Facts

TAP is a Delaware corporation with its principal place of business in Peoria, Ariz. Defendant Maximum Business Innovations Inc. ("MBI") is a formerly defunct Colorado corporation brought back to life in 2008 by defendant Kevin McBride, its CEO. Defendant Roddy is an employee and agent of MBI. Defendants Timothy Gates, Richard Kryza, Matthew Anderson and Rhett Shepard are long time business partners. Defendant Dakota Holdings, a California corporation, ("Dakota") is a shell company operated by defendant Matthew Anderson. Defendant Rhett Shepard's company is Pound Hill Inc., owned and operated by his father Bruce Shepard. Defendant Gates has a partnership with defendant Richard Kryza, which operates as Ideal Development and Investments ("IDI").

In December 2009, MBI approached TAP about a business transaction, which it claimed was proprietary. The deal-involved plaintiff placing $1 million into escrow for the purpose of what amounted to leasing a bank account with approximately $50 million on deposit. Having access to this account, at least on paper, would allow TAP to obtain a loan of approximately $40 million, which TAP would then invest, at MBI's direction, into trading platforms offering extraordinary returns. In a short time, this investment would turn into approximately $143 million. The entire transaction – from arranging the escrow to investment of the loan proceeds was to be handled by MBI and was being orchestrated behind the scenes by Anderson, Gates, Kryza and Shepard.

To allay any reservations that plaintiff may have, MBI represented that they had been in business for over 10 years, and that the employees of MBI were experts at these transactions, leading plaintiff to believe that it had successfully transacted dozens of these deals. Moreover, MBI represented that the transaction, for plaintiff, would be seamless, as everything was being carried out by MBI and their team of preferred companies, such as Commercial Escrow, the escrow company for the transaction. Indeed, MBI represented that TAP's money was safe with Commercial Escrow. In fact, MBI, and it's employees was a relatively new business, brought to life from a defunct Colorado corporation which was formed in 1999, but dissolved in 2002, only to be revived with new principles and with an eye toward fraud.

In fact, MBI only qualified to do business in California in 2008, the same year that the business was reinstated with state of Colorado. Despite the fact that they claim to be an asset-based lender dealing with structured finance and financial instruments, MBI has never held any state or federal licenses to engage in the activities it promotes. Defendant Michael Roddy and defaulted defendant Kevin McBride took active roles in the operation of MBI and the misrepresentations made to TAP to get it to place the funds into escrow. Specifically, the MBI defendants told TAP that MBI was experienced and successful at this proprietary transaction – that they would easily return $143 million on their $1 million.

Further, MBI insisted that the funds be placed into escrow with their company – Commercial Escrow Service ("CES"), which would only release the funds on being presented with an SBLC within 21 days of depositing the money. Plaintiff was also told that its funds would be the only funds in the escrow – approximately $500,000 was wired into the same account from different companies, including Element Capital, LLC, which is the subject of a related lawsuit. Rather than honoring the escrow instructions approved by TAP, a second, unapproved set of instructions were presented to CES by MBI and its co-conspirators, Anderson, Gates, Shepard and the shell companies, which instructed them to release the funds to Dakota, upon "Escrow Agent receiving confirmation of the Instrument" which in this case was done by a simple telephone call between defaulted defendant Anderson, principal and agent for service for defaulted defendant Dakota Holdings, a California corporation, and Kevin McBride of MBI.

The reality is that there was never an Instrument presented to escrow or anyone else. What was purported to be the instrument was nothing more than a photocopy of a "swift message" referencing a bank instrument that had expired in 2005. Defendant Rhett Shepard, when presented with the so-called instrument in deposition, testified that it was definitely not an instrument, and would not be mistaken as one. Despite the lack of a proper instrument, escrow released the following funds: to MBI, $40,000; to Ideal Development and Investments ("IDI"), the company owned by defendant Timothy Gates and defaulted defendant Richard Kryza, $625,000; to defaulted defendant Matthew Anderson, $628,000; and $200,000 to Pound Hill, defendant Rhett Shepard's company. Clearly, none of the funds went to purchase an instrument, or any other collateral that TAP could borrow against. Indeed, defendant Gates, a key player in the transaction and long-time partner of Matthew Anderson, admitted this in his deposition.

Although defendant Gates asserts that he was simply a consultant to Dakota on this project and that he had no outside relationship with Anderson, the evidence shows otherwise. It is clear from the testimony of other members of the scheme and evidence in this case that defendants Gates and Anderson were working as a team, along with the rest of the defendants to steal TAP's money.

Defendant Rhett Shepard testified in his deposition that Gates was running a boiler-room operation out of his living room when Anderson introduced them. Although he testified that he trusted Gates and Anderson to payout the commissions "fairly and equitably," he also described the operation they were running as a "cesspool." Moreover, Rhett Shepard testified that the two had traveled to the Philippines together on more than one occasion, and that only "Matt and Tim" knew what was really going on in the transaction.

Despite defendant Gates' best efforts to appear as an outside consultant, the emails that he produced belie the truth. He testified and he and defendant Anderson had not spoken in a very long time, and that they really were more like work acquaintances than anything else, yet he produced an email from Anderson's personal email address to Gates' personal email address dated just a week before the deposition which appears to outline what Gates should testify to – the timeline, the facts, and where the money went. In fact, Gates could not even articulate what consulting he did to earn the $625,000 fee paid to IDI, nor could he explain what role Dakota was playing in the transaction, or concisely explain what the transaction that he was responsible for orchestrating actually was.

What is clear from the evidence is none of defendants ever intended to produce an instrument against which plaintiff could borrow. Indeed, none of the defendants has ever successfully completed a transaction like the one promised to TAP. From the moment MBI approached TAP in December 2009 regarding the investment opportunity it could provide until the plaintiff's money was squandered by each and every one of the individual defendants, this was a planned heist – a somewhat sophisticated Three-card Monte where TAP was the mark.

PLAINTIFF'S CONTENTIONS:
Plaintiff claimed that defendants engaged in conspiracy, fraud and deceit, intentional misrepresentation, concealment, false promise, negligent misrepresentation, conversion, and equitable relief.

DEFENDANT'S CONTENTIONS:
Defendant Gates claimed that because he never spoke directly with TAP, he could not have made any misrepresentations to them.

Defendant Shepard claimed that all he had done was introduce two parties and receive a commission.

Damages

Plaintiffs claimed that they are entitled to recover at least $144 million from defendants jointly, in addition to any award of punitive damages.

Result

Plaintiff's verdict for $5,225,000.

Other Information

The last remaining defendants were Timothy P. Gates and Rhett Landon Shepard. The last remaining causes of action were for fraud and violations of Business and Professions Code Section 17200. The jury decided the fraud cause of action, and the parties are still waiting a determination from Judge Derek W. Hunt as to Section 17200. FILING DATE: Sept. 13, 2011.

Deliberation

one day

Poll

12-0 (in favor of plaintiff)

Length

seven days