Facts

Plaintiff Jack Ajluni alleged that he met defendant James Ward about 10 years ago, and developed a close, personal friendship. Ward operated Jim Ward & Associates in Mountain View, which lent money to real estate developers to build new homes, primarily in San Mateo and Santa Clara counties.

Ward funded his business with money from about 200 individual investors, primarily seniors living in San Mateo and Santa Clara Counties. The investors were told that their funds would be used to fund developments and that they would be repaid from proceeds from sales of the homes, along with interest. Ajluni became one of Ward's investors.

In 2005, Ward formed JSW Financial Inc. Ward told Ajluni that JSW Financial was the same business as Jim Ward & Associates, and that he had merely changed the name because of confusion in the marketplace due to another person having a similar name. According to Ward, all other aspects of the business remained the same.

In January 2006, Ajluni was asked to make a large investment in JSW Financial. Ajluni agreed, and invested about $500,000. Over the next two years, Ajluni invested more money in JSW Financial, and convinced friends and family members to do the same. Ward and others at JSW Financial told him that JSW Financial was profitable, that its business model was sound, and that no investor had ever lost a dime. JSW Financial later provided promissory notes, which defined the repayment terms with Ajluni.

JSW was formed by Ward shortly after the California Dept. of Real Estate accused him of mismanaging funds at his prior company, Jim Ward & Associates. In Dec. 2005, just one month before Ajluni's $500,000 investment, the Dept. of Real Estate issued a final order and revoked Ward's real estate license and suspended him from the real estate business.

In January 2006, just one week before Ajluni's investment, Ward sold his business to three associates.

Ward's associate, Richard Tipton, testified that JSW was not a safe and profitable company. JSW was losing money from its real estate developments, and relied on new investors in order to pay back its obligations to current investors. Ward had also instructed Tipton to conceal losses from individual projects, so as not to raise red flags to investors.

In September 2008, Ajluni received a promissory note from JSW Financial, reflecting that he was still owed approximately $842,000 on his investment. However, just a few weeks later, JSW told investors at an investor meeting that it had run out of funds and was closing its doors. Shortly thereafter, JSW filed for bankruptcy.

PLAINTIFF'S CONTENTIONS:
Ajluni claimed that he was never told that Ward had lost his license, had been suspended from the business, or had sold his business.

DEFENDANT'S CONTENTIONS:
Ward denied the allegations. Ward alleged that he disclosed the Dept. of Real Estate proceedings to his investors, including Ajluni. Ward also alleged that, when he sold his business to others in 2005, he then retired to live in Ohio and had no involvement in JSW Financial and no knowledge of its losses. He also alleged that he had no communications with Ajluni about an investment or loan to JSW, and that Ajluni knew more about JSW than he did.

Settlement Discussions

Prior to trial, defendant offered to settle the case by waiving costs.

Result

Plaintiff's verdict for $396,000 plus $400,000 in punitives. For plaintiff on claims of fraud and negligent misrepresentation.

Other Information

FILING DATE: Sept. 24, 2009.

Deliberation

six hours

Poll

10-2 (fraud), 10-2 (negligent misrepresentation), 10-2 (punitive damages)

Length

three days