Windermere Charged with Financial Elder Abuse—AGAIN.
(At left, former Windermere Coachella agent Faith Messenger, and former Windermere Coachella / SoCal Owners Joseph R. "Bob" Deville and Bob Bennion.)
Windermere Real Estate Coachella Valley, Palm Desert, Portola Agent Faith Messenger, and Windermere Real Estate SoCal, Sued for Breach of Fiduciary Duty, Fraud and Deceit, Negligence, Negligent Misrepresentation, Financial Elder Abuse, Intentional Infliction of Emotional Distress, Negligent Infliction of Emotional Distress and Breach of Contract, in Complaint Alleging:
"It was also not until March 6, 2013, that Messenger first presented Dr. Glancz with the C.A.R. form entitled “Disclosure and Consent for Representation of More Than One Buyer or Seller” for Dr. Glancz’s signature. Thus, the first written disclosure of Messenger's dual agent status, representing both Dr. Glancz and the Buyer did not occur until long after the initial offers had been signed and exchanged and weeks after most of the negotiations, misrepresentations by Messenger and her failures to inform Dr. Glancz had all taken place." and;
"Dr. Glancz is informed and believes that the misrepresentations, concealments, and non-disclosures of Messenger and all other wrongful acts alleged in this complaint were carried out within the course and scope of her duty as an agent for Windermere. Furthermore, Windermere contracted directly with Dr. Glancz and assigned Messenger to work for Dr. Glancz and had a duty and responsibility to oversee Messenger's conduct. As a consequence, Windermere is responsible for Messenger's conduct and is directly liable to Dr. Glancz not only for Windermere's failures, but for Messenger's failures and wrongful conduct under principles of agency and because Messenger's conduct is imputed to Windermere under the doctrine of respondeat superior," and;
"Dr. Glancz is informed and believes and thereon alleges that Defendants’ conduct constituted oppression, fraud, and malice in the commission of financial abuse, and Dr. Glancz is entitled to recover damages for the sake of example and by way of punishing Defendants for financial elder abuse pursuant to California Welfare and Institutions Code section 15657.5 and California Civil Code section 3294."
DOWNLOAD A COMPLETE COPY OF THE COMPLAiNT HERE
FILED JANUARY 23, 2014
SUPERIOR COURT OF CALIFORNIA
COUNTY OF RIVERSIDE, PALM SPRINGS COURTHOUSE
GEORGE GLANCZ, individually, and as Trustee of the Glancz Family Trust U/T/D April 21, 2005,
Plaintiff,
v.
WINDERMERE REAL ESTATE SOCAL, INC., a California corporation; FAITH MESSENGER, an individual,
Defendants
Case. No. PSC 1400430
[Action Filed: _____________ Case Assigned For All
Purposes to Dept. ____, the Hon. _____________________]
COMPLAINT FOR:
1) Breach of Fiduciary Duty
2) Fraud and Deceit;
3) Negligence;
4) Negligent Misrepresentation;
5) Financial Elder Abuse;
6) Intentional Infliction of Emotional Distress;
7) Negligent Infliction of Emotional Distress; and
8) Breach of Contract
Plaintiff GEORGE GLANCZ, individually, and as Trustee of the Glancz Family Trust U/T/D April 21, 2005 (“Plaintiff” or “Dr. Glancz”) alleges as follows:
PRELIMINARY ALLEGATIONS
1. Plaintiff Dr. George Glancz is, and at all times herein mentioned was, an individual residing in the State of California, County of Riverside, City of Palm Desert, and is also the Trustee of the Glancz Family Trust u/d/t April 21, 2005. Dr. Glancz is sixty-nine (69) years old. At all times relevant hereto, Dr. Glancz resided at 21 Avenida Andra, Palm Desert, California, 92211 (hereinafter, the “Property”).
2. Dr. Glancz is informed and believes and thereon alleges that Defendant Windermere Real Estate Socal, Inc. (hereinafter “Windermere”) is a corporation duly incorporated in the State of California with its primary place of business located at 71-691 Highway 111, Rancho Mirage, California. Dr. Glancz is informed and believes and thereon alleges that Windermere is a real estate company that offers brokerage and related services in connection with the purchase and sale of real estate in Riverside County and elsewhere.
3. Dr. Glancz is informed and believes and thereon alleges that Defendant Faith Messenger (hereinafter “Messenger”) is an individual residing in the County of Riverside, State of California. Dr. Glancz is informed and believes that at all times herein mentioned Messenger was and is employed by, or associated with, Windermere in her capacity as a real estate agent licensed by the State of California, and at all times acted as Windermere's representative, employee, and/or agent such that Messenger's conduct at issue herein was and is imputed to Windermere under general principles of agency and employment. Messenger and Windermere are hereinafter sometimes referred to collectively as “Defendants.”
ALLEGATIONS RELEVANT TO ALL CAUSES OF ACTION
4. On or about April 24, 2012, Dr. Glancz, as seller, and Windermere, as broker, entered into a written Residential Listing Agreement dated April 24, 2012 (the “Listing Agreement”). A true and correct copy of the Listing Agreement is attached hereto as Exhibit “1” and incorporated herein. The Listing Agreement granted Windermere the exclusive right to act as the broker for the sale of the Property for a six month term. Dr. Glancz is informed and believes that the parties to the Listing Agreement thereafter executed an extension or extensions to the Listing Agreement continuing Windermere's exclusive right to sell the Property through all relevant times herein mentioned. The Listing Agreement is signed on behalf of Windermere by Defendant Faith Messenger, who acted at all times herein mentioned as Dr. Glancz's real estate agent on behalf of Windermere.
5. The initial listing price for the Property in the Listing Agreement is $2,095,000.00.
6. On or about February 18, 2013, Messenger contacted Dr. Glancz to inform him that she had received an offer for the purchase of the Property from a person named Harold Rothman (“Rothman” or “Buyer”). The offer stated as follows: “The Purchase Price offered is One Million, Five Hundred Fifty Thousand (Dollars $ 1550000.00).” Under Finance Terms, the offer stated, “Initial Deposit: Deposit shall be made in the amount of $52,500.00 ....Balance of Purchase Price or Down Payment: In the amount of $1,497,500.00 to be deposited with Escrow Holder within sufficient time to close escrow.” A true and correct copy of the written California Residential Purchase Agreement and Joint Escrow Instructions dated February 18, 2013, including Counter-Offers One through Six described below, (collectively, the “Purchase Agreement” is attached hereto as Exhibit “2”, and incorporated herein in full by this reference. Dr. Glancz is informed and believes that Messenger represented Rothman as his agent in this transaction at the time the aforementioned offer was conveyed, however, Messenger did not provide written disclosure or seek to obtain written consent from Dr. Glancz for the joint representation at that time.
7. Dr. Glancz is informed and believes that on or about February 20, 2013, Messenger, on behalf of Dr. Glancz, presented a written counter-offer (“Counter-Offer One”) to Rothman which included the following stated terms: “(1) Sale Price $1,900,000; (2) Seller to carry back $450,000 at 5% for 5 year term - no prepayment penalty after the first 2 years; (3) Escrow to be 60 days; (4) Furnished per inventory list; (5) Possible 30-day lease back after COE.” Messenger was informed and was aware that Dr. Glancz, who is nearly seventy (70) years old, desired and would only agree to terms of financing which would allow him to receive the funds from the sale no later than 5 years after the close of escrow as Dr. Glancz had specific plans for the use of the funds as he nears retirement.
8. On or about February 21, 2013, Messenger telephoned Dr. Glancz and informed Dr. Glancz that Rothman had signed another counter offer (“Counter-Offer Two”) which Messenger stated included a purchase price of $1,650,000.00, the Property subject to an appraisal, with seller financing in the amount of $1,050,000.00 at 5% interest, monthly payments only, a sixty-day escrow with a seller lease back for thirty-days. Messenger did not immediately provide Counter-Offer Two to Dr. Glancz, but further informed Dr. Glancz that, aside from these terms she stated, there were no other material changes to the previous terms Dr. Glancz had offered.
9. Messenger failed to inform Dr. Glancz and he was, therefore, unaware that Counter-Offer Two provided for the seller to carry back a note and deed of trust with a fifteen year term, rather than the five year term in counter-offer one. Counter-Offer Two further provided for no prepayment penalty after the first five years. Counter-Offer Two stated as follows: “1. Sale Price to be $1,650,000. 2. Seller to carry $1,050,000.00 (or more) for 15 years at 5% Interest only with no pre-payment penalty after the first 5 years. . 3. Buyer to put down $600,000.00. 4. Property to be subject to appraisal. 5. Escrow to be 60 days with an option for seller to lease back after the COE for additional 30 days. 6. All other terms and conditions in original offer remain.” Messenger was well aware of Dr. Glancz' desires and knew he would not and could not agree to terms of seller financing in which he would receive only interest payments for fifteen years, and thereby not receive the majority of the purchase price or have access to those funds until he was nearly eighty-five (85) years old. Despite that knowledge and the knowledge that the funds could serve Dr. Glancz's intended purposes only if the balance of the purchase price were paid no later than five years after the close of escrow, Messenger either intentionally or negligently, omitted those essential terms from her explanation of the offer to Dr. Glancz.
10. On or about February 21, 2013, relying on Messenger's representations and without knowledge of the actual changed terms of the seller financing provided in Counter-Offer Two, Dr. Glancz signed another counter offer (“Counter-Offer Three”) to be transmitted by Messenger to Rothman, which included the following stated terms: “(1) Sale Price to be $1,725,000 - (2) Seller to carry First Trust Deed of $1,050,000 (or less)(or more) (3) Buyer to put minimum of $600,000 down payment (4) Seller to pay $5,000 after COE for additional 30 days (5) Seller to have attorney draft terms and conditions of First Trust Deed within 17 days of acceptance.” After Dr. Glancz had explained his situation, needs and desires, Messenger had suggested including the language in parenthesis “or more - or less” regarding the amount of the trust deed to allow Dr. Glancz the ability to adjust the amount of the note depending on the funds Dr. Glancz would need. Dr. Glancz had explained to Messenger his need to acquire a replacement home at a cost then unknown to Dr. Glancz, and to assist Dr. Glancz’s son and daughter-in-law who were then expecting the birth of another child and were themselves looking to purchase a new home. At that time, and repeatedly thereafter, Messenger informed Dr. Glancz that this arrangement - in which Dr. Glancz could adjust the respective amounts of the cash due at closing and the amount of seller financing - was acceptable to Rothman because Rothman had more than sufficient immediately available funds to pay whatever final allocation Dr. Glancz decided upon.
11. On or about February 22, 2013, Messenger came to Dr. Glancz's home with another counter offer from Rothman (“Counter-Offer Four”) which Messenger again explained to Dr. Glancz. Messenger informed Dr. Glancz that Counter-Offer Four included the following terms: Dr. Glancz could either (1) accept Counter-Offer Two (i.e., purchase price of $1,650,000.00, seller financing of $1,050,000.00 at 5% interest), with an appraisal contingency on value of $1,725,000.00; or (2) agree to a purchase price of $1,725,000.00, with an appraisal contingency, and the seller carrying back a First Trust Deed at 3.5% interest per annum for the terms negotiated in Counter Offers Two and Three. However, Dr. Glancz understood the terms and conditions of the prior counter-offers to be as explained to him by Messenger and described above (i.e., either option including a five-year note). With that understanding, Dr. Glancz instructed Faith Messenger to prepare another counter offer (“Counter-Offer Five”), which stated as follows: “Seller agrees to sell using either Option #1 or Option #2 as outlined in Counter-Offer Four. Decision will be made after discussion with Accountant by Monday, 2-25-2013 on or before 5:00 p.m.”
12. Messenger later informed Dr. Glancz that Rothman was agreeable to the proposal set forth in Counter-Offer Five. Therefore, Dr. Glancz decided to go with the second option described in the preceding paragraph, as Dr. Glancz understood those terms to be. Messenger prepared a further counter offer (“Counter-Offer Six”) which Dr. Glancz signed on February 26, 2013, and which Messenger was to provide to Rothman. Counter-Offer Six stated, “Seller has chosen Option #2 as described in Counter-Offer #5... Sale price to be $1,725,000.00 with seller carry of First Trust Deed at 3.5% for terms and conditions negotiated in Counter Offers #2 and #3.” Counter-Offer Six further provides that it is revoked if not accepted in writing by the buyer and received by the seller by 5:00 p.m. on the third day after it is made. Consequently, Rothman had until 5:00 p.m. on March 1, 2013, to deliver to Dr. Glancz or Messenger a signed Counter-Offer Six. At the time Dr. Glancz provided Messenger with the signed Counter-Offer Six, Messenger told Dr. Glancz that she believed Rothman would sign all the counter offers and that the sale was essentially a done deal.
13. On February 26, 2013, Dr. Glancz's attorney, Robert Patterson, telephoned Messenger at Windermere to request copies of all the contractual documents so that he could prepare the note and first trust deed. Messenger responded defensively and evasively insisting that the escrow company was “perfectly capable of preparing the note and deed of trust.” Attorney Patterson insisted that Messenger forward him the contractual documents and further informed Messenger that the documents he would prepare would be identical to those normally used for his clients and assured Messenger that he had no intention of making the transaction any more difficult than necessary. Although Messenger remained defensive, she agreed to have all offers and counter offers forwarded to Mr. Patterson shortly. That morning, Dr. Glancz' attorney, Patterson, sent Messenger an email confirming his request that Messenger fax or email him the offers and counter offers for the sale of Dr. Glancz's home and confirming that he would then draft a standard note and deed of trust, a true and correct copy of which email is attached hereto as Exhibit “3”.
14. On February 27, 2013, Messenger emailed Dr. Glancz falsely telling him that “[w]e have a fully executed agreement...” A true and correct copy of the February 27 email is attached hereto as Exhibit “4”.
15. Despite Messenger's promise to attorney Patterson on February 26th that she would forward all the contractual documents to him shortly, more than a week later no documents had been forwarded. Consequently, on Wednesday, March 6, 2013, attorney Patterson again emailed Messenger asking her to send him all the documents concerning the sale of the Property and requesting that she confirm receipt of the email. At 9:57 a.m., Messenger responded by email confirming that she did receive Patterson's email and stating that: “I waited until we passed a challenge.” Messenger did not explain what “challenge” she referred to. Messenger further wrote that she was on jury duty but would have her assistant email him the documents “before the end of the week.” Patterson responded by email at 10:00 a.m. “Thank you ...the sooner the better.” A true and correct copy of the email string between Messenger and Patterson of March 6, 2013, is attached hereto as Exhibit “5”.
16. It was also not until March 6, 2013, that Messenger first presented Dr. Glancz with the C.A.R. form entitled “Disclosure and Consent for Representation of More Than One Buyer or Seller” for Dr. Glancz’s signature. Thus, the first written disclosure of Messenger's dual agent status, representing both Dr. Glancz and the Buyer did not occur until long after the initial offers had been signed and exchanged and weeks after most of the negotiations, misrepresentations by Messenger and her failures to inform Dr. Glancz had all taken place.
17. Messenger was aware that Dr. Glancz had planned a trip to Hawaii starting on March 8, 2013. Consequently, on March 7, 2013, Messenger brought to Dr. Glancz's home two documents which she told Dr. Glancz were the supplemental escrow instructions (collectively, the “Escrow Instructions”) for the escrow for the sale of the Property to be opened with Foresite Escrow. At that time, Messenger told Dr. Glancz that because Rothman had signed all the papers, Dr. Glancz needed to sign the escrow documents before he left on his trip. At that time, Messenger stated to Dr. Glancz that the Escrow Instructions were the customary instructions that mirrored the terms of the Purchase Agreement and were necessary for Foresite Escrow to carry out those terms and bring the transaction to a close. Messenger further told Dr. Glancz that to the extent, if any, there were any conflicts between the Escrow Instructions and the Purchase Agreement, the Purchase Agreement would control. Based on these representations, and under the belief that a contract with Rothman already existed, Dr. Glancz signed and initialed the Escrow Instructions where Messenger indicated. A true and correct copy of the Escrow Instructions is attached hereto as Exhibit “6”.
18. While Dr. Glancz was in Hawaii, he contacted Faith Messenger and inquired regarding the status of the sale. It was only at this point that Messenger told him there was “a problem” and that the buyer was now “having second thoughts” about purchasing the Property. However, shortly after Dr. Glancz's return from Hawaii, Messenger told him everything was “now okay with the buyer,” or words to that effect. At no time during this conversation did Messenger state to Dr. Glancz that Rothman had not signed the offers and counter offers.
19. Despite Messenger's promise to attorney Patterson on March 6th that she would forward the contractual documents to him “before the end of the week,” it was only at 4:07 p.m., on Monday, March 11, 2013, that Patterson finally received an email from Jacklyn Chaney at Windermere attaching copies of the C.A.R. form Purchase and Sale Agreement and Counter-Offers 1-5. A true and correct copy of Ms. Chaney's email of March 11th (without attachments) is attached hereto as Exhibit "7". Ms. Chaney's email did not include or otherwise reference Counter-Offer Six, signed by Dr. Glancz on February 26, 2013, and purportedly signed by Rothman, according to Messenger, no later than February 27, 2013.
20. Contrary to Messenger's representation to Dr. Glancz on February 27, 2013, that the parties had a "fully executed agreement," Counter Offers One through Five attached to Ms. Chaney's email of March 11, 2013, show that there was not a “fully executed agreement” between Dr. Glancz and Rothman on that date. Instead, the counter offers show that they were not signed by Rothman until March 11th. Further, when Windermere finally produced a copy of Counter Offer Six, the document showed that it had not been signed by Rothman until March 14, 2013.
21. Because the offer and counter offers forwarded to attorney Patterson were extremely convoluted and did not show which of the two “options” constituted the parties supposed agreement, Patterson prepared drafts of the note and deed of trust based upon the terms communicated to him by Dr. Glancz; specifically, that purchase price was to be $1,725,000.00, the seller to take back a note for $1 million, with interest payments only at 3.5% for five (5) years, at which time the entire principal would become due, a prepayment Penalty for early repayment, and that the seller could require prepayment at any time without penalty.
Events Leading to the Buyer's Lawsuit Against Dr. Glancz
22. On or about March 20, 2013, attorney Patterson forwarded drafts of the note and deed of trust to Messenger at Windermere so that she could forward them to Rothman and/or his attorney for review. On March 22, 2013, Messenger sent an email to attorney Patterson attaching an email from Alex Yoffe, counsel for Rothman. In his March 21, 2013 email to Messenger, Mr. Yoffe states that based on his review of the Note, “there are significant issues, which substantially change the agreement for the purchase of the property.” He then notes that “unless changed,” several items are “absolute deal breakers.” Specifically, Mr. Yoffe wrote: “(1) the Note should be 15 years (not 5 years); (2) The Note should be an interest only note for the entire 15 years, with principal repaid at the end of the 15 years, unless [the] Purchaser chooses to pay early; (3) (the] Note should be for 3.5% for the 15 year term; (4) the prepayment penalty only applies, if the Note is prepaid in the first 5 years; (5) [the] Seller cannot draw down, or call the note at any time during the 15 years, unless there is a default; and (6) default shall require written notice, and at least a two week cure period after notice is received.” A true and correct copy of the March 22, 2013, email from Messenger, forwarding Mr. Yoffe's email of March 21, 2013, is attached hereto as Exhibit "8". Subsequent informal attempts to resolve the dispute were not successful.
23. On March 29, 2013, Rothman, Zachary P. Rothman, and the Harold B. Rothman Revocable Trust filed a lawsuit against Dr. Glancz in the Riverside County Superior Court as Case Number INC 1302067, captioned as “Complaint for Recording of a Notice of Pendency of Action for Damages for Breach of Contract, Negligent Misrepresentation, Fraud, and Specific Performance,” a true and correct copy which is attached hereto as Exhibit “9”. Dr. Glancz subsequently filed an answer to the complaint denying the allegations and setting forth numerous applicable affirmative defenses.
24. On or about April 2, 2013, attorney Yoffe served a copy of the Notice of Pendency Action recorded in connection with the lawsuit, a true and correct copy of which is attached hereto as Exhibit “10”. The Notice of Pendency of Action clouded title to Dr. Glancz's property rendering it impossible for him to sell the Property.
25. Rothman's lawsuit was based, not on the Purchase Agreement, but on the signed Escrow Instructions which Rothman alleged formed a binding contract between the parties, even in the absence of a separate purchase agreement. However, Dr. Glancz would never have signed the escrow instructions unless he had been under the mistaken belief that a contract already existed between the parties (i.e., the Purchase Agreement), that the Escrow Instructions accurately reflected the terms of the Purchase Agreement, as those terms were described to Dr. Glancz by Messenger, and that Dr. Glancz was required to sign the Escrow Instructions under the terms of the Purchase Agreement. Accordingly, Dr. Glancz was fraudulently induced to execute the Escrow Instructions by Messenger's misrepresentations, concealments, and/or breaches of fiduciary duty, as described herein.
26. In order to resolve the dispute and remove the Notice of Pendency of Action clouding title to Dr. Glancz's Property, Dr. Glancz and Rothman entered into a settlement in which Dr. Glancz was forced to accept a lower purchase price for the Property of $1,590,000.00, and to incur related costs, including but not limited to, significant legal fees, all as a result of the misrepresentations, concealments, negligence, and breaches of fiduciary duties on the part of Windermere and Messenger.
27. Subsequent communications between counsel for Rothman and Plaintiff's counsel revealed other and additional representations which Messenger, purporting to act on behalf of Dr. Glancz, had made to Rothman in the course of the negotiation and execution of the Purchase Agreement that were in direct contradiction to the desires and instructions of Dr. Glancz, such as the inclusion of various fixtures within the sale, which ultimately lead to additional conflict and dispute between Dr. Glancz and Rothman and which forced Dr. Glancz to incur additional related costs to settle the disputes with Rothman caused by Defendants.
28. Pursuant to a separate agreement with Dr. Glancz, Defendants have waived any commission or compensation which would have been due Defendants under the Listing Agreement upon sale of the Property and have thereby resolved the dispute regarding the obligation to pay compensation under the Listing Agreement and the total damages suffered by Dr. Glancz have thus been reduced by $62,940.00.
FIRST CAUSE OF ACTION
(For Breach of Fiduciary Duty Against All Defendants.)
29. Dr. Glancz realleges and incorporates by reference the allegations of Paragraphs I through 28, inclusive as though fully set forth herein.
30. Dr. Glancz alleges that there existed a fiduciary duty and/or relationship of trust and confidence (hereinafter “fiduciary duty”) between Dr. Glancz and Defendants arising out of their relationship and Defendants' role as Dr. Glancz's broker and real estate agent in connection with the sale of the Property and, therefore, in connection with the exchange of the offers and counter offers between Dr. Glancz and Rothman, as described above. The agency relationship in the real estate context existing between Dr. Glancz and Defendants was a strict fiduciary relationship that required Defendants to act in Dr. Glancz's best interests at all times.
31. Despite the misrepresentations and concealments by Defendants described above, and despite the fact that discovery of the full extent of Defendants’ wrongful acts are not fully known and discovery has yet to commence, Dr. Glancz is informed and believes and thereon alleges that Defendants, and each of them, breached their fiduciary duty to Dr. Glancz and took advantage of Dr. Glancz's dependence and trust, engaged in acts of self-dealing and self-profit desiring a “binding” contract between Dr. Glancz and Rothman by any means available so as to secure a double commission, and ignoring the best interests of Dr. Glancz, the various actions constituting breaches include, but are not limited to, the following:
A. Misrepresenting and concealing material terms of Rothman's counteroffers to Dr. Glancz, knowing and that Dr. Glancz relied on Defendants to fully, accurately, and faithfully describe the terms of the counter offers to Dr. Glancz, as further described below;
B. Misrepresenting and concealing from Dr. Glancz that Rothman's counteroffers included seller financing by means of a promissory note and deed of trust with no payment of principal for fifteen years, as opposed to the five years Defendants knew Dr. Glancz understood as being offered and which Defendants knew Dr. Glancz required given his disclosed age and his needs in retirement;
C. Misrepresenting and concealing from Dr. Glancz that Rothman's counteroffers did not allow the prepayment penalty intended by Dr. Glancz;
D. Misrepresenting to Dr. Glancz on February 27, 2013, that the parties had a “fully executed agreement” while concealing from Dr. Glancz that Rothman had not then signed the Purchase Agreement, including all counter-offers thereto;
E. Misrepresenting to Dr. Glancz that the Escrow Instructions contained no terms different from those represented to Dr. Glancz by Defendants;
F. Falsely and fraudulently misrepresenting to Dr. Glancz that Dr. Glancz's signature on the Escrow Instructions was a mere formality required by the Purchase Agreement, which Purchase Agreement did not in fact exist, thereby fraudulently inducing Dr. Glancz into signing the Escrow Instructions when Dr. Glancz had no intention of entering into a separate contract at the time he signed the Escrow Instructions;
G. Falsely and fraudulently stating to Dr. Glancz that in the event there was a conflict between the Purchase Agreement, which did not yet exist, and the Escrow Instructions that the terms of the Purchase Agreement (as Defendants knew Dr. Glancz understood them to be) would control.
H. Initially refusing and then delaying the provision of the Purchase Agreement documents to counsel for Dr. Glancz in furtherance of concealing the fact that the Purchase Agreement was not, in fact, executed at the time Messenger indicated it was complete.
1. Failing to timely provide written notice and obtain written approval of the joint representation by Defendants of Dr. Glancz and Rothman in the sales transaction at issue.
32. Dr. Glancz is informed and believes that the misrepresentations, concealments, and non-disclosures of Messenger and all other wrongful acts alleged in this complaint were carried out within the course and scope of her duty as an agent for Windermere. Furthermore, Windermere contracted directly with Dr. Glancz and assigned Messenger to work for Dr. Glancz and had a duty and responsibility to oversee Messenger's conduct. As a consequence, Windermere is responsible for Messenger's conduct and is directly liable to Dr. Glancz not only for Windermere's failures, but for Messenger's failures and wrongful conduct under principles of agency and because Messenger's conduct is imputed to Windermere under the doctrine of respondeat superior.
33. Dr. Glancz is informed and believes that as a direct and proximate result of the breaches of fiduciary duty and the unlawful conduct of Defendants, Dr. Glancz is entitled to recover all compensable damages under the law in an amount to be determined at trial, including, but not limited to, the difference between the purchase price stated in the Purchase Agreement, $1,725,000.00, and the amount Dr. Glancz was forced to accept to settle Rothman's lawsuit, $1,590,000.00, as well as the lost interest, tax benefits, attorney's fees and costs incurred by Dr. Glancz in defending against and settling Rothman's claims in an amount to be determined according to proof at trial.
34. Dr. Glancz is informed and believes and thereon alleges that pursuant to Civil Code section 3345, Dr. Glancz is entitled to recover three times the amount of damages otherwise recoverable against Defendants, and each of them.
35. Dr. Glancz is further informed and believes and thereon alleges that the aforementioned conduct of Defendants were intentional acts and failures to disclose and breaches of fiduciary duty made with the intention on the part of Defendants of depriving Dr. Glancz of property or legal rights or otherwise causing injury and was despicable conduct that subjected Dr. Glancz to cruel and unjust hardship, in conscious disregard of Dr. Glancz's rights, so as to justify an award of exemplary and punitive damages in an amount according to proof.
SECOND CAUSE OF ACTION
(Fraud and Deceit Against All Defendants)
36. Dr. Glancz realleges and incorporates by reference the allegations of Paragraphs 1 through 35, inclusive as though fully set forth herein.
37. Dr. Glancz alleges that at the times herein mentioned with respect to the representations and non-disclosures alleged herein, Defendants committed such acts and made such representations, engaged in non-disclosures and attempted to conceal her misrepresentations and non-disclosures while obligated by law to disclose the true facts kept from Dr. Glancz, with the intent to deceive Dr. Glancz in direct violation of Defendants' representations to the contrary and the duties existing to Dr. Glancz by Defendants under the Listing Agreement and by law, as alleged herein.
38. Dr. Glancz is informed and believes and thereon alleges that when Messenger made misrepresentations alleged herein and failed to disclose and concealed the true terms of the counter-offers for the purchase of the Property as well as the fact that there was no contract in effect at the time Messenger coerced Dr. Glancz to execute the escrow instructions, such conduct resulted in reliance by Dr. Glancz thereon and at a time Messenger knew them to be false and were made at the time to deceive and defraud Dr. Glancz and to induce Dr. Glancz to act in reliance on that conduct in the manner herein alleged.
39. Dr. Glancz is informed and believes and thereon alleges that at the time of these misrepresentations, deceit, non-disclosures and concealment, Dr. Glancz was ignorant of the falsity of Messenger's representations and believed them to be true and had no reason not to believe in the trustworthiness and honesty of Messenger. In reasonable reliance on the representations of Messenger and the professed and required good faith obligation of Messenger, Dr. Glancz was induced to and did employ Defendants and otherwise allow Defendants to occupy the positions they held and to undertake the duties and services to be rendered on behalf of Dr. Glancz as herein alleged. Had Dr. Glancz known the true facts, Dr. Glancz would not have allowed such action to occur. Dr. Glancz's reliance on Messenger's representations was justified and reasonable under the circumstances given when, how, and by whom they were made.
40. Dr. Glancz is informed and believes that the misrepresentations, concealments, and non-disclosures of Messenger and all other wrongful acts alleged in this complaint were carried out within the course and scope of her duty as an agent for Windermere. Furthermore, Windermere contracted directly with Dr. Glancz and assigned Messenger to work for Dr. Glancz and had a duty and responsibility to oversee Messenger's conduct. As a consequence, Windermere is responsible for Messenger's conduct and is directly liable to Dr. Glancz not only for Windermere's failures, but for Messenger's failures and wrongful conduct under principles of agency and because Messenger's conduct is imputed to Windermere under the doctrine of respondeat superior.
41. Dr. Glancz is informed and believes that as a direct and proximate result of the fraud and deceit of Defendants, Dr. Glancz is entitled to recover all compensable damages under the law in an amount to be determined at trial, including, but not limited to the difference between the purchase price stated in the Purchase Agreement, $1,725,000.00, and the amount Dr. Glancz was forced to accept to settle Rothman's lawsuit, $1,590,000.00, as well as the lost interest, tax benefits, attorney's fees and costs incurred by Dr. Glancz in defending against and settling Rothman's claims in an amount to be determined according to proof at trial.
42. Dr. Glancz is informed and believes and thereon alleges that pursuant to Civil Code section 3345, Dr. Glancz is entitled to recover three times the amount of damages otherwise recoverable against Defendants, and each of them.
43. Dr. Glancz is further informed and believes and thereon alleges that the aforementioned conduct of Defendants were intentional acts and failures to disclose constituting fraud and/or deceit made with the intention on the part of Defendants of depriving Dr. Glancz of property or legal rights or otherwise causing injury and was despicable conduct that subjected Dr. Glancz to cruel and unjust hardship, in conscious disregard on Dr. Glancz's rights, so as to justify an award of exemplary and punitive damages in an amount according to proof.
THIRD CAUSE OF ACTION
(For Negligence Against All Defendants.)
44. Dr. Glancz realleges and incorporates by reference the allegations of Paragraphs I through 35 and 37 through 43, inclusive as though fully set forth herein.
45. As the duly hired broker and agent for Dr. Glancz in the attempted sale of his home, Defendants and each of them owed a duty to Dr. Glancz to exercise the caution and care of a reasonable residential real estate broker/agent in all efforts to list and sell the Property.
46. In performing the acts alleged herein and engaging in the conduct described herein and, inter alia, failing to make all the proper disclosures, failing to inform and explain to Dr. Glancz all relevant terms of the counter-offers, and failing to keep Dr. Glancz apprised of the actual status of execution of the Purchase Agreement, Defendants and each of them failed to exercise the care and caution expected of a reasonable residential real estate broker/agent.
47. As a direct and proximate result of Defendants' negligence as described herein above, Dr. Glancz has incurred damages, losses, costs and fees in an amount to be determined at trial, including, but not limited to the difference between the purchase price stated in the Purchase Agreement, $1,725,000.00, and the amount Dr. Glancz was forced to accept to settle Rothman's lawsuit, $1,590,000.00, as well as the lost interest, tax benefits, attorney's fees and costs incurred by Dr. Glancz in defending against and settling Rothman's claims in an amount to be determined according to proof at trial.
FOURTH CAUSE OF ACTION
(For Negligent Misrepresentation Against All Defendants.)
48. Dr. Glancz realleges and incorporates by reference the allegations of Paragraphs 1 through 28, 37 through 43, and 45 through 47, inclusive as though fully set forth herein.
49. Dr. Glancz is informed and believes and thereon alleges that the misrepresentations and concealments of Defendants as set forth herein, if not intentional, were negligent in that Defendants had no reasonable ground for believing them to be true or believing that they were not required to disclose the actual facts to Dr. Glancz, and were carried out with reckless disregard for their accuracy and for the well-being of Dr. Glancz.
50. Defendants made these representations and concealments with the intention of inducing Dr. Glancz to act in reliance thereon in the manner herein alleged, or with the expectation that Dr. Glancz would do so.
51. Dr. Glancz is informed and believes that the misrepresentations, concealments, and non-disclosures of Messenger and all other wrongful acts alleged in this complaint were carried out within the course and scope of her duty as an agent for Windermere. Furthermore, Windermere contracted directly with Dr. Glancz and assigned Messenger to work for Dr. Glancz and had a duty and responsibility to oversee Messenger's conduct. As a consequence, Windermere is responsible for Messenger's conduct and is directly liable to Dr. Glancz not only for Windermere's failures, but for Messenger's failures and wrongful conduct under principles of agency and because Messenger's conduct is imputed to Windermere under the doctrine of respondeat superior.
52. Dr. Glancz is informed and believes that as a direct and proximate result of Defendants' negligence, and as a consequence of the fiduciary relationship between the parties, Dr. Glancz is entitled to recover all compensable damages under the law in an amount to be determined at trial, including, but not limited to, the difference between the purchase price stated in the Purchase Agreement, $1,725,000.00, and the amount Dr. Glancz was forced to accept to settle Rothman's lawsuit, $1,590,000.00, as well as the lost interest, tax benefits, attorney's fees and costs incurred by Dr. Glancz in defending against and settling Rothman's claims in an amount to be determined according to proof at trial.
53. Dr. Glancz is informed and believes and thereon alleges that pursuant to Civil Code section 3345, Dr. Glancz is entitled to recover three times the amount of damages otherwise recoverable against Defendants, and each of them.
FIFTH CAUSE OF ACTION
(For Financial Elder Abuse Against All Defendants.)
54. Dr. Glancz realleges and incorporates by reference the allegations of Paragraphs 1 through 28, 36 through 43, and 45 through 47, inclusive as though fully set forth herein.
55. Dr. Glancz is and at all times herein mentioned was a resident of California and an elder within the meaning of California Welfare and Institutions Code section 15610.27.
56. Dr. Glancz is informed and believes and thereon alleges that Defendants, and each of them, acted wrongfully and illegally by taking advantage of Dr. Glancz's age and physical condition, his dependence on, and trust and confidence in, Defendants to take, procure, or otherwise obtain control and/or a claim on assets of Dr. Glancz in the form of proceeds from the sale of Dr. Glancz’s residence rightfully belonging to Dr. Glancz by means of the false and fraudulent misrepresentations, concealments, non-disclosures, and other wrongful conduct herein alleged, for Defendants' own benefit in a manner completely contrary to the interests of Dr. Glancz and in violation of Defendants’ fiduciary duty to Dr. Glancz.
57. Dr. Glancz is informed and believes and thereon alleges that Defendants had obtained or sought to obtain the use and benefit of Dr. Glancz’s property in the form of proceeds from the sale of Dr. Glancz's residence, and had otherwise deprived Dr. Glancz of the use of his property, with the intent to defraud Dr. Glancz within the meaning of California Welfare and Institutions Code section 15610.30.
58. Dr. Glancz is informed and believes and thereon alleges that as a direct and proximate result of Defendants' wrongful conduct, Dr. Glancz has sustained damages in an amount according to proof at the time of trial.
59. Dr. Glancz is informed and believes and thereon alleges that in addition to all other remedies provided by law, Dr. Glancz is entitled to recover reasonable attorney’s fees and costs for financial abuse pursuant to California Welfare and Institutions Code section 15657.5.
60. Dr. Glancz is informed and believes and thereon alleges that Defendants’ conduct constituted oppression, fraud, and malice in the commission of financial abuse, and Dr. Glancz is entitled to recover damages for the sake of example and by way of punishing Defendants for financial elder abuse pursuant to California Welfare and Institutions Code section 15657.5 and California Civil Code section 3294.
61. Dr. Glancz is informed and believes and thereon alleges that pursuant to Civil Code section 3345, Dr. Glancz is entitled to recover three times the amount of damages otherwise recoverable against Defendants, and each of them.
SIXTH CAUSE OF ACTION
(For Intentional Infliction of Emotional Distress Against All Defendants.)
62. Dr. Glancz realleges and incorporates by reference the allegations of Paragraphs 1 through 35, 36 through 43, 45 through 47, 49 through 53, and 55 through 61, inclusive as though fully set forth herein.
63. Dr. Glancz is informed and believes and thereon alleges that based on the allegations that Defendants willfully and maliciously and knowingly engaged in in the actions set forth herein with a conscious design to deprive Dr. Glancz of his rights.
64. Dr. Glancz is informed and believes and thereon alleges that Defendants' conduct was intentional, malicious, unprivileged, outrageous and done for the purpose of causing Dr. Glancz to suffer humiliation, anguish and emotional and physical distress. Defendants' conduct as alleged herein, was done with knowledge that Dr. Glancz would suffer mental anguish and emotional and physical distress and Defendants’ conduct was wanton and reckless disregard for the consequences of said actions to Dr. Glancz.
65. Dr. Glancz is informed and believes and thereon alleges as a direct and proximate result of the actions of Defendants alleged herein, Dr. Glancz has suffered humiliation, mental anguish and emotional and physical injuries, and Dr. Glancz has suffered loss of sleep, severe tension, profound shock and anxiety, all to Dr. Glancz’s damage in an amount according to proof, at the time of trial.
66. Dr. Glancz is informed and believes and thereon alleges in performing the acts herein alleged, Defendants acted fraudulently, maliciously, and oppressively, within the meaning of Civil Code section 3294, thereby justifying an award of punitive damages in an amount according to proof.
67. Dr. Glancz is informed and believes and thereon alleges that pursuant to Civil Code section 3345, Dr. Glancz is entitled to recover three times the amount of damages otherwise recoverable against Defendants, and each of them,
SEVENTH CAUSE OF ACTION
(For Negligent Infliction of Emotional Distress Against All Defendants.)
68. Dr. Glancz realleges and incorporates by reference the allegations of Paragraphs 1 through 35, 37 through 43, 45 through 47, 49 through 52, 54 through 62, and 63 through 67, inclusive as though fully set forth herein.
69. Dr. Glancz is informed and believes and thereon alleges that the conduct of Defendants alleged herein, if not intentional, was negligent on the part of Defendants and was reckless and without due regard for the health and welfare of Dr. Glancz.
70. Dr. Glancz is informed and believes and thereon alleges that Defendants had a duty of care towards Dr. Glancz in light of Defendants' fiduciary duties to Dr, Glancz, as Dr. Glancz’s agent and representative, and due to the trust and confidence Dr. Glancz placed in Defendants. Said duties were breached as a result of the conduct herein alleged, which had continued through Defendants’ unjustified claim and demand on proceeds from the sale of Dr. Glancz's residence.
71. Dr. Glancz is informed and believes and thereon alleges that in their handling of the transaction at issue, Defendants acted negligently, carelessly, and without justification and in carrying out the acts herein alleged have intended to deprive Dr. Glancz of his rights and property. Defendants knew or should have known that Dr. Glancz would suffer severe emotional distress as a direct and proximate result of Defendants' conduct.
72. Dr. Glancz is informed and believes and thereon alleges as a direct and proximate result of the actions of Defendants alleged herein, Dr. Glancz has suffered humiliation, mental anguish and emotional and physical injuries, and Dr. Glancz has suffered loss of sleep, severe tension, profound shock and anxiety, all to Dr. Glancz's damage in an amount according to proof, at the time of trial.
73. Dr. Glancz is informed and believes and thereon alleges that pursuant to Civil Code section 3345, Dr. Glancz is entitled to recover three times the amount of damages otherwise recoverable against Defendants, and each of them.
EIGHTH CAUSE OF ACTION
(For Breach of Contract Against All Defendants.)
74. Dr. Glancz realleges and incorporates by reference the allegations of Paragraphs 1 through 35, 36 through 43, 45 through 47, 49 through 53, 55 through 61, 63 through 67, and 69 through 73, inclusive as though fully set forth herein.
75. Dr. Glancz and Defendants entered into a valid and enforceable contract when the parties executed the Listing Agreement for the Property whereby Defendants agreed to exercise reasonable effort and due diligence to achieve the purposes of the agreement and to confirm the agency relationship existing between Defendants and the parties, in writing, prior to or concurrent with Dr. Glancz’ execution of a purchase agreement and Dr. Glancz agreed to compensate Defendants with a percentage of the purchase price in the event that a buyer was procured during the listing period and Defendants otherwise complied with the contract.
76. Dr. Glancz is informed and believes and thereon alleges that Defendants breached the contract by failing to exercise the due diligence required to achieve the purposes of obtaining a buyer for the property on terms agreeable to Dr. Glancz, but instead, worked to obtain a buyer on terms that were knowingly disagreeable to Dr. Glancz thereby exerting efforts contrary to the purposes of the Listing Agreement and failed to confirm the agency relationship existing between Defendants and the parties in writing prior to Dr. Glancz' execution of the Purchase Agreement.
77. The Listing Agreement between Dr. Glancz and Defendants additionally contains an implied covenant of good faith and fair dealing. The implied covenant of good faith and fair dealing prohibits Defendants from engaging in any conduct that interferes with Dr. Glancz's ability to perform under the Listing Agreement or under any contract or prospective contract Dr. Glancz might enter into with a prospective purchaser of the Property, or otherwise denies Dr. Glancz the benefits of such contract with a prospective purchaser of the Property, which contract is expressly contemplated in the Listing Agreement.
78. Dr. Glancz is informed and believes and thereon alleges that Defendants’ efforts to push through an agreement with Rothman as a buyer on terms that were not in accord with what Defendants knew to be the desires of Dr. Glancz and Defendants’ failures to notify Dr. Glancz in writing of the dual agency relationship constitute direct breaches of the Listing Agreement and further constitute a breach of the implied covenant of good faith and fair dealing. Defendants’ further efforts to conceal Messenger’s true motives and to further conceal her deception constitute additional breaches of the covenant of good faith and fair dealing in force under the Listing Agreement.
79. As a direct and proximate result of Defendants’ breaches as herein alleged, Dr. Glancz has been denied the benefits of the Listing Agreement in that Dr. Glancz has been subjected to potential liability arising from the purported agreement between Dr. Glancz and Rothman, and has further sustained damages in the form of having to accept a lower purchase price for the Property and under less favorable terms than Dr. Glancz was led to believe he had reached and which he would otherwise have received but for the breaches of Defendant herein alleged. Dr. Glancz has sustained further damages by being required to incur significant legal expenses to defend against and settle the various claims of Rothman. The full extent of damages sustained by Dr. Glancz as a result of Defendants' breaches have not yet been ascertained, but are believed to be well in excess of this Court's jurisdictional minimum of $25,000.00.
80. Dr. Glancz requests an award of damages, costs of suit, and attorney fees that he is entitled to recover on this claim as provided by the parties' Listing Agreement.
WHEREFORE, Dr. Glancz prays for Judgment as follows:
On the First, Second, Fifth and Sixth Causes of Action:
1. For general and compensatory damages in the sum of not less than $800,000.00 according to proof;
2. For special damages for losses incurred by Dr. Glancz in connection with the sale of Dr. Glancz's residence and resolution of disputes with Rothman;
3. For all costs of suit including Dr. Glancz’s attorney's fees pursuant to Welfare and Institutions Code section 15657.5, according to proof;
4. For exemplary and/or punitive damages in an amount appropriate to punish Defendants, and each of them, and to deter Defendants and others from engaging in similar conduct, according to proof;
5. For treble damages pursuant to Civil Code section 3345.
On the Third, Fourth, Seventh and Eighth Causes of Action:
1 . For general and compensatory damages in the sum of not less than $800,000.00 according to proof;
2. For special damages for losses incurred by Dr. Glancz in connection with the sale of Dr. Glancz’s residence and resolution of disputes with Rothman;
3. For all costs of suit including Dr. Glancz's attorney's fees pursuant to Welfare and Institutions Code section 15657.5, according to proof;
4. For treble damages pursuant to Civil Code section 3345.
Dated: 1-22, 2013 Respectfully submitted,
SLOVAK BARON ENTEY MURPHY & PINKNEY LLP
By: _____________________________
JOHN O. PINKNEY
CHARLES L. GALLAGHER
TORY J. CHRISTENSEN
Attorneys Plaintiff GEORGE GLANCZ, individually
and as Trustee of the Glancz Family Trust
RECENT CASE UPDATES: Glancz Case Management Statement. Bennion & Deville Case Management Statement. 2/18/2015 UPDATE: Plaintiff’s counsel files Notice Of Settlement Of Entire Case, conditional upon satisfactory completion of specified terms.
29 PALMS BAND OF MISSION INDIANS CASE (cont'd.)
SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF RIVERSIDE—CASE NO. RIC10006101
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construction contracts, a substantial portion of which were passed on to Bardos' co-conspirators, Heslop and then Kovall, via Shambaugh, to reward Kovall for his efforts for steering work to Bardosl Cadmus. The evidence shows that Kovall, Heslop and Bardos schemed to form Cadmus Construction Co. ("Cadmus") to hide their fraud from the Tribe, to undermine Bardos' competitor, the Worth Group, and to grossly inflate the prices of the contracts that Kovall presented and sold to the Tribe.
As a result of the scheme, Bardos obtained highly lucrative contracts for: (1) the temporary access road and parking lot at more than double the price, (2) the disking of Tribal land at nearly 10 times the price, (3) the cogeneration oversight work, which was a total windfall and did not require him to perform any real additional work, (4) the remodeling of the casino's bathrooms, (5) the building ofa cogeneration shell, and (6) the building of the casino addition. The scheme also placed Bardos in a position where he was able to outright embezzle $300,000 from the Tribe relating to the purchase of granite for the bathroom remodel, the proceeds from which he passed onto his co-conspirators.
As a result of the scheme, the Tribe paid Bardos over $3 million. (Exs. 1-2.) Like clockwork, each time Bardos received a big payout from the Tribe, he passed approximately one half of his spoils onto Heslop, who in turn passed one half onto to Kovall via Shambaugh. Bardos paid Heslop approximately $683,382.00 of this money (Ex. 3) and Heslop kicked back to Shambaugh approximately $308,538.00 to influence and reward Kovall. (Ex. 4.) The evidence shows that Shambaugh was clearly aware of the scheme, that she was a conduit for the kickbacks, and in many instances, an active participant.
The fraud scheme was not limited to the construction contracts pertaining to the Tribe's casino. At the same time they were executing the construction fraud scheme, the defendants conspired to convince the Tribe to purchase real property next door ("47 Acres") so that Cadmus could develop it, allowing the kickback scheme to continue indefinitely. Bardos was aware of this plan.
Heslop, Kovall and Shambaugh conspired to convince the Tribe to purchase the property through the shell company Echo Trail Holdings, ("ETC") which would allow Heslop, as manager of ETC, to secretly pay a substantial commission to Shambaugh, even though there was no reason for the Tribe to purchase the property through ETC, since the seller always knew the Tribe was the buyer, and there was no reason for a real estate agent to be involved in the transaction since Kovall, from the beginning, had negotiated the deal. When the seller refused to pay Shambaugh's commission, Kovall and Heslop convinced the Tribe to increase the purchase price over a $1 million to cover it without disclosing the reason. Heslop and Kovall deliberately hid this payout to Shambaugh from the Tribe. Indeed, the closing deal documents reflect that the seller, not the Tribe, would pay the commission to Windermere, the company where Shambaugh worked, not Shambaugh personally. Heslop ultimately approved the payment to Shambaugh as manager of ETC, not the Tribe. Shambaugh paid Heslop at $10,000 to reward him for his efforts.
Moreover, the defendants knew that the seller's asking price for 47 acres was grossly inflated and based on a sham appraisal. When the Tribe's legitimate, BIA approved, appraisal came in at approximately $19 million, $12 million less than the seller's appraisal, the defendants went into overdrive to convince the Tribe's appraiser to raise its value, in complete disregard for their client. When that failed, the defendants themselves convinced the Tribe to offer substantially more for the property than it was worth, to ensure that the purchase would go forward, presenting another opportunity for Cadmus to build and the co-conspirators to share their spoils, while also providing a commission windfall to Shambaugh. The scam succeeded and the Tribe suffered substantial losses in the form of the price differential and excessive mortgage payments and property taxes.
The Tribe's actual loss approximates $22,399,689.20.2 This amount includes: (1) the gross overpayments the Tribe paid for the construction projects which directly resulted from the fraudulent scheme, a substantial portion of which the defendants passed onto themselves as
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2 This amount consists of that specified in Keith Shibou's report plus an additional $77,820.00 in legal fees which the Tribe has incurred pertaining to the restitution claim. (Freeman Decl. ¶ 2, Ex. A, ¶ 22.)
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kickbacks ($1,413,824.77 + 421,632.59 (PI) 3 = $1,835,459.36); (2) the commission paid to Shambaugh ($804,252 + $246,358.90 (PI) = $1,050,610.90); (3) the overpayment of the 47 acres purchase price ($11,695,748 + $3,274,309.57 (PI) = $14,970,057.57); (4) excess property taxes paid on the higher purchase price ($137,500 + $38,018 (PI) = $175,518); (5) excess bank loan interest ($1,756,291 + $703,193.55 (PI) = $2,459,484.55); (6) Heslop's management fees ($29,900 + $8,275.41 (PI) = $38,175.41); (7) Mr. Shibou's investigation fees ($374,313.60 + $77,719.65 (PI) = $452,033.35); (8) fees incurred by Sheppard Mullin pertaining to the underlying criminal investigation, case and restitution claim ($951,342 + $152,962.76 (PI) = $1,104,315.75); (9) investigator Mr. Marinko's fees ($245,484.20 + $48,664.97 (PI) = $294,149.17); and (10) the kickbacks paid during the precursor fraud scheme concerning Diversification Resources ($14,378 + $5,507.96 (PI) = $19,885.96). All of these costs are recoverable under the MVRA and supporting case law.
The crimes in this case are particularly egregious. White, educated and professional men, who were trusted fiduciaries, repeatedly preyed upon a naive and unsuspecting Native American Tribe. Defendants' crime was not an isolated event. Rather, it was a deeply premeditated and highly orchestrated scheme by fiduciaries that involved numerous transactions and ploys to financially exploit their trusting client which was highly dependent on its advisors. Time and time again, over the course of two years, the defendants colluded about how they could rob the Tribe blind. Defendants carried on their scheme with impunity, to maximize their own wealth in complete disregard to, and disdain for, their client. No doubt the scheme would have continued indefinitely, but for the fact that Bardos was ultimately fired due to his incompetence.
Unfortunately, this scheme is not an isolated event but an ongoing problem for Indian tribes, who are unsophisticated, but have generated new income due to casino revenue. Indian Country is watching this case and asking the Court to tell these defendants that no man is above the law, that power and education should not be used to pursue crooked ends, and that Native
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3 The listed numbers include the prejudgment interest calculations done by Mr. Shibou. Prejudgment interest is also recoverable under the MVRA.
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American tribes are not savages to be abused, but noble men and women who deserve to be protected from predators like Kovall, Heslop and Bardos and their losses made whole.
II.
Factual Background
The facts of this case are laid out in detail in stipulated factual agreements between the government and Heslop, Kovall and Bardos (Docket Entry No. 237-1) and the Tribe's sentencing memorandum against Heslop (Docket Entry No. 269). Further evidence documenting the fraud is described below.
A. Defendants' Background
For nearly a decade prior to the scheme, Kovall was the Tribe's trusted and beloved attorney. Kovall, who became the Tribe's general counsel in approximately 2000, with an office at the Tribe, had broad responsibilities in providing business and legal advice to the Tribe and had substantial influence over the Tribe's decision making process. (Ex. 5; Kovall Plea Agreement ¶ 13.) For example, Kovall identified and helped the Tribe chose consultants and contractors for various construction projects concerning their casino and other developments, negotiated agreements and pricing with consultants and contractors, and advised the Tribe and its affiliates on potential business development, economic development, and expansion. (Id.) The Tribe, whose members have high school educations, relied heavily on the advice they received from Kovall and trusted him completely. (Id.; Exs. 9-13.)
Sometime in 2002-03, Kovall began a romantic relationship with Shambaugh. The two became engaged in the spring of 2007 and married in July 2008. (Exs. 5-7; Kovall Plea Agreement ¶ 13.) Very few if any of the tribal members knew of Kovall's and Shambaugh's relationship. (Exs.9-13.)
In approximately 2005, Kovall introduced Heslop to the Tribe, who was a longtime friend of Kovall's. Initially, Heslop advised the Tribe on various development opportunities in the region. Eventually, Kovall convinced the Tribe to form Echo Trails Holding, LLC, ("ETC") a company wholly owned by the Tribe. (Id.; Exs. 5-7; Kovall Plea Agreement ¶13.) Through ETC, the Tribe could disguise its interest in real estate and purchase property anonymously. One problem for Indian Tribes is that once a real property seller learns that the interested buyer is a tribe, the purchase price is increased. Kovall caused the Tribe to hire Heslop on as manager of ETC. (Id.)
B. The Initial Scheme
During the summer of 2006, Kovall, Heslop and Shambaugh, along with another attorney for the Tribe, Gene Gambale, agreed to form a company called Diversification Resources, LLC ("Diversification Resources") to capitalize on economic opportunities for Indian Tribes. (Stipulated Facts ("SF") ¶ 4-6; Pocket Entry 237-1; Exs. 14-17.) The co-conspirators agreed that Kovall, Heslop and Gambale would share Diversification Resources' proceeds and that Kovall's portion would be paid to Shambaugh to reward him for using his position of influence with the Tribe to secure opportunities for the company. (Id.). Kovall's portion of the proceeds were paid to Shambaugh to hide Kovall's involvement from the Tribe and his ex-wife, with whom he was in an alimony and property court battle. (Id.) Kovall was well aware that the Tribe would not condone this arrangement and kept it secret for this reason. (Ex. 5.)
On or about November 1, 2006, Kovall convinced the Tribe to hire Diversification Resources and Heslop as "owner's representative" to manage various proposed construction contracts, including the development of a campsite, parking lot, and modifications of an existing casino, Spotlight 29. SF ¶ 7,8 (Docket Entry No. 237-1); Ex. 14.) Heslop and Kovall agreed to hire Bardos on as a consultant to Diversification Resources. (Ex. 15.) Bardos was a longtime friend and former student of Heslop. (Ex. 36.)
As a result of this scheme, the Tribe paid DR $49,346, at least $14,378 of which was kick backed to Shambaugh and then Kovall to reward him for his efforts in securing the contract for Diversification Resources and Heslop. (SF ¶ 9; Ex. 17.) Bardos was paid $26,250 of this amount. (Ex. 17.) Shambaugh was aware the payments she received were to reward Kovall. (Exs. 5-7.)
C. Bardos Succeeds Diversification Resources as Owners Representative
In early 2007, Angelina Mike, a member of the Tribe, complained about Heslop's lack of experience in construction. (SF ¶ 12-13). In response, Kovall, Heslop and Bardos schemed to replace Diversification Resources as "owners representative" with an entity which Bardos would front entirely (Cadmus) and thereby place Bardos in a position to obtain future construction work from the Tribe. (SF ¶ 13.)
Bardos was fully aware of this plan. For example, on February 1, 2007, Heslop wrote Bardos an email entitled ["FWD: Draft for Paul]", "cc"ing Kovall, which reads, "I have talked at length with Gary and he believes that he can so arrange things as to replace Diversification Resources with Bardos Construction, beginning February 1." ... [this] will allow Gary to position you for future work." (Emphasis added.) Heslop further wrote that Kovall "believes that he can get you a fee of $12,500 initially (covering garage and casino modifications), with potential for a higher fee as work expands. Gary can handle all of this with Darryl [Darrell Mike, Chairman of Twenty-Nine Palms] and Dean [Dean Mike, a member of the Tribal CounciL]" (SF ¶ 13, Ex. 18.) This same day, the Tribe executed an agreement with Bardos dba Bardos Construction to serve as owners representative pursuant to which the Tribe paid Bardos $12,500 a month. (Ex. 19.)
Notably, Bardos was woefully underqualified for the job. Although he had some experience in residential construction, Bardos had no experience in complex commercial construction. (Exs. 20-24, see, e.g., Smith interview (stating that Bardos did not know how to read construction plans, draft commercial subcontractor contracts, and did not understand electrical systems)). Bardos was not employed by any construction or design company and did not have, or employ anyone who had, design or engineering skills. (Id.) Rather, he was a one man operation who ran his business out of a pickup truck and home office. The only reason Heslop and Kovall introduced Bardos to the Tribe was to serve as a vehicle for their fraud, after it became apparent that the Tribe would no longer do construction business with Diversification Resources or Heslop.
(NEXT—RESTITUTION BRIEF CONTINUED)