Re: 10/17/01 - [IFTA] J Group Holdings et al vs. Bondy & Schloss... Infotopia, Inc. (Part 1 of 2)
SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
J GROUP HOLDINGS, INC., JULIUS
EULBERG, and JANE SCHUB,
Plaintiffs,
vs.
BONDY & SCHLOSS LLP, JEFFREY A. RINDE, GERALD ALAN ADLER,
R&A GROUP HOLDINGS, INC., and INFOTOPIA, INC.,
Defendants.
Hon.
Case No.: 01-605027
VERIFIED COMPLAINT
JURY TRIAL DEMANDED
Plaintiffs J Group Holdings, Inc., Julius Eulberg and Jane Schub, by and through their attorney David A. Browde, for their Complaint respectfully allege as follows:
NATURE OF THE CASE
1. This action arises from the flagrant malpractice and more than twenty-one separate ethical violations committed by two partners of the law firm Bondy & Schloss LLP, who acted in concert with others among their clients to generate and protect their secret profits in a penny stock scam by defrauding and breaching contracts with Plaintiffs, who were also clients of Bondy & Schloss LLP.
2. Bondy & Schloss LLP and the two partners, Gerald Alan Adler ("Adler") and Jeffrey A. Rinde ("Rinde") simultaneously were: (a) attorneys for; (b) creditors of; and (c) shareholders of Plaintiffs, while also serving as (d) attorneys for; e) creditors of ; and, secretly, f) major shareholders of, Defendant Infotopia, Inc. ("Infotopia"), from which they collected over $1 million dollars in legal fees, and to which they forced Plaintiffs to license all their trademarks in exchange for stock which they purposely overvalued. They were also, simultaneously: and (g) attorneys for Altea Investments, Ltd. ("Altea"), itself a lender to and a creditor of both Plaintiff J Group Holdings, Inc. ("J Group") and Infotopia.
3. Though Adler had been a respected legal advisor to the family of Plaintiff Jane Schub ("Schub") for more than a decade, Adler led the Bondy Defendants in a complete betrayal of the family's trust.
4. Defendants Bondy & Schloss LLP, Adler and Rinde (collectively, "the Bondy defendants") caused substantial damages to Plaintiffs through their repeated breaches of the fiduciary and other duties they owed Plaintiffs.
5. In addition to the flagrant conflicts of interest, the Bondy defendants engaged in outrageous self dealing. While ostensibly representing Plaintiffs in this action, they arranged, negotiated, and wrote contracts between Plaintiffs and entities they controlled, as well as between Plaintiffs and other clients they simultaneously represented and in some of which they held secret ownership positions, each of which clients had interests antithetical to Plaintiffs, and each of which the Bondy defendants favored over the interests of Plaintiffs.
6. The Bondy defendants favored their own interests and those their other clients by failing to collect and/or account for hundreds of thousands of dollars due Plaintiffs pursuant to the contracts the Bondy defendants negotiated between Plaintiffs and the other clients.
7. The Bondy defendants further assisted those other clients in violating the contracts, in making personal and so called "toxic convert" loans to Plaintiffs and by engaging in a series of penny stock transactions, some of them unauthorized, in which the Bondy Defendants acted in their own financial interest at the direct expense of Plaintiffs.
8. At the direction of Adler and Rinde, the Bondy Defendants, along with other of their clients, including Infotopia, conspired to develop and then executed a penny stock swindle, causing millions of dollars in losses to Plaintiffs and their fledgling cosmetics venture, crippling J Group, and badly damaging the reputation of both that company and its principals.
9. The Bondy defendants took advantage of the financial distress they had caused Plaintiffs by threatening Plaintiffs, using undue influence, and forcing Plaintiffs into transactions both with other clients of Rinde and Adler, including so-called "death spiral" or "toxic" lenders, at least partly in order to obtain for their own benefit an equity interest in J Group.
10. The Bondy defendants then unilaterally converted the equity interest in they had obtained in J Group into a loan, purportedly from R&A Group Holdings, Inc. ("R&A Group"), a shell corporation Rinde and Adler formed and ran from the offices of the Bondy & Schloss offices.
11. Throughout the course of their representation of Plaintiffs the Bondy Defendants insisted that they exclusively control J Group's corporate accounts, documents, loan agreements, stock certificates and the proceeds of any transactions, asserting that it would both allow them to secure the interests of all the parties and to move with requisite speed.
12. Because Plaintiffs were inexperienced in the type of complex transactions these trusted advisors were proposing, and the Bondy & Schloss firm and Adler were so highly trusted by Plaintiffs, and also because the Bondy defendants insisted that they were the only ones who should, under the circumstances, handle all documents relating to the transactions, Plaintiffs acceded to the Bondy defendants exercising this unusual level of control.
13. Within days of obtaining agreement from J Group to their demanded degree of control, defendants Rinde and Adler began to abuse their positions and violate their fiduciary duties to Plaintiffs, using an insidious combination of threats, misrepresentations and undue influence to convince Plaintiffs to enter into contracts with several of their other clients.
14. These contracts, rather than being in the interest of Plaintiffs, were written and designed by the Bondy defendants to benefit the Bondy & Schloss law firm and Rinde and Adler themselves, who used their shell corporation, R&A Group, to siphon off and park some of their ill gotten gains.
15. The Bondy defendants also designed the contracts to further benefit their other clients, including Infotopia, in which the Bondy defendants owned a then-secret interest, and Altea, at the direct expense of Plaintiffs.
16. When the Bondy defendants obtained possession of 8.5 million shares of Infotopia stock that was sent to them for the account of J Group, pursuant to one contract described herein, the Bondy defendants took and sold the shares in direct and flagrant violation of a specific written authorization and instructions which the Bondy defendants had themselves solicited and prepared for signature by J Group, doing so for their own benefit and the benefit of their other clients, including Altea and R&A Group.
17. Under the written authorization and instructions, the sale of the 8.5 million shares of stock was to yield $612,850. The Bondy defendants, however, claimed the sale proceeds were only $280,383.
18. Despite repeated demands for an accounting of the stock sale, the Bondy defendants for months refused to provide any accounting at all, then produced a single unsigned page, not on law firm letterhead, that showed disbursements only.
19. When told that its single unsigned sheet form of accounting was unacceptable, the Bondy defendants first stalled, then promised to deliver a more detailed accounting. They violated that promise, too.
20. As of the date of this filing, the Bondy defendants have never properly accounted for any of the transactions questioned by Plaintiffs. However, when Plaintiffs, on or about August 13, 2001, demanded an accounting and recompense for the discrepancies, Adler responded with a letter demanding $130,000, which he claimed was overdue in satisfaction of what he characterized as a $100,000 loan to Plaintiffs from R&A Group.
21. When Plaintiffs demanded return of their corporate documents, stock certificates and copies of contracts including loan agreements for which Plaintiffs were purportedly liable, the Bondy defendants also refused, stalled, prevaricated and never produced.
22. When Infotopia defaulted on payments to Plaintiffs due under three contracts negotiated and drafted by the Bondy defendants, J Group launched an investigation, which revealed discrepancies involving hundreds of thousands of dollars and millions of shares of stock.
23. As a result of the Infotopia default, J Group was unable to pay its vendors for badly needed inventory to fill orders for its products.
24. When Plaintiffs' demands for an accounting and payment of the missing money due from Infotopia went unanswered, and when Bondy & Schloss repeatedly refused to turn over critically needed corporate documents, Plaintiffs dismissed the Bondy defendants for cause.
25. After they were terminated for cause as attorneys for Plaintiffs, the Bondy defendants continued to refuse to turn over Plaintiffs' corporate documents, stock certificates, and client files to Plaintiffs' new counsel.
26. Astonishingly, even though every bill they had produced had been paid in full and there was not one dime in any bill outstanding, the Bondy defendants, as their excuse for refusing to turn over client documents and files, asserted an attorney's lien for unpaid legal fees.
27. When shown both that there were no outstanding bills, and further advised that an attorney's lien was inapplicable under circumstances of a termination for cause, and even after being told that litigation was impending and that the files were needed for that purpose, the Bondy defendants still refused to turn over any corporate documents or client files, but again promised an additional accounting at some undisclosed date in the future.
28. The Bondy defendants violated that promise, too, and never produced any such accounting.
29. In the course of their representation of Plaintiffs, the Bondy defendants violated at least 21 separate sections of the Disciplinary Rules of the Code of Professional Responsibility, including making unauthorized transactions, failing to account for client funds, and apparently misappropriating or simply not collecting hundreds of thousands of dollars that should have been paid to Plaintiffs by Bondy & Schloss' other clients. These violations have cost Plaintiffs millions of dollars in lost sales and fees due, as well as hundreds of thousands of dollars in the transactions the Bondy defendants assert they made to dispose of Plaintiffs' 8.5 million shares of Infotopia stock.
30. Despite being notified of the matters leading to this action and warned that their ongoing relationship with Infotopia represented another ethical violation, the Bondy defendants continued to expand their relationship with Infotopia, in flagrant and outrageous violation of the Disciplinary Rules, by filing with the SEC on or about October 3, 2001 documents indicating that they are "General Counsel" to Infotopia, and handle "general corporate and litigation" matters.
31. The Bondy defendants' relationship as General Counsel to Infotopia was never disclosed to Plaintiffs, and until the SEC filing was discovered in a search of records prior to filing this action, the relationship was unknown to Plaintiffs.
JURISDICTION AND VENUE
32. This Court has subject matter jurisdiction over this action as it is the court of general jurisdiction in the State of New York.
33. This Court has personal jurisdiction over each of the defendants under CPLR § 302 (a) 1 - 3.
34. Venue is proper under CPLR §503 (a).
PARTIES
35. Plaintiff J Group Holdings, Inc. is a Delaware Corporation with its principal offices at 9 Mill Street, Putnam Valley, New York.
36. Plaintiff Julius Eulberg is an individual, owning at least 25% percent of J Group (the exact percentage is unknown because the attorney Defendants claim not to have calculated the respective interests of the parties and control all the corporate documents), who serves as President of J Group. He resides at 150 East 39th Street, New York, New York.
37. Plaintiff Jane Schub is an individual, owning at least one third of J Group (the exact percentage is unknown because the attorney Defendants claim not to have calculated the respective interests of the parties and control all the corporate documents) and serving as its Vice President. She resides at 9 Mill Street, Putnam Valley, New York.
38. Defendant Bondy & Schloss LLP is a law firm, with its principal offices at 6 East 43rd Street, Suite 2500, New York, New York.
39. Defendant Gerald Alan Adler is a partner in Bondy & Schloss LLP. Upon information and belief he resides at 420 East 79th St., Apt. 12D, New York, New York.
40. Defendant Jeffrey A. Rinde is a partner in Bondy & Schloss LLP. Upon information and belief he resides at 593 Riverside Dr. Apt. 5F, New York, New York.
41. Defendant R&A Group Holdings, Inc. is a New York Corporation with its principal offices at 6 East 43rd Street, Suite 2500, New York, New York - the address of Bondy & Schloss LLP. Upon information and belief R&A Group is owned and controlled by Defendants Adler and Rinde. Upon information and belief R&A stands for Rinde and Adler. Some papers prepared by the Bondy defendants indicate that Jodie Rinde, Jeffrey A. Rinde's wife, is the president of R&A Group.
42. Upon information and belief, Defendant Infotopia, Inc. is a Nevada Corporation with its principal offices at 3635 Boardman-Canfield Road, Canfield, Ohio.
FACTUAL ALLEGATIONS
THE BONDY BETRAYAL
43. In February, 2000, Plaintiffs sought the legal advice of defendant Gerald Alan Adler, the long time attorney and trusted advisor to the Schub family, regarding financing for a cosmetics venture called "Jules and Jane," a follow-on to the "Bubbe's Best" line of baby products, which Jane Schub had developed. At the time, "Bubbe's Best" was owned by Schub and two partners, Marsha Goldstein and Fran Olmstead, through Bubbe's Best LLC. "Jules & Jane" was owned by Schub and Eulberg through Centerprise LLC.
44. Adler suggested that a new partner in the Bondy & Schloss law firm, Jeffrey Rinde, was the ideal person to assist him in developing a new corporate structure and financing plan, and arranged a meeting. Adler spoke in glowing terms of Rinde's ability to generate huge sums of money for promising emerging companies, and urged that Schub meet with him as soon as possible.
45. On or about March 3, 2000 Schub met with Adler and Rinde at the offices of Bondy & Schloss.
46. Schub showed Rinde voluminous publicity the Bubbe's Best products had already generated and initial press coverage and plans for the Jules & Jane line.
47. Rinde immediately began to structure what he called "a deal," a complex series of legal maneuvers and transactions that he said would lead to an initial public offering, despite the fact the company was a start up without sales or inventory.
48. Rinde stated that Bondy & Schloss would convert both Bubbe's Best LLC and Centerprise LLC into corporations (Bubbe's Best Inc. and Centerprise Inc. respectively) and that he would organize a new corporation, J Group Holdings, Inc., into which all stockholders in Bubbe's Best and Centerprise would contribute their shares, in a tax free exchange for shares in the J Group.
49. Rinde stated that he had clients for whom he had generated "huge returns" who would invest money where he indicated that they should and promised that one of these clients would within eight weeks of March 3, 2000 put up a certificate of deposit in order to secure a $500,000 bank loan to J Group.
50. Rinde said that within a year J Group would pay off the $500,000 loan by borrowing from another of Rinde's clients, securing that loan with a convertible note and becoming a reporting company so that J Group could hold an initial public offering.
51. Rinde further stated that he wanted to personally invest in the venture, through a holding company he would form. Upon information and belief, the company was later formed and named R&A Group Holdings, Inc.
52. Rinde promised to pay off a Bubbe's Best LLC bank loan of approximately $80,000 in exchange for the two-thirds aggregate membership interest in Bubbe's Best LLC belonging to Marsha Goldstein and Fran Olmstead, who had personally guaranteed the $80,000 loan.
53. Rinde promised to make the payment within two weeks, and to deliver documents formalizing the transactions.
54. At that meeting Schub agreed to Rinde's proposals regarding corporate restructuring and his offers regarding loans and other financing.
55. Rinde failed to make timely payment of the $80,000 as promised, costing both additional interest on the bank loan until his late payment and a substantial delay in production of products necessary to fill existing orders.
56. Rinde further failed to deliver the documents formalizing the transactions he had proposed and that he said he had executed, or otherwise demonstrate that they had been formalized or executed, although he caused some unsigned drafts to be circulated.
57. Rinde did file papers with the office of the Secretary of State of Delaware, organizing J Group Holdings, Inc., and, upon information and belief, issuing more than four million shares of stock in the still fledgling company.
58. Upon information and belief, Rinde took 1.53 million of the newly issued shares for his and Adler's benefit, and for the benefit of his R&A Group.
59. To date Rinde and the other Bondy defendants have refused to turn over to the corporation any of its corporate records and stock certificates, despite its repeated demands that they do so.
60. Rinde reneged on his promise to deliver the $500,000 certificate of deposit, stating that, notwithstanding his promise, his clients would not participate in the deal unless Jules & Jane products generated "a few million" dollars in sales, a level Rinde knew was unattainable for the start up operation.
61. On April 17, 2001, Rinde said his R&A Group would loan J Group $100,000, and that a friend of his at Clarins would immediately "dump" $2 million worth of Jules and Jane products into mass market outlets, including Target stores. Schub pointed out that the Jules & Jane products were too expensive to produce for mass market price points and were not suitable for the mass market.
62. After discussion and at Rinde's request, Plaintiffs developed a special mass-market line under the trademark "Skindom" to fill the $2 million order Rinde had said would be coming for the mass market stores.
63. The "friend" at Clarins never materialized, nor did the promised order for $2 million worth of products for the mass-market stores.
64. As a result, there was no money to fund production needed to meet existing orders for the Jules and Jane and Bubbe's Best products. Rinde's failure cost the company substantial sales during the Christmas period, when cosmetics and related products traditionally sell at their highest levels of the year.
65. In the summer of 2000, the Bondy defendants, following the financing plan they had devised, began work on a form 10SB stock registration statement for J Group.
66. Although some drafts of the form 10SB were prepared and circulated for comment, the Bondy defendants, without explanation or agreement from Plaintiffs, failed to complete the document or the financing.
67. In August 2000, the Bondy defendants requested sales projections from J Group's President, Julius Eulberg, based on a test run of ten Jules & Jane products. Eulberg repeatedly told Rinde he was not qualified to make the projections.
68. Nonetheless, Rinde insisted that some numbers be generated, and, acting with Plaintiff's Chief Financial Officer Victor Neary ("Neary") and later with Plaintiff's CPA Tom Kellerman ("Kellerman"), Eulberg and Schub provided their "best guess" of what the line might produce in sales.
69. At the end of December, 2000, with J Group virtually out of cash and at a standstill, Rinde proposed an additional $100,000 loan from another of his clients, Altea Investments, Ltd., a British Virgin Islands based lender or so-called PIPES investor (private investment in public equity) and major creditor of Defendant Infotopia. The loan was secured by a 12% promissory note, convertible into shares of the common stock of Plaintiff J Group.
70. Rinde told Kellerman and Adler, at the time of the Altea loan, that he expected J Group to default on the note. Rinde then negotiated and drafted the loan agreement so that the loan was secured by Schub and Eulberg's shares in J Group, but not the shares held by R&A Group.
71. All of the balance sheets prepared by Neary and Kellerman for Rinde through November 2000 list Rinde as a creditor of Plaintiff in the amount of $100,000, and show the balance of money advanced by Rinde or through R&A Group as an equity investment.
72. However, after the Altea loan closed, Rinde announced that his equity investment "had always been intended" by him as a loan.
73. Under the threat of his not completing paperwork necessary to close the then-essential loan from Altea, Rinde obliged Plaintiff to accept the conversion of all funds advanced by Rinde into a loan.
74. The result of the forced conversion to a loan was that Rinde and Adler, through R&A Group, had taken 1.53 million shares of J Group stock for no new equity investment whatsoever.
75. When the "loan" proceeds were finally received it was too late for the Christmas season. Although they were promptly were used to pay vendors, the product shipments could not be released until late December and early January, a season during which cosmetics products normally sell at low levels.
76. In March 2001, J Group was unable to pay the installment due on the Altea loan.
77. J Group proposed to Adler and Rinde that they seek to restructure the Altea loan to provide for payment of interest only until sales picked up and/or the 10SB registration was filed, giving the company additional financing options.
78. Rinde rejected the suggestion.
THE BONDY DEFENDANTS INTRODUCE INFOTOPIA
79. On March 23, 2001, Rinde announced he had found another client of his, Infotopia, willing to buy J Group for $500,000. Rinde did not disclose that the Bondy defendants served as General Counsel to Infotopia, nor did he disclose that the Bondy defendants were major stockholders of Infotopia, but rather implied that the Bondy firm did securities registration work only for Infotopia.
80. Schub and Eulberg told Rinde they had no intention of selling what they still considered to be a promising business, and said they would prefer to renegotiate with Altea, arguing that Altea should be willing to negotiate, because the J Group products, which represented Altea's security interest, were too specialized to be profitably sold off on a liquidation basis.
81. Rinde said the Infotopia offer was, in essence, a gun held at their heads, and that if Schub and Eulberg refused it, Altea would seize their remaining inventory regardless of its value, as well as the common stock Eulberg and Schub (but not Rinde or Adler) had put up as collateral for the loan. An exchange of emails in which Defendant Rinde repeats these threats is attached to this Complaint as Exhibit A.
82. In the face of Rinde's ultimatum, J Group proposed that Rinde negotiate an exclusive license of the trademarks coupled with two lucrative consulting agreements rather than an outright sale.
83. Rinde accepted the compromise on behalf of Infotopia, but insisted that the first proceeds from the trademark license be paid to Rinde's client Altea to retire its loan.
84. Not until after J Group agreed to the licensing scheme did Rinde reveal that rather than cash, J Group would be paid in Infotopia stock. Rather than informing J Group directly, Rinde and Adler merely prepared a contract in which the payment terms showed the payment would be made in Infotopia common stock.
85. When questioned, Rinde and Adler both insisted being paid with the stock was better than being paid in cash, because in Rinde's words, Infotopia's Chairman was "stock smart" and in Adler's words, J Group would "make a fortune" on the stock.
86. In further effort to persuade J Group to accept the Infotopia deal containing the stock payment, Adler told Schub that Infotopia "never took on products that they couldn't sell at a rate of $20 million per year" and that most of the Infotopia products grossed $50 million per year.
87. Unaware that the Bondy defendants were themselves engaged in massive trading in Infotopia stock and that the Bondy defendants were in the process of arranging a 200-for-1 reverse split of the stock, and believing the Bondy defendants' threats, J Group agreed to the Infotopia deal and the stock payment.
88. Three contracts prepared by the Bondy defendants were then executed by both Plaintiffs and Infotopia at the offices of the Bondy defendants in New York City, on or about March 30, 2001.
THE LICENSE AGREEMENT
89. The principal agreement, known as the License Agreement, granted Infotopia rights to market the "Jules & Jane", "Bubbie's Best" and "Skindom" lines (the "J Group Products").
90. The marketing rights granted Infotopia were exclusive except that Plaintiff was allowed to continue selling to certain outlets which had been served by Plaintiff prior to the License Agreement. These outlets were enumerated by name in a list appended to the License Agreement as Schedule A. The License Agreement is attached to this Complaint as Exhibit B.
91. Upon execution of the License Agreement, Infotopia was required to deliver to J Group "a number of shares of Infotopia's common stock equal in value to $500,000" (the "minimum payment guarantee") and to register the shares with the Securities and Exchange Commission ("SEC"). Upon the effective date of the registration, J Group had a 30 day window in which to sell the shares, at the end of which, if the proceeds of the sale were less than the minimum payment guarantee, Infotopia was required to issue additional shares to J Group to make up the difference, so that in no event would J Group receive less than the $500,000 minimum payment guarantee as long as it sold the shares within 30 days of the registration becoming effective.
92. J Group was allowed to retain any proceeds of the stock sale in excess of the minimum payment guarantee, if it was able to achieve any such amounts.
93. Infotopia was additionally required under the License Agreement to pay J Group a five per cent royalty on the gross revenue it received from sales of the J Group Products, less certain deductions.
94. The License Agreement contained a clause stating that if Infotopia failed to sell $10 million worth of the J Group Products in the calendar year commencing October 1, 2001, and $20 million in the following calendar year, J Group had the option to cancel the License Agreement, unless Infotopia, notwithstanding the sales shortfall, made royalty payments to J Group of $500,000 the first year, and $1 million the second year.
95. The License Agreement, in Paragraph 12 (b), contained language requiring Infotopia, in the event of a perceived breach by J Group "of any material representation, warranty, convent or agreement contained in this Agreement," to provide written notice of the breach. If such notice were provided, J Group was afforded 30 days to cure the breach.
96. Breach of either of the other two contracts, which are discussed below, were also defined grounds for termination by J Group of the License Agreement, an action which would cause all rights granted under the License Agreement to revert to J Group.
THE CONSULTING AGREEMENTS
97. Infotopia contracted individually with both Schub and Eulberg for their consulting services over a five-year period, executing almost identical agreements with each.
98. Under the Consulting Agreements, Eulberg and Schub were to provide consulting services to Infotopia in connection with the marketing of the J Group Products, in exchange for a fee that started at $5000 per month each and escalated through the life of the contract, totaling some $420,000 to each in payments, for a total of $840,000.
99. Under the Consulting Agreements, the payments to Eulberg and Schub were due on the 15th of each month.
100. The Consulting Agreements are attached to this Complaint as Exhibits C and D.
INFOTOPIA IMMEDIATELY RENEGES
101. At signing of the contracts, on or about March 30, 2001, in Bondy & Schloss' New York offices, the president of defendant Infotopia, Ernest Zavoral ("Zavoral") in the presence of Infotopia's Chairman Daniel Hoyng, ("Hoyng") stated that he "had not read" the contracts, and began to demand a series of changes in the rights granted by Plaintiffs to Infotopia.
102. At the insistence of the Bondy defendants, who had negotiated and authored the contracts, Plaintiffs made further concessions, including extension of the time to reach minimum sales levels and expansion of the exclusive territory granted to Infotopia from North America to worldwide. An exchange of emails between Plaintiffs and the attorney Defendants reflecting Plaintiffs' objections to these changes and Defendant Rinde and Adler's response agreeing with Infotopia's position is attached to this Complaint as Exhibit E.
103. After the concessions were granted and the agreements signed, Rinde and Zavoral instructed Eulberg and Schub to work with employees of and consultants to Infotopia by giving advice on the production and marketing plans Infotopia was developing for the J Group products.
104. Infotopia then placed notices that it would market the J Group Products on its corporate site on the Internet's world wide web, and began advising investors and the SEC that it had acquired the worldwide rights to market the J Group Products.
105. Rinde demanded that J Group sell its products to Infotopia at cost, although this depleted Plaintiff's inventory needed to fill orders by Schedule A retail outlets, and although he knew that pending the sale of the promised Infotopia stock, Plaintiffs lacked funds to replenish inventories.
106. Rinde, saying he was acting on behalf of Infotopia, advised J Group on or about April 16, 2001, that within weeks Infotopia would make a "huge" order for inventory, and sell needed inventory to J Group at cost, thereby giving J Group the benefit of the economies of scale Infotopia would enjoy through buying in quantity.
107. Infotopia never ordered inventory, and the action of Rinde and the other Bondy Defendants inducing J Group to empty its warehouse coupled with defendants' failure and refusal to turn over the $500,000 minimum payment guarantee has virtually put J Group out of business due to lack of funds and inventory.
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