Re: 8/9/01 - [ZSUN] Complaint: Leif Aa. Fredsted vs. Bryant D. Cragun et al
James A. Shalvoy SBN 129503
1201 Morningside Drive
Suite 215
Manhattan Beach, CA 90266
Tel 310-796-0447
Fax 310-796-0277
Attorney for Plaintiff
LEIF Aa. FREDSTED
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN DIEGO
LEIF Aa. FREDSTED,
Plaintiff,
vs.
BRYANT D. CRAGUN, an individual,
RICHARD SWATMAN, an individual,
LYNN BRIGGS, an individual,
JAMES HOWARD, an individual,
ZIASUN TECHNOLOGIES, INC., a
Nevada corporation, WORLD
TRADE FINANCIAL CORPORATION, a
Nevada corporation, and DOES 1
through 50 inclusive,
Defendants.
Case No.
COMPLAINT FOR:
1. Unfair Business Practices
2. Unlawful Business Practices
3. Deceptive Business Practices
4. Deceit
5. Securities Fraud
6. Temporary Restraining Order
and Preliminary and
Permanent Injunctions
7. Conversion
8. Conspiracy
Plaintiff Leif Aa. Fredsted (“Fredsted” or “plaintiff”) alleges as follows:
1. Plaintiff is an individual who, at all times relevant, was a resident of Oslo, Norway.
2. Plaintiff is informed and believes, and on that basis alleges, that one or more of the defendants are, and were at all times relevant, either residents of the state of California, doing business in the state of California, or otherwise engaging in activity creating sufficient contact with the state of California to give rise to personal jurisdiction.
3. Plaintiff is informed and believes, and on that basis alleges, that venue is proper in this County because at least one defendant resides in the County of San Diego or engaged in the conduct alleged within the County of San Diego.
4. Plaintiff is ignorant of the true names and capacities of the defendants who are sued as Does 1 through 50 inclusive and therefore sues these defendants by fictitious names. Plaintiff will amend this complaint to allege the defendants’ true names and capacities when ascertained. Plaintiff is informed and believes, and on that basis alleges, that each of the fictitiously named defendants is responsible in some manner for the occurrences alleged, and that plaintiff’s damages as alleged were caused by such defendants.
5. Plaintiff is informed and believes, and on that basis alleges, that at all times mentioned, each of the defendants was the agent of each of the remaining defendants, and in doing the things hereinafter alleged, was acting within the course and scope of such agency and at the direction of and with the knowledge, permission, and consent of the other defendants.
COMMON ALLEGATIONS
6. Defendant Bryant Cragun (“Cragun”) is an individual who, at all times relevant, was a resident of San Diego County, California. Cragun is an investment adviser and fund raiser for, and shareholder of, several publicly traded companies including defendant ZiaSun Technologies, Inc. (“ZiaSun”), Chequemate International, Inc. (“Chequemate”), Titan Motorcycles of America, Inc. (“Titan”), Dynatec International, Inc. (“Dynatec”), Loraca International, Inc. (“Loraca”), Bevex, Inc. (“Bevex”), Castpro.com (“Castpro”), RealestateFederation.com (“REF”), Broadcast International (“Broadcast”), and Asia4Sale (“Asia4Sale”) (sometimes collectively referred to as the “OTC Companies”). Cragun regularly assists the OTC Companies in raising capital from private investors. Cragun was an officer and director of ZiaSun and one or more of the OTC Companies during some or all of the relevant period.
7. Defendant Richard Swatman (“Swatman”) is an individual who, at all times relevant, was a portfolio advisor and agent for an entity that became known as World Trade Financial Corporation (“World Trade”), Cragun, Briggs, Howard, and the other defendants.
8. Defendant Lynn Briggs (“Briggs”) is an individual who, at all times relevant, was a resident of Salt Lake City, Utah. Briggs was a Financial & Investment Consultant and agent for defendant World Trade and an officer and director of ZiaSun and one or more of the OTC Companies during some or all of the relevant period.
9. Defendant James Howard (“Howard”) is an individual who, at all times relevant, was an employee and agent of World Trade, Cragun, Briggs, Swatman, and the other defendants.
10. ZiaSun is a publicly traded Nevada corporation with its United States headquarters in the County of San Diego, California. ZiaSun holds itself out as an Internet related company providing services to consumers located primarily in Asia. ZiaSun is the parent company of Asia4Sale.
11. World Trade is a Nevada corporation with its United States headquarters in the County of San Diego, California. World Trade is a broker/dealer registered under the Securities Exchange Act of 1934. World Trade was previously known as Amber Securities Corporation (“Amber”), Capital Assets, Ltd. (“Capital”), and/or Carlton Capital Management (“Carlton”).
12. Cragun, Swatman, Briggs, and Howard (sometimes collectively referred to as the “individual defendants”), acting individually and through World Trade and ZiaSun, have conspired to, have been, and are engaged in a scheme to defraud plaintiff and other private investors by causing them to invest in the OTC Companies and other entities through misstatements and omissions of material fact.
13. The scheme involves the individual defendants’ use of World Trade and other broker/dealers, such as Amber, Capital, and Carlton, as “boiler rooms” to raise funds from plaintiff and other unsuspecting private investors by using high pressure sales tactics and by making misstatements and omissions of material fact. The misstated and omitted facts made by defendants to plaintiff include, but are not limited to:
a. The fact that no client had ever lost money in any investments recommended by World Trade, Carlton, or Capital due to a close association and intimate knowledge by World Trade, Carlton, or Capital of the companies being recommended;
b. The fact that funds invested by plaintiff would be used to finance the individual defendants’ activities involving criminal behavior, securities fraud, pornography, false corporate disclosures, and illegal business practices;
c. The fact that returns on plaintiff’s investment would be made from new investors’ funds, i.e., plaintiff was investing in a “pyramid” or “Ponzi” scheme;
d. The fact that little or no market existed for the OTC Companies’ stock; and
e. The fact that insiders at one of the OTC Companies traded that company’s stock on the basis of material, nonpublic information.
BACKGROUND
14. In or about January 2000, plaintiff was contacted by Swatman. Swatman stated that he was a broker and portfolio advisor with Capital and solicited plaintiff’s investment in Chequemate, one of the OTC Companies. Plaintiff purchased 250 shares based upon the representations of Swatman.
15. Shortly after the initial purchase, plaintiff was advised by Swatman of an increase in the price of Chequemate. Swatman solicited plaintiff to purchase additional shares of Chequemate by representing that the share price would increase several times over. Only after plaintiff agreed to purchase the additional shares did Swatman advise that the stock was restricted and could not be sold for one year. Swatman also failed to advise plaintiff before he invested: (a) that funds invested by plaintiff in Chequemate would be used by the individual defendants to finance activities involving criminal behavior, securities fraud, pornography, false corporate disclosures, and illegal business practices; (b) that returns on plaintiff’s investment would be made from new investors’ funds, i.e., plaintiff was investing in a “pyramid” or “Ponzi” scheme; and (c) that little or no market existed for the Chequemate stock.
16. Shortly after plaintiff opened his account with Capital, Howard contacted plaintiff and advised that he, not Swatman, would be plaintiff’s account manager. Howard solicited plaintiff to invest in Asia4Sale, Castpro, REF, and Broadcast. Howard also arranged a meeting with Briggs, with whom plaintiff met in Oslo, Norway on November 13, 2000 for approximately one hour. Howard described Briggs as a Financial & Investment Consultant for Capital. Howard represented that Briggs and Capital had a close association with the other OTC Companies.
17. At the November 13 meeting with plaintiff, Briggs touted several of the OTC Companies including representing that he was closely affiliated with Broadcast and he provided plaintiff with information regarding the company’s background. Swatman, Briggs, and Howard, at the direction of Cragun and the other defendants, failed to advise plaintiff at any time before he invested: (a) that funds invested by plaintiff in any of the OTC Companies would be used to finance the individual defendants’ activities involving criminal behavior, securities fraud, pornography, false corporate disclosures, and illegal business practices; (b) that returns on plaintiff’s investment would be made from new investors’ funds, i.e., plaintiff was investing in a “pyramid” or “Ponzi” scheme; (c) that little or no market existed for the OTC Companies’ stock; and (d) that insiders at one of the OTC Companies traded their company’s stock on the basis of material, nonpublic information.
18. Between January 2000 and December 2000, on the basis of the misrepresentations and omissions of Swatman, Howard, and Briggs described above, which were made at the direction of Cragun and with the other defendants’ knowledge and consent and as the other defendants’ agents and as agents for each other, plaintiff invested approximately $108,840.10 through Capital and Carlton in the securities of Broadcast, Chequemate, REF, Asia4Sale, and Castpro.
19. After purchasing the stocks, plaintiff requested stock certificates but was informed by Howard, at the direction of the other defendants, that Capital maintained the restricted certificates on behalf of their owners.
20. Since February 2001, plaintiff has demanded that defendants return the monies he has invested, but defendants have failed and refused to return to plaintiff the monies he invested, or any part of them.
FIRST CAUSE OF ACTION
Unfair Business Practices
Business and Professions Code 17200 et seq.
Against All Defendants
21. Plaintiff repeats and realleges paragraphs 1 through 20 as if set forth in full.
22. In making and disseminating the misstatements and omissions of material fact as set forth above, defendants were acting in the course of business and their actions were business acts and practices.
23. These business acts of defendants were unfair in that the harm to plaintiff and the market was grave and outweighed any utility such acts may have had, if any.
24. As a result of their unfair business acts, defendants have received ill gotten gains at the expense of plaintiff and the market in amounts to be proven at trial.
25. Unless enjoined by the court, defendants will continue to engage in the unfair acts and practices described above, all at great and irreparable harm to plaintiff and the market.
SECOND CAUSE OF ACTION
Unlawful Business Practices
Business and Professions Code 17200 et seq.
Against All Defendants
26. Plaintiff repeats and realleges paragraphs 1 through 20 as if set forth in full.
27. The actions of the defendants, and each of them as alleged herein, violate California Corporations Code 25401 as the acts of defendants described above amount to the offer or sale of securities by means of written or oral communications containing false statements or omissions of material facts.
28. These unlawful acts of defendants, and each of them, were business acts.
29. As a result of defendants’ unlawful business acts, defendants have received ill gotten gains at the expense of plaintiff and the market in an amount to be proven at trial.
30. Unless and until enjoined by the court, defendants will continue to engage in the above described unlawful business acts, all at great and irreparable harm to plaintiff and the market.
THIRD CAUSE OF ACTION
Deceptive Business Practices
Business and Professions Code 17200 et seq.
Against All Defendants
31. Plaintiff repeats and realleges paragraphs 1 through 20 as if set forth in full.
32. In making the misrepresentations and omissions of material fact alleged above, defendants acted in the course of business and their actions were business acts and practices.
33. Defendants’ statements alleged above were fraudulent under the Unfair Business Practices Act in that they were likely to and did deceive consumers and the market.
34. As a result of their fraudulent business acts and practices, defendants have received ill gotten gains at the expense of plaintiff and the market in an amount to be proven at trial.
35. Unless and until enjoined by the court, defendants will continue to engage in the fraudulent business practices described above, all at great and irreparable harm to plaintiff and the market.
FOURTH CAUSE OF ACTION
Deceit
Civil Code 1710
Against All Defendants
36. Plaintiff repeats and realleges paragraphs 1 through 20 as if set forth in full.
37. Swatman, Howard, and Briggs, acting at the direction of and with the knowledge and consent of Cragun and the other defendants and as the agents for the other defendants and for each other, and each of them, misrepresented and omitted material facts to plaintiff including, but not limited to:
a. The fact that no client had ever lost money in any investments recommended by Carlton or Capital due to a close association and intimate knowledge by Carlton and Capital of the companies being recommended;
b. The fact that funds invested by plaintiff and other private investors would be used to finance the individual defendants’ activities involving criminal behavior, securities fraud, pornography, false corporate disclosures, and illegal business practices;
c. The fact that any return on plaintiffs’ investment would be made from new investors’ funds, i.e., plaintiff was investing in a “pyramid” or “Ponzi” scheme;
d. The fact that little or no market existed for the OTC Companies’ stock; and
e. The fact that insiders at one of the OTC Companies traded their company’s stock on the basis of material, nonpublic information.
38. Defendants misrepresented and omitted these material facts with knowledge of their falsity and with scienter.
39. Defendants intended to defraud plaintiff by misstating and omitting these material facts, i.e., they intended to induce plaintiff’s reliance.
40. Plaintiff justifiably relied upon these misstated and omitted material facts in making his investment decisions.
41. Plaintiff was damaged as a result of his justifiable reliance on defendants’ misstated and omitted material facts in an amount to be proven at trial.
FIFTH CAUSE OF ACTION
Securities Fraud
Corporations Code 25401
Against All Defendants
42. Plaintiff repeats and realleges paragraphs 1 through 20 as if set forth in full.
43. Swatman, Howard and Briggs, acting at the direction of Cragun and with the knowledge and consent of Cragun and the other defendants and as the agents for the other defendants and for each other, and each of them, offered to sell, sold, offered to buy, or bought, securities in this state by means of written or oral communications which included untrue statements of material facts or 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 including, but not limited to:
a. The fact that no client had ever lost money in any investments recommended by Carlton or Capital due to a close association and intimate knowledge by Carlton and Capital of the companies being recommended;
b. The fact that funds invested by plaintiff and other private investors would be used to finance the individual defendants’ activities involving criminal behavior, securities fraud, pornography, false corporate disclosures, and illegal business practices;
c. The fact that any return on plaintiff’s investment would be made from new investors’ funds, i.e., plaintiff was investing in a “pyramid” or “Ponzi” scheme;
d. The fact that little or no market existed for the OTC Companies’ stock; and
e. The fact that insiders at one of the OTC Companies traded their company’s stock on the basis of material, nonpublic information.
44. Defendants misstated and omitted these material facts with knowledge of their falsity and with scienter.
45. Defendants intended to defraud plaintiff by misstating and omitting these material facts, i.e., they intended to induce plaintiff’s reliance.
46. Plaintiff justifiably relied upon these misstated and omitted material facts in making his investment decisions.
47. Plaintiff was damaged as a result of his justifiable reliance on defendants’ misstated and omitted material facts in an amount to be proven at trial.
SIXTH CAUSE OF ACTION
Temporary Restraining Order
and Preliminary and Permanent Injunctions
Civil Code 3422 and Code of Civil Procedure 526, 527
Against All Defendants
48. Plaintiff repeats and realleges paragraph 1 through 20 as if set forth in full.
49. Unless and until the defendants’ wrongful conduct as alleged is enjoined and restrained by order of this court, defendants’ actions will cause great and irreparable harm and injury to plaintiff in that, among other things, the value of plaintiff’s investments will be adversely affected, and defendants will continue their fraudulent, unfair, unlawful, and illegal business practices to the detriment of plaintiff and the market.
50. Plaintiff has no adequate remedy at law in that, unless defendants are enjoined, it will be impossible to determine the precise amount of damages that plaintiff and the market will suffer due to defendants’ fraudulent, unfair, unlawful, and illegal business practices.
SEVENTH CAUSE OF ACTION
Conversion
Against All Defendants
51. Plaintiff repeats and realleges paragraphs 1 through 20 as if set forth in full.
52. Defendants, and each of them, actually, wrongfully, and intentionally interfered with plaintiff’s ownership right to the funds invested by him and with the stock certificates to which he was entitled.
53. Plaintiff made demand on defendants that the funds invested by him be returned, and that the stock certificates be forwarded to him, but defendants have failed and refused to return the funds, or any part of them, or to forward to plaintiff the requested stock certificates.
54. Plaintiff has been damaged as a result of defendants’ interference with plaintiff’s ownership right to the funds invested by him, and the stock certificates, in an amount to be proven at trial.
EIGHTH CAUSE OF ACTION
Conspiracy
Against All Defendants
55. Plaintiff repeats and realleges paragraphs 1 through 20 as if set forth in full.
56. Defendants, and each of them, entered into an agreement among themselves with the intent to commit wrongful acts including, but not limited to, misstating and omitting material facts in order to cause plaintiff to invest funds in the OTC Companies, and others.
57. Defendants, and each of them, aided and abetted the commission of these wrongful acts (a) knowing the other’s conduct constituted a breach of duty and gave substantial assistance or encouragement to so act, or (b) gave substantial assistance to the other in accomplishing a tortious result and defendants’ conduct, separately considered, constituted a breach of duty to plaintiff.
PRAYER FOR RELIEF
WHEREFORE, plaintiff prays for the following relief:
1. With respect to the first, second, third, and sixth causes of action, for such relief as may be just and proper;
2. With respect to the fourth, fifth, seventh, and eighth causes of action, compensatory damages in an amount to be proven, plus interest thereon at the legal rate, plus costs and attorney’s fees;
3. Because the conduct of defendants, and each of them, was intentional, despicable, outrageous, and ongoing, exemplary damages against defendants, and each of them, in an amount sufficient to make an example of them and to deter such conduct in the future;
4. For costs of suit herein; and
5. For such other relief as the court may deem just and proper.
Dated: August 9, 2001 __________________________
James A. Shalvoy
Attorney for Plaintiff Leif Aa. Fredsted
DEMAND FOR JURY TRIAL
Plaintiff demands trial by jury of all issues and causes of action so triable.
Dated: August 9, 2001 __________________________
James A. Shalvoy
Attorney for Plaintiff
Leif Aa. Fredsted |
