Fagan v. Central Bank of Cyprus

• Decision Date: 28 June 2021
• Docket Number: 19-80239-CIV-ROSENBERG/Reinhart
• Parties: EDWARD FAGAN, Plaintiff, v. CENTRAL BANK OF CYPRUS, et. al., Defendants.
• Court: U.S. District Court — Southern District of Florida

EDWARD FAGAN, Plaintiff,
v.
CENTRAL BANK OF CYPRUS, et. al., Defendants.

No. 19-80239-CIV-ROSENBERG/Reinhart

United States District Court, S.D. Florida

June 28, 2021

REPORT AND RECOMMENDATION REGARDING PLAINTIFFS MOTION FOR DEFAULT JUDGMENT (ECF NO. 104)

BRUCE REINHART, United States Magistrate Judge.

This matter is before the Court on a referral from the presiding District Judge. ECF No. 107. Currently pending is Plaintiffs Motion for Entry of Default Judgment ("Motion") ECF No. 104. Pursuant to Federal Rule of Civil Procedure 55(b)(2), I held a hearing on April 22, 2021, at which Plaintiff testified and submitted evidence for the Court's review. ECF No. 116.1 have reviewed Plaintiffs Motion and the evidence before me. I am fully advised, and this matter is now ripe for decision. For the reasons stated below, the undersigned RECOMMENDS that the District Court GRANT IN PART and DENY IN PART Plaintiffs Motion (ECF No. 104) and enter a judgment in favor of Plaintiff for $5, 111, 577 in damages.

BACKGROUND

Plaintiff Edward Fagan ("Plaintiff) brought the following causes of action against Defendants G.K. Finance Limited ("GK Finance"), APUS Finance Ltd. ("APUS Finance"), APUS Fund Management Ltd. ("APUS Fund"), G.E.O. Holdings Limited ("GEO"), Holdsworth Associates Venture Incorporated (Holdsworth), George Kallis a/k/a Georgios Kallis ("Mr. Kallis); Fintop Ltd ("Fintop"), Brian Ranee (Mr. Ranee) (collectively "Defendants") alleging (1) violation of Federal RICO law under 18 U.S.C. § 1962(c); (2) violation of conspiracy to violate Federal RICO Law under 18 U.S.C. 1962(c) and (d); (3) violation and conspiracy to violate Florida RICO Law under Florida Statute 895.01 et seq.; (4) fraud; (5) aiding and abetting; (6) breach of contract; (7) interference with contract; (8) fraudulent inducement; (9) rescission or specific performance; (10) civil theft; (11) unjust enrichment; (12) conversion; and (13) bailment. ECF No. 93. Defendants failed to appear, answer, or otherwise respond to Plaintiffs Amended Complaint. On February 9, 2021, Plaintiff filed a Motion for Clerks Entry of Default as to the Defendants. ECF No. 102. On February 9, 2021, the Clerk entered default against the Defendants. ECF No. 103. On February 18, 2021, Plaintiff filed his Motion for Entry of Default Judgment against Defendants Pursuant to Federal Rule of Civil Procedure 55(b)(1) ("Motion"). ECF No. 104. Plaintiff seeks a judgment in the amount of $13.68 million, trebled to $41.04 million pursuant to 18 U.S.C. § 1962(c), applicable interest, and compensation for expenses and court costs in the amount of $15, 864.00. See Id. at 2.

This case revolves around an Advanced Fee Fraud of which Plaintiff alleges he was a victim from 2012 to early January 2016. ECF No. 93 ¶¶ 1-2. Plaintiffs Amended Complaint describes a complicated web of companies starting with Holdsworth at the top of the food chain and the remaining companies wholly owned subsidiaries of each other. Id. ¶¶ 20-24. Holdsworth is located in the British Virgin Islands. Id. ¶ 24. George Kallis is an officer and director of G.K. Finance, APUS Finance, APUS Fund, GEO, and Holdsworth. Id. ¶ 25. Fintop is the designated agent for GK Finance, APUS Finance, APUS Fund, GEO, Holdsworth, and Mr. KaUis. Id. ¶ 27. Mr. Ranee is the owner and an officer of Fintop, as well as a designated agent for GK Finance, APUS Finance, APUS Fund, GEO, Holdsworth, and KaUis. Id. ¶ 32. Mr. Kallis and his companies (GK Finance, APUS Finance, APUS Fund, GEO Holdings, and Holdsworth) used Mr. Ranee and Fintop for all official representations on behalf of the companies. Id.

Plaintiff alleges in his Amended Complaint that from May 2013 to January 2016, Mr. Ranee and Fintop, as the agents for Mr. Kallis and his companies, solicited Plaintiff and the others into entering into contract agreements in which they paid a fee in exchange for a line of credit. Id. ¶ 65. Mr. Owens, Mr. Stoeckl, Mr. Stuart, Mr. Kalchbrenner, Balruddery Investments, Mr. Melville, Mr. Drummond Hay, Mr. Kindersley, and Mr. Andriesz (collectively, the "Original Borrowers"), like Plaintiff, entered into contracts with the Defendants in which they paid a percentage of the contract's value in exchange for a line of credit. See ECF No. 112. Mr. Owens, Mr. Stoeckl, and Mr. Stuart state in their affidavits that they assigned 100% of their "rights, including the right to make regulatory, criminal, and civil action complaints" to Mr. Fagan, as did the six other Original Borrowers. Id. at 3, 7, 19. In total, Plaintiff states that he and the Original Borrowers paid $13.68 million in exchange for a line of credit valued at $1, 368 billion. In other words, Plaintiff paid a non-refundable 1% advance fee of the face value of the contracts. ECF No. 93 ¶ 93. Plaintiff claims that instead of providing the line of credit, Defendants laundered the $1, 368 billion and would not return the $13.68 million advance fees. Id. ¶ 89.

There are fourteen "advanced fee" contracts at issue here. They range in value from $10 million to $500 million. Id. ¶ 125. Most of them were originally executed in the early 2000s. Id. In 2012, Plaintiff and the Original Borrowers began to grow suspicious and asked Defendants to either honor the contracts or return the advance fee payment, plus interest. Id. ¶ 131. Between May and October 2013, "Defendants sent knowingly false statements intended to deceive and mislead Plaintiff from continuing efforts" to discover the owners of the $1, 368 billion and the identity of the banks where the advance fees were deposited and held. Id. ¶ 133. These communications included "solicitations and inducements" to try to convince Plaintiff to enter into new contracts or reinstate the old ones. Id. ¶ 136. After much back-and-forth communication, Plaintiff agreed to reinstate the fourteen contracts in October 2013. Id. ¶¶ 142-45. Of the fourteen contracts, two were reinstated in October 2013 and the remaining were "committed to be reinstated" in December 2013. Id. ¶ 125. Between October 2013 and January 2016, Plaintiff alleges multiple "bad acts":

(1) Defendants never provided the required banking due diligence documents to prove the source of the 1.368 billion was "clean." Id. ¶¶ 114, 115 128, 154

(2) On October 28, 2013, Defendants told Plaintiff that since Plaintiff had performed on the reinstated contracts Defendants would be transferring $100 million, however, they never did. Id. ¶¶ 15-53

(3) Defendants referred to the contracts as either "money first" or "funds first" contracts. Id. ¶¶ 114, 164.

(4) Defendants withheld or concealed the identity of the trustee benefitting from the contracts and refused to disclose the source of the $1, 368 billion they said they could provide. Id. ¶¶117, 159, 162.

(5) Defendants concealed the identity of the bank where the Advanced Fees were being held and lied about where the $1, 368 billion was being held. Id. ¶¶ 145, 163.

(6) Defendants sent numerous misleading and false statements to Plaintiff via letter and email to induce Plaintiff into entering into new contracts and continue reinstating the old ones. Id. ¶¶ 135-36, 147-48.

(7) Defendants sent correspondence to Plaintiffs saying that they could not pay the $1, 368 billion and provided false bank documents to try to demonstrate their inability to perform on the contracts. Id. ¶ 155.

(8) Defendants "conspired" to change the terms of the contracts, refused to transfer funds, and refused to communicate with Plaintiffs bank and financial advisors. Id. ¶¶ 158-60.

(9) Defendants-specifically Kallis and Ranee-lied about deals they had made to show Plaintiff that they could make the $1, 368 billion loan. Id. ¶161.

(10) Defendants induced Plaintiff to suspend efforts with the Cyprus police to bring criminal and civil charges by promising they would perform on the reinstated contracts. Id. ¶ 166.

(11) From September 2015 to January 2016, Defendants demanded that all of the contracts be wrapped into one contract "which would be performed and as such Defendants would be considered to have performed" on the original fourteen reinstated contracts. In exchange for performance, Plaintiff would give Defendants a document that the obligations were performed and completed. Id. ¶ 149.

DISCUSSION

I. Default Judgment

Rule 55 of the Federal Rules of Civil Procedure dictates that the clerk of court enter a party's default if the party "has failed to plead or otherwise defend." Fed.R.Civ.P. 55(a). Plaintiff filed the Amended Complaint (ECF No. 93) on June 25, 2020, and properly noticed Defendants (ECF Nos. 99, 100); Defendants never filed an answer or otherwise responded to the Amended Complaint. Consequently, the clerk of court entered a default against Defendants on February 9, 2021. ECF No. 103. Plaintiff then filed the instant Motion for Entry of Default Judgment on February 18, 2021 (ECF No. 104). He also filed an Affidavit in Support of the Motion for Entry of Default Judgment (ECF No. 105) ("First Declaration"), Notice of Joint Liability (ECF No. 106), a Supplemental Declaration from Mr. Fagan ("Second Declaration") with supporting exhibits (ECF Nos. Ill. 111-1), Affidavits from Mr. Stoeckl, Mr. Stuart, and Mr. Owens (ECF No. 112), and a third Declaration from Mr. Fagan ("Third Declaration") with additional supporting evidence (ECF Nos. 114 and 117).^[1]

After entry of the clerk's default, the court may enter default judgment against the defendant so long as the defendant is not an infant or incompetent person. Fed.R.Civ.P. 55(b)(2). When default judgment is entered, "the defendant 'admits the plaintiffs well-pleaded allegations of fact, is concluded on those facts by entry by the judgment, and is barred from contesting on appeal the facts thus established.'" Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir. 1987) (quoting Nishimatsu Construction Co., Ltd. V. Houston...