMSTAD (hereinafter AGRIMSTAD@), was, and now is, an individual, residing in the City of Nashville, State of Tennessee.
19. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, RICHARD TORINO (hereinafter ATORINO@), was, and now is, an individual, residing in the City of Nashville, State of Tennessee.
20. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, RICHARD SCHUBERT (hereinafter ASCHUBERT@), was, and now is, an individual, residing in the City of Los Angeles, County of Los Angeles, State of California, and, at all times relevant herein, was, and now is, an attorney at law duly licensed under and by virtue of the laws of the State of California, and was the attorney for GORDON and his companies, some of which are sued upon herein, and then simultaneously to the events alleged, became General Counsel for Defendant, IPAYMENT, INC., and its related companies and subsidiaries.
21. Plaintiffs are informed and believe, and thereon allege, that all times herein mentioned, Defendant, STEVEN N. HOLLAND (hereinafter AHOLLAND@), was, and now is, an attorney at law duly licensed under and by virtue of the laws of the State of California, and a member and employed by Defendant, MORGAN, LEWIS & BOCKIUS, LLP, was previously a member of and employed by Defendant, BROBECK, PHELGER AND HARRISON LLP, and was the attorney for Defendants, DAILEY, GRIMSTAD, IPAYMENT, INC., and its related companies and subsidiaries.
22. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, DAVID J. BROWN (hereinafter ABROWN@), was, and now is, an attorney at law duly licensed under and by virtue of the laws of the State of California, and a member and employed by Defendant, MORGAN, LEWIS & BOCKIUS, LLP, was previously a member of and employed by Defendant, BROBECK, PHELGER AND HARRISON LLP, and was the attorney for Defendants, DAILEY, GRIMSTAD, TORINO, IPAYMENT, INC., and its related companies and subsidiaries.
23. Plaintiff is informed and believes, and thereon allege, that all times herein mentioned, Defendant, BROBECK, PHELGER AND HARRISON LLP (hereinafter BPH@), was, and now is, a Limited Liability Partnership, duly licensed under and by virtue of the laws of the State of California, the employer of Defendants, HOLLAND AND BROWN, and was the law firm of record and the attorneys for DAILEY, GRIMSTAD, TORINO, IPAYMENT, INC., and its related companies and subsidiaries in all of the transactions alleged herein.
24. Plaintiff is informed and believes, and thereon allege, that all times herein mentioned, Defendant, MORGAN, LEWIS & BOCKIUS, LLP, (hereinafter AMLB@), was, and now is, a Limited Liability Partnership, duly licensed under and by virtue of the laws of the State of California, the employer of Defendants, HOLLAND AND BROWN, and was the law firm of record and the attorneys for DAILEY, GRIMSTAD, TORINO, IPAYMENT, INC., and its related companies and subsidiaries in all of the transactions alleged herein.
25. Plaintiff is informed and believes, and thereon alleges, that at all times herein mentioned, each of the Defendants sued herein was the agent, employer, and/or employee, of each of the remaining Defendants, and in doing the things hereinafter alleged, was acting within the course and scope of such agency, and employment.
26. Plaintiff is informed and believes, and thereon alleges, that all times herein mentioned, Defendant, ARTHUR ANDERSEN LLP (hereinafter AANDERSEN @), was, and now is a Limited Liability Partnership, duly organized under and by virtue of the laws of the State of Illinois, with it principal place of business located in the City of Chicago, State of Illinois. Defendant Ernst & Young LLP, was and is a Limited Liability Partnership, formed in Delaware and is hereinafter referred to as “E & Y”.
Both accounting firms are hereinafter referred to as “Andersen & E & Y”. Plaintiff is informed and believes and further alleges that Defendant ANDERSEN & E & Y was and were the accounting firms and accountants for all of the transactions complained of herein, are operating and responding to claims there against as a result of wrongdoings and legal violations, of which include the claims made herein.
27. Plaintiff is informed and believes and thereon alleges that at all times herein mentioned, GORDON, and the Debtor herein, ITSV, entirely dominated, controlled, and directed the affairs of Defendants E-SYSTEMS, E-COMMERCE, IT LLC, IT INC., and was using these corporate Defendants, ITSV, GORDON, INC., E-SYSTEMS, E-COMMERCE, IT LLC, IT, INC., as an instrumentality and conduit for the conduct of their businesses and as an obligor for their personal and corporate obligations and liabilities. Plaintiff is informed and believes and thereon allege that at all times material hereto all of the capital stock of Defendants, E-SYSTEMS, E-COMMERCE, IT LLC, IT, INC., was owned by GORDON , and the Debtor herein, ITSV who caused said corporate Defendants, E-SYSTEMS, E-COMMERCE, IT LLC, IT, INC., to be formed and to conduct business without adequate capitalization, and utilized the same and common place of business and office space, employees, telephone system, office machinery, computers, and other such kindred business items, equipment, and necessities, including having common and like customers. As a result, at all times material hereto, such unity of interest and ownership existed between said Defendants, which included the Debtor herein, and said corporate Defendants so that any separateness ceased to exist and therefore, GORDON, and the Debtor herein, ITSV are the alter egos of said corporate Defendants, E-SYSTEMS, E-COMMERCE, IT LLC, IT, INC., and adherence to the fiction of the separate corporate existence would sanction a fraud and promote injustice.
28. Plaintiff is informed and believes and thereon alleges that at all times herein mentioned, Defendants, GRIMSTAD, DAILEY, TORINO, SCHUBERT, and each of them, entirely dominated, controlled, and directed the affairs of Defendants CAYMAS, CREDITCARDS, IPAYMENT HOLDINGS-TN, IPAYMENT HOLDINGS-CA, IPAYMENT MERGER, and each of
them, and were, and are, using these corporate Defendants, CAYMAS, CREDITCARDS, IPAYMENT HOLDINGS-TN, IPAYMENT HOLDINGS-CA, IPAYMENT MERGER, as an instrumentality and conduit for the conduct of their businesses and as an obligor for their personal obligations and liabilities and as shields and entities to cover-up and to avoid detection of the fraudulent conduct perpetrated thereby all as alleged herein . Plaintiff is informed and believes and thereon alleges that at all times material hereto all of the capital stock of Defendants, CAYMAS, CREDITCARDS, IPAYMENT HOLDINGS-TN, IPAYMENT HOLDINGS-CA, IPAYMENT MERGER, and each of them, was and is owned by Defendants, GRIMSTAD, DAILEY, TORINO, SCHUBERT, and each of them, who caused said corporate Defendants, CAYMAS, CREDITCARDS, IPAYMENT HOLDINGS-TN, IPAYMENT HOLDINGS-CA, IPAYMENT MERGER, and each of them, to be formed and to conduct business without adequate capitalization and to further advance the fraudulent schemes and conduct all as alleged herein. As a result, such unity of interest and ownership exists and has at all times material hereto existed between said individual Defendants and said corporate Defendants so that any separateness has ceased to exist and therefore, Defendants GRIMSTAD, DAILEY, TORINO, SCHUBERT, and each of them, are the alter egos of said corporate Defendants, CAYMAS, CREDITCARDS, IPAYMENT HOLDINGS-TN, IPAYMENT HOLDINGS-CA, IPAYMENT MERGER, and each of them, and adherence to the fiction of the separate corporate existence would sanction a fraud and promote injustice.
29. On or about December 18, 1999, Defendants, and each of them, at Los Angeles, CA, at meetings and in various conversations with GORDON, and the Debtor herein, ITSV, and each of them, continuing through and including the consummation of same as represented by certain purchase agreements in or about July, 2000, represented to GORDON, GORDON, INC., and the Debtor herein, ITSV, and each of them, that if said GORDON, GORDON, INC., and the Debtor herein, ITSV, would sell to Defendants, and each of them, for valuable and substantial cash and consideration, certain stock in CREDITCARDS, said purchasing Defendants would provide said GORDON, GORDON, INC., and the Debtor herein, ITSV, with certain accommodations to continue doing business, among which included, but was not limited to, free rent, free phones, free computers, and access to all records, all for at least six (6) months, said services valued at no less than $75, 000 per month, and said purchasing Defendants, and each of them, would structure and document said purchase as a purchase by the selling parties of certain stock of a company owned by said purchasing Defendants to allow said sellers, which included the Debtor ITSV herein, to continue in business and compete against CREDITCARDS and develop new and further business, all as was eventually represented and incorporated into a certain purchase agreement.
30. The representations made by said Defendants, were in fact, false. The true facts were that said purchasing Defendants, in concert and by arrangement with other Defendants herein, namely GRIMSTAD, CAYMAS, and all successor and succeeding interests held by and among all other Defendants, by and with the direction and legal assistance of Defendants HOLLAND, BROWN, BPH, MLB, and each of them, did not intend to, nor ever intended to, repay said monies then owed by virtue of the agreements, but, rather, utilized the assets and continuing personal guarantees of selling GORDON, GORDON, INC., and the Debtor herein, ITSV, to build their successor businesses to eventually create their own company and go public, which was commenced with the assets advanced by GORDON, GORDON, INC., and the Debtor herein, ITSV, by virtue of the aforesaid sale of all of the assets of GORDON=s related companies. Said Defendants did so without assuming any liabilities therefor despite so obtaining the assets of GORDON, GORDON, INC., and the Debtor herein, ITSV, which also included the obligation owed by Defendants to GORDON, GORDON, INC., and the Debtor herein, ITSV. Subsequent thereto, and in furtherance of same, said Defendants transferred the assets without full disclosure to GORDON, GORDON, INC., and the Debtor herein, ITSV, and without their consent to Defendant CREDITCARDS, and then, eventually, by virtue of a public offering, into Defendant IPAYMENT, all, again, without full disclosures, adequate appraisals, or the consent of said selling GORDON, GORDON, INC., and the Debtor herein, ITSV. Plaintiffs are informed and believe that Defendants in so doing the things alleged herein violated the Sarbanes-Oxley Act and breached their fiduciary duty to the shareholders of the Defendant corporations.
31. Consistent therewith, and in furtherance of said fraud and misrepresentations, said Defendants, among other things:
A. Unilaterally and without due or just cause excluded the employees of the Debtor herein and otherwise prevented them from gaining access to their place of business, cut off the telephone service, answering service, reception service, seized all mail, files, records, bank statements and cancelled checks, took possession of all their computers and proprietary information, and otherwise prevented access to their business and records, all without any reasonable or justifiable warning or notice;
B. Notified GORDON, who they had so induced as heretofore alleged, that instead of owning forty percent (40%) of CREDITCARDS after the acquisition of same from him and other shareholders for which he and they had agreed to sell, which included creditors of the Debtor herein, ITSV, that there would be a reverse stock split of 100:1, thereby, in effect, reducing his agreed to ownership to four one hundredths of a percent (.04%) and that the shares of said company were not worth the $7.00 per share which they were valued at the closing of said sale, but rather had been unilaterally reduced to $ 0.37 per share. Further, Defendants failed to disclose to GORDON, GORDON INC. and the shareholders of CREDITCARDS that in fact the shares were worth $7.00 per share or $26 million dollars, ($26,000,000) pursuant to an offer to purchase a copy of which is attached hereto and incorporated herein by reference and marked exhibit A.
C. Further notified and advised GORDON, the principal shareholder of the Debtor herein, ITSV, that they would make no payments to him pursuant to their obligation of a Promissory Note for Two Million Dollars ($2,000,000.00), which cut off all cash -flow and income to said GORDON and the Debtor herein, ITSV, which then was unable to be operated and to so compete, all as originally agreed as heretofore alleged; and
D. Admonished and advised said GORDON and the Debtor herein, ITSV, not to file this bankruptcy now pending for a period of two (2) years and by their unilateral breach of said agreement and conduct, deliberately and intentionally forced said GORDON and the Debtor herein, ITSV, to seek the appropriate redress in the Superior Court of the State of California, for the County of Los Angeles, to recover those monies due, all in order to avoid this Court from discovering their fraud perpetrated on the Debtor herein ITSV, which would unwind their deceitful schemes and devise to withhold the consideration duly bargained for by the Debtor herein ITSV and its principal shareholder, GORDON.
32. When said Defendants made these representations, they knew them to be false, and these representations were made by said Defendants with the intent to defraud and deceive GORDON and the Debtor herein, ITSV, and with the intent to induce GORDON and the Debtor herein, ITSV, to act in the manner herein alleged.
33. At the time these representations were made and at the time GORDON and the Debtor herein, ITSV, took the actions herein alleged, they were ignorant of the falsity of said Defendants= representations and believed them to be true. In reliance thereon, GORDON and the Debtor herein, ITSV, were induced to and did enter into the subject agreements and transferred controlling interests in CREDITCARDS, all as heretofore alleged. Had GORDON and the Debtor herein, ITSV, known the actual facts, it would not have taken such actions. Reliance on said Defendant's representations was justified because of their previous dealings with Defendants, and each of them, and that there was no justifiable economic reason why said Defendants, or any of them, would not perform as agreed.
34. As a direct and proximate result of said Defendants fraud and deceit, and the conduct perpetrated thereby, all as heretofore alleged, Plaintiff, on behalf of the Debtor herein, ITSV, has lost the value of the services to be provided and which were unilaterally terminated, or the sum of $450,000, the value of all creditors claims who were unpaid by the cessation of business of the Debtor herein, or the sum of $1,200,000, and the value of the asset and the Debtor herein so destroyed, in a sum of no less than Fifty-One Million Dollars ($51,000,000.00).
35. Defendants= conduct, all as heretofore alleged, was done intentionally, knowingly, willfully, maliciously, oppressively and in conscious disregard of the rights of the Debtor herein, ITSV, and its creditors, thereby entitling Plaintiff, on its behalf, to punitive and exemplary damages.
SECOND CAUSE OF ACTION
(Fraudulent Transfer - California Civil Code Section 3439.04)
36. Plaintiff realleges and incorporates Paragraphs 1 through 33 of the First Cause of Action and by this reference makes the same a part hereof as though fully set forth herein.
37. The transfer of the assets and stock pursuant to the subject purchase agreements as heretofore alleged was without valuable and just consideration, was done so without the proper and required appraisals, and, if any were had, were false and manipulated by the Defendants, and each of them, to support their scheme and devise all as heretofore alleged, and was all done so without the proper and legal notice to the creditors, of which included the creditors of the Debtor herein, ITSV, as was required, all knowingly and willfully done by said Defendants,
and each of them, to hinder and delay, and eventually avoid, all of the Debtor=s creditors.
38. Pursuant to California Civil Code Section 3439.08, the Trustee may recover judgment for the value of the asset transferred. As a proximate result of the acts and conduct of Defendants, and each of them, and the fraudulent transfer perpetrated thereby, all as heretofore alleged, Plaintiff Trustee is entitled to judgment, joint and severally against all of said Defendants, and each of them, for a sum equal to the value of the assets so fraudulently transferred, plus pre-judgment interest, according to proof. Plaintiff Trustee is informed and believes and thereon alleges that the value of the Debtor ITSV, and its assets, at the time of said transfer, was no less than Fifty-One Million Dollars ($51,000,000.00).
39. Defendants= conduct, all as heretofore alleged, was done intentionally, knowingly, willfully, maliciously, oppressively and in conscious disregard of the rights of the Debtor herein, ITSV, and its creditors, thereby entitling Plaintiff, on its behalf, to punitive and exemplary damages.
THIRD CAUSE OF ACTION
(Conspiracy to Defraud)
40. Plaintiff realleges and incorporates Paragraphs 1 through 33 of the First Cause of Action and Paragraphs 37 of the Second Cause of Action and by this reference makes the same a part hereof as though fully set forth herein.
41. In or around July, 2000, GORDON, GORDON, INC., ITSV, E-SYSTEMS, E-COMMERCE, IT-LLC, and each of them (collectively herein Athe GORDONS@), entered into a certain agreements with Defendants, CREDITCARDS, CAYMAS, IPAYMENT TECHNOLOGIES, and each of them (collectively herein Athe IPAYMENTS@) whereby the GORDONS sold all of their businesses to the IPAYMENTS, and the IPAYMENTS purchased all of the assets of the GORDONS but did not assume all of the liabilities, of which included the monies due the Debtor herein, ITSV, and its creditors, all as heretofore alleged.
42. Subsequent thereto, in and around April, 2002, the IPAYMENTS were all merged and became a public company pursuant to a public offering, by which it was represented that they lawfully and in good faith created their business without any liabilities, of which included the monies still owed to Plaintiffs and the continuing guarantee upon which they built said business. Said representations were false and in direct and express violations of the various Federal and State securities regulations which promulgate and promote full and honest disclosures to the public when selling securities including but not limited to the Sarbanes Oxley Act.
43. Plaintiff is informed and believes and thereon allege that notwithstanding the object and intent of the underlying sale as aforesaid, the GORDONS and the IPAYMENTS entered into such agreements, and completed said merger and public offering, and formed certain entities, of which included the named Defendants corporations herein, and took other steps unknown to Plaintiff at this time, all in order to avoid certain outstanding liabilities, of which included the obligation owed to the Debtor herein, ITSV, and its creditors, all as heretofore alleged, and to defraud and deceive the Debtor herein, ITSV, and its creditors, and all other similarly situated creditors. In particular, and in concert with, and at the direction of, the GORDONS, the IPAYMENTS, in order to deceive and defraud Plaintiffs, and with full knowledge of the obligation due and owing to the Debtor herein, ITSV, and its creditors, instead of paying Defendant, ITSV, directly, as the obligor, monies were paid GORDON, the individual, directly and so surreptitiously, so as to avoid and thwart any such repayment to the Debtor herein, ITSV, and its creditors, at which time said Defendants, and all of them, knew of this obligation to Plaintiffs and knew that GORDON was going to file bankruptcy in an attempt to discharge the obligation to the Debtor herein, ITSV, and its creditors, and, thus, committed bankruptcy fraud.
44. In doing the things as heretofore alleged, Defendants, and all of them, willfully and knowingly conspired to defraud and oppress the then and present creditors of the Debtor herein, ITSV, all to the damage of the Plaintiff Trustee, in seeking recovery of the damages sustained thereby, in the sum of the loss of the value of the services to be provided and which were unilaterally terminated, or the sum of $450,000, and the value of all creditors claims who were unpaid by the cessation of business of the Debtor herein, or the sum of $1,200,000, and the value of the asset and the Debtor herein so destroyed, in a sum of no less than Fifty-One Million Dollars ($51,000,000.00)..
45. Defendants= conduct, all as heretofore alleged, was done intentionally, knowingly, willfully, maliciously, oppressively and in conscious disregard of the rights of the Debtor herein, ITSV, and its creditors, thereby entitling Plaintiff, on its behalf, to punitive and exemplary damages.
FOURTH CAUSE OF ACTION
(Violation of California Business and Professions Code Sections 17200 et seq.)
46. Plaintiff realleges and incorporates Paragraphs 1 through 33 of the First Cause of Action, Paragraphs 37 of the Second Cause of Action, and Paragraphs 41 through 43 of the Third Cause of Action, and by this reference makes the same a part hereof as though fully set forth herein.
47. In doing the things as herein alleged, and perpetrating the fraud upon the Debtor ITSV, all as heretofore alleged, Defendants, and each of them, by conspiring to force Debtor into bankruptcy and preventing it from lawfully competing with CREDITCARDS as was originally represented and agreed, violated Sections 17000 et seq. of the California Business and Professions Code, which provides for the lawful competition and appropriate and fair trade practices that govern such business in the State of California, a such conduct was unfair, dishonest, deceptive, and destructive, which eventually prevented the Debtor herein, ITSV, from fair and honest competition.
48. In doing the things as heretofore alleged, Defendants, and all of them, willfully and knowingly conspired to defraud and oppress the then and present creditors of the Debtor herein, ITSV, all to the damage of the Plaintiff Trustee, in seeking recovery of the damages sustained thereby, in the sum of the loss of the value of the services to be provided and which were unilaterally terminated, or the sum of $450,000, and the value of all creditors claims who were unpaid by the cessation of business of the Debtor herein, or the sum of $1,200,000, and the value of the asset and the Debtor herein so destroyed, in a sum of no less than Fifty-One Million Dollars ($51,000,000.00). Pursuant to said Business and Professions Code, Plaintiff is entitled to three times the amount of said damages, or the sum of One Hundred Fifty-Seven Million, Nine Hundred Fifty Thousand Dollars ($157,950,000.00).
49. Defendants= conduct, all as heretofore alleged, was done intentionally, knowingly, willfully, maliciously, oppressively and in conscious disregard of the rights of the Debtor herein, ITSV, and its creditors, thereby entitling Plaintiff, on its behalf, to punitive and exemplary damages.
50. Pursuant to said Business and Professions Code, Plaintiff is entitled to his reasonable attorneys= fees incurred herein.
WHEREFORE, Plaintiff prays for judgment against Defendants, and each of them, as follows:
1. For general damages in the sum of $52,650,000;
2. For treble damages in the sum of $157,950,000.00;
3. For interest thereon at the legal rate from and including July 10, 2000, to
the date of judgment herein;
4. For his reasonable attorneys= fees incurred;
5. For costs of suit incurred herein; and
6. For such other and further relief as the court may deem proper.
Dated: July 23, 2004 PRATTER & YOUNG, ATTORNEYS
ROBERT J. YOUNG
MICHAEL S. PRATTER
By: Michael S. Pratter
Attorneys for Plaintiff, HOWARD B. EHRENBERG,
Chapter 7 Trustee for the Estate of ITSV, Inc.
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