Facts

In January 2009, defendant/cross-complainant Delta Aliraq Inc. hired plaintiff/cross-defendant David Weisman as its Chief Executive Officer for purposes of a contract to construct a steam generating station in Iraq. Weisman and his companies, Davro LLC and Delta Alpha X-Ray were to invest in excess of $4 million in the project pursuant to an investment and profit-sharing agreement.

In January 2012, Weisman was terminated, and filed a demand for arbitration and named plaintiffs Kais Almarzouk, Abbass Al Judui, Nazar Dhahir, Oday Al Sultani, Armando Dupont, as respondents. Almarzouk is President and Secretary of Delta Aliraq Inc., and Al Judui, Dhahir, Al Sultani, and Dupont,are members of the Board of Directors of Delta Aliraq. Plaintiffs are all shareholders of the company. Plaintiffs filed suit for the sole purpose of enjoining the arbitration that had been commenced by Davro and Weisman, on the ground that the individuals were not parties to the contract containing the arbitration clause. No other relief was sought in that pleading. This original pleading was mooted and arbitration was abandoned when Davro and Weisman filed a cross-complaint against Delta Aliraq.

The cross-complaint set forth the first substantive allegations in the action. Davro and Weisman sought declaratory relief, and asserted other claims.

Delta Aliraq then filed a cross-complaint to the Weisman and Davro cross-complaint, against Weisman, Davro, Delta Alpha X-Ray, and their officer Robert Hoyt, seeking affirmative relief. The cross-defendant shareholders were also sued by Davro and Weisman, but did not individually seek affirmative relief by way of cross-complaint.

For purposes of trial, because the original pleading regarding arbitration was moot, Davro and Weisman were deemed the nominal plaintiffs and cross-defendants, while Delta Aliraq was the nominal defendant and cross-complainant.

CROSS-COMPLAINANT'S CONTENTIONS:
Defendant/cross-complainant Delta Aliraq claimed that after Weisman was hired on as CEO, he commanded that he have sole and exclusive control of Delta Aliraq Inc.'s bank account. Thereafter, acting through his alter egos Davro and Delta Aliraq X-Ray, Weisman misappropriated in excess of $6 million of Delta's operating capital during his tenure as CEO of the company. After investing an initial $1.75 million into the company, Weisman immediately siphoned that money out of Delta Aliraq's operating capital to pay himself back. Delta Alpha X-Ray also defaulted on its promise to invest the $3 million pursuant to the investment and profit sharing agreement.

Delta Aliraq claimed that the governing contract provided that reimbursement of investment and profits were not to be distributed until the contract was complete. Weisman, who had control of Delta Aliraq's books and bank accounts, surreptitiously reimbursed himself out of the first monies received, and took the additional sums without informing the Board of Directors, depleting the company's operating capital and leaving the company unable to complete its contract.

CROSS-DEFENDANTS' CONTENTIONS:
Cross-defendants denied all Delta Aliraq Inc.'s contentions.

Result

Judgment for defendant/cross-complainant Delta Aliraq in the amount of $7,589,809. Davro and Weisman were found liable for fraud and breach of contract, there was also a finding of breach of fiduciary duty against Weisman, as he was CEO of the company. Weisman's cross-complaint was dismissed and judgment was entered in favor of cross-defendants Almarzouk, Al Judui, Dhahir, Al Sultani, Dupont, and Delta Aliraq. Davro had also brought a claim against Kais Almarzouk's nephew, Zeyed Almarzouk, for fraudulent transfer of a $1 million building, and, in settlement of that claim, Zeyed transferred that property to an assignee of Davro.

Other Information

FILING DATE: March 28, 2012.