Reporting Investor Fraud on the “Louisiana Mafia”

Charles Marsala July 3, 2015 0
Reporting Investor Fraud on the “Louisiana Mafia”

Dear Editor,

During June the St. Tammany Salt Council produced the Gulf Coast Elder Abuse Conference.

An important presentation of the conference was a presentation by Nancy Boudreaux, Investor Education Trainer, of the Office of Financial Institutions.  Investor Fraud impacts 30 million people per year.

Ms. Boudreaux had a handout which stated that targets for Investment Fraud were “Social Club Members” which would include Fraternity Brothers.

She also stressed and encouraged that people report Investment Fraud.  This makes sense as the Financial Industry Regulatory Authority or FINRA and Victims of Crime.org issued a 72 page report that stated most were afraid to report Investment Fraud with three of the top eight reasons being:  “feeling that reporting wouldn’t make a difference; fear that reporting will lead to a loss of legal or financial control; and  lack of confidence in the ability of authorities to respond and assist.”

Cases in Judge Martin Fledman’s 5th District Court named Profitable Dining and Jacksonville Dining Concepts exemplify those concerns.

A general partner established seven different Limited Liability Companies (LLCs) to open Copeland’s New Orleans restaurants.  He recruited fraternity brothers and their contacts as investors.  He established other companies with other fraternity brothers to supply the buildings and furniture, fixture, and equipment (FF&E) to the restaurants, making an extra profit off the investors.

Although he recruited investors as Limited Partners, he knew he would soon come back to them and require they sign personal guarantees or lose their initial investment.  The personal guarantees were to companies he owned between 45-55%. On one occasion he charged the investors 31% interest on a $250,000.00 loan for FF&E to the restaurants.  The two doctors lost over $900,000.00 each in the investment.

On another occasion the general and managing partners promoted returns of 104% starting in year six to recruit investors.  A document supported this position and stated “Investor expectations must be met”.

The same day as the money was received from one investor, it was transferred to yet another LLC owned by the general and managing partners, without advising the investor of the transfer.  For nine years the partner’s denied this transfer happened, perhaps violating Sarbanes-Oxley and committing perjury in their depositions.

After borrowing millions from banks and GE Capital, the general partner took a job in Dubai for several months while declaring  bankruptcy and thus removed his name from any personal guarantees.

After this step, a buy/sell clause to force out the investor was used, and the restaurants were transferred to the landlord. The landlord then hired the managing partner to manage them and defaulted on the debt to GE Capital, leaving the limited partner to pay.

After 15 months the landlord sold the restaurant back to the managing partner. The restaurant had reported a profit of $812,000.00 the year prior to the transfer to the landlord.

The investor sued. The managing and general partners hired former law clerks to Judge Fledman to represent them.  One was Aimee Quirk, who later became New Orleans Economic Development Advisor to Mayor Landrieu.  Ms. Quirk’s sister is the current Clerk of the Fifth Circuit Court of Appeal.

Defense withheld discovery until after depositions and provided a “data dump” of 45 banker’s boxes the week they filed a motion for dismissal under expedited Summary Judgment.

Defense maintained that the transfer of investor funds the same day as investment was appropriate as a separate company owned by the general partner had agreed to repay the transfer.

An email was discovered from another lawsuit filed by Ericsson Telcom agents the same partners, in which one referred to their association as the “Louisiana Mafia”.

The investor filed motions for a continuance and oral argument and which were denied by Judge Feldman.

Judge Feldman without reviewing the case for Securities Fraud, Money Laundering, Financial Institution Fraud, Bankruptcy Fraud, or Fraudulent Transfer to Avoid Creditors, dismissed one case in Summary Judgment, reversed another after an Entry of Default, and a third for failure to state a claim.

He advised in one document that any further action by the investor, would result in sanctions.

He accepted his former clerk’s position that the venture had “failed”, although six years later the restaurant in Jacksonville is still open.

Judge Feldman refused to comment on a document that was discovered that stated: “remove assets prior to bankruptcy” and denied a request for a jury trial.

Judge Feldman has gained national attention for the FBI Operation Wrinkled Robe as a sentencing Judge involving Al Copeland’s custody battle.

Judge Feldman was challenged during the BP Oil spill as he was one of many federal judges across the Gulf Coast region with money in oil and gas. Most  disqualified themselves from hearing spill-related lawsuits and others sold their holdings so they can preside over some of the 200-plus cases.

Judge Feldman was the first Federal Judge out of twenty-one to have a different opinion that the Supreme Court on same-sex marriage.  The Supreme Court has advised him to reverse that decision.

The investor ended up spending more than $100,000.00 in legal fees only to have Judge Feldman deny the Seventh Amendment right to a trial.

The Louisiana Attorney Disciplinary Board (LADB) was asked to review the attorney’s actions as possible Ethics Violations for withholding discovery and presenting perjured testimony.  LADB refused to grant an oral presentation and after eight months, dismissed the case as not meeting a level of “clear and convincing evidence” to pursue further.

The Appeals Court reviewed the case, which was filed under Rule 60B(6) which has no time limits,  after a year they issued a note, refusing to review under Rule 60(b) (6) and dismissed under Rule 60 (b) (3) which has a one year time limit.

A similar action happened during Wrinkled Robe involving a case between the Turners and Ned Pleasant and presided over by Judge Porteous, who was later impeached by Congress.

While investor conferences are wonderful for the consumer education, FINRA and the Victims of Crime are correct in the need to be self-aware when investing as investors should not expect the authorities to resolve their disputes nor give them a trail as right provided by the Seventh Amendment.

The perception of investors “that reporting wouldn’t make a difference; fear that reporting will lead to a loss of legal or financial control” is well rooted and will need authorities to be more responsive to change.

Regards,

Charles Marsala

Benchmark Investments Group LLC AWE Poster Awe Adoptions 6 Steps To Leave Your Legacy Book Cover

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comments are closed.