Louros v. Cyr
| Decision Date | 17 April 2001 |
| Docket Number | No. 00 CIV 2166 LAP.,00 CIV 2166 LAP. |
| Citation | 175 F.Supp.2d 497 |
| Parties | Helen LOUROS and Rose Louros, Plaintiffs, v. Arnold CYR, Lynn Cyr, Douglas Johnson, Ken Adler, James Sexton, Kevin McGeever and H. Freeman Wilkinson Defendants. |
| Court | U.S. District Court — Southern District of New York |
Kostas T. Golfinopoulos, New York, NY, Steven Louros, New York, NY, for Helen Louros, Rose Louros.
Lawrence Banigan, Hill & Associates, New York, NY, for Arnold Cyr, Lynn Cyr, Ken Adler.
Eugene Novy, Deborah M. Vaughan, Novy, James & Vaughan, Atlanta, GA, for H. Freeman Wilkinson.
Plaintiffs, Helen and Rose Louros ("plaintiffs"), bring this diversity action against Arnold Cyr, Lynn Cyr, Ken Adler, H. Freeman Wilkinson, James Sexton, Douglas Johnson and Kevin McGeever, claiming fraud, breach of contract, conversion, unjust enrichment, breach of fiduciary duty, violations of New York State Banking and General Business laws, negligence and civil RICO. Defendants Arnold Cyr, Lynn Cyr,1 Ken Adler and H. Freeman Wilkinson ("defendants") move to dismiss the second amended complaint (the "Complaint") pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. In addition, defendant H. Freeman Wilkinson moves to dismiss the Complaint against him for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) and for improper venue pursuant to Fed.R.Civ.P. 12(b)(3). For the reasons set forth below, the motion is granted with respect to Claims Seven, Eight, Nine and Ten and denied with respect to Claims One, Two, Three, Four, Five and Six.
Despite plaintiffs' somewhat convoluted and confusing presentation of the facts, on a motion to dismiss, I accept as true plaintiffs' recitation of the facts. In September or October 1998, H. Freeman Wilkinson contacted Douglas Johnson and Kevin McGeever about establishing a private bank in the country of Liechtenstein. (Compl., Ex. D). Wilkinson stated that this bank would be a branch of a larger, existing Liechtenstein bank, and would be able to offer all the services of a private bank, including debit cards and internet banking. (Id.). Wilkinson "pointed out that Liechtenstein was the best off-shore scenario from a security and confidentiality standpoint." (Id.). The goal for Johnson and McGeever was to "place funds into a[n] [investment] program once they were aggregated to $10 million." (Id.). For the depositor, banking in Liechtenstein would offer "personal attention," "individualized services to each client," a "dollar for dollar" guarantee on all deposits and "tax-free interest income." (Id., Ex. E).
In order to set up a private bank, Wilkinson stated that it was necessary to have a contact who had a connection to the Liechtenstein government; this contact was James Sexton. (Compl., Ex. D). For a fee of $25,000, Sexton set up "the whole bank structure" for Johnson and McGeever. (Id.). The original idea was to establish the bank as a "trust entity under [Verwaltungs und Privat Bank] and the trust would have a main account with VP Bank and individual, depositor controlled, sub-accounts to the main account for individual depositors." (Id.).
Under this scenario, Johnson and McGeever were the "creators" of the bank, (id., Ex. M); Ken Adler marketed and administered the program by attracting depositors and acting as the conduit for the required paperwork and communications; and Wilkinson handled the individual account balances and monthly statements (id., Ex. D). Sexton required all prospective depositors to submit bank reference letters and passport information as well as a completed power of attorney forms appointing Sexton attorney-in-fact for the sole purpose of establishing the bank accounts in Liechtenstein. (Compl., Ex. D, id., Ex. I). Together, these individuals formed the Global Trust Management Team, and the bank was named the Global Trust Bank.
On or about December 17, 1998, Arnold Cyr called Rose Louros and stated that he had established an agreement between an entity he controlled, Levite Holdings, and a Liechtenstein bank. (Id. ¶ 26(a)). Under this arrangement, Cyr stated, Rose and Helen Louros would have individual bank accounts with "the Liechtenstein Bank," "full control over [their] funds at all times," and their "funds would not be moved, liened, hypothecated or encumbered in any way." (Id.). Cyr's call was followed by a faxed memorandum confirming the aspects of the arrangement. (Id., Ex. J.). On December 22, 1998, Arnold Cyr called Helen Louros again and stated that "he had become part of the Global Trust Management Team and that all of plaintiffs' accounts and transactions would be through Global Trust Bank (not Levite Holdings)." (Compl., ¶ 26(c)). Cyr also gave plaintiff instructions of how to wire money to Global Trust Bank in Liechtenstein. (Id.; id., Ex. G). Cyr assured Rose Louros that each depositor's funds would be placed in a separate account; that the principal in the account was 100% guaranteed; that the depositor would have sole control over the account and could withdraw the principal at any time; that the funds would be used for a high yield investment program that was to begin in February 1999; and that no funds would be moved without the depositor's written consent. (Id. ¶ 26(c)(i)-(iv)). The high yield investment program was to last three months after which "Investors could roll over their deposits into another high yield investment program at Global Trust Bank." (Id. ¶ 26(e)(ii)).
Rose and Helen Louros completed powers of attorney naming James Sexton attorney-in-fact on December 18, 1998 and December 31, 1998, respectively. (Compl., Ex. I). As of January 4, 1999, Rose Louros had an account balance of $251,385. She instructed Arnold Cyr to roll $201,382 into the "Liechtenstein program" and to wire $50,000 back to her account at a bank in Los Angeles, California. (Id., Ex. P).
As of January 31, 1999, Helen Louros had almost $141,000 on deposit. (Id., Ex. N). In an undated letter to Helen Louros, Ken Adler stated that Account # 10 had been established for Helen Louros and that she had a balance of $140,372.31. He enclosed with the letter "an automatic funds transfer form ... to move a set percentage of [depositor's] `HOLDING ACCOUNT' funds into [depositor's] `ACTIVE ACCOUNT,'" and stated that a welcome pack, withdrawal request form and pin code authorization form would be sent under separate cover. (Id., Ex. F).
In December 1998 or January 1999, the arrangement with VP Bank ended, allegedly because a prospective depositor had called VP Bank directly to question the existence and structure of the Global Trust Bank. (Id., Ex. D). VP Bank apparently "took offense" to this call and viewed it as a "major breach of security." (Compl.Ex. D). Thereafter, Sexton established a relationship with a trust at another Liechtenstein bank called Landesbank. (Id.). In a phone call among Sexton, Johnson and McGeever, Sexton stated that initially the funds would be deposited in a trust called P.B. Global Investments and would then be transferred to a new trust that Sexton would establish. (Id.). "[U]nder the new scenario, all funds would be deposited into one account and ... [Adler and Wilkinson] would have to keep track of individual depositor's balances as a separate ledger until the new banking relationship was set up by Sexton." (Id.). Adler "was notified that he could no longer represent the entity as `Global Trust Bank'" and was instructed to change the paperwork. (Id.). The paperwork was changed to read "Global Trust Limited, Global Investments, Ltd.," and Adler continued to solicit new depositors.
Despite the fact that under the arrangement with Landesbank all the money would be deposited into one account, defendants repeatedly assured plaintiffs that their funds were deposited in individual accounts. On January 26, 1999, Adler faxed a memorandum to Rose and Helen Louros which stated that the Global Trust Management Team had established the Global Trust Limited Bank d/b/a Global Investments, Ltd.; that the bank was "a trust affiliate of Landesbank;" that plaintiffs funds were deposited in separate accounts; and that all deposits were guaranteed, dollar for dollar. (Compl. ¶ 26(g)(i)— (vi); id., Ex. E). On or about February 17, 1999, Cyr and Adler met with Rose Louros in New York to solicit her participation in high yield investment programs. (Id. ¶ 20). In February 1999, in a telephone call to Rose Louros, Johnson and McGeever reiterated that her funds were on deposit in an individual, separate account; that her funds were 100% guaranteed; that they would be used for a high yield investment program; that plaintiff had sole control over her account; and that her funds would not be moved without her express written permission. (Id. ¶ 26(d)).
According to Johnson and McGeever, in January 1999, Landesbank started rejecting wire transfers allegedly because "once again, someone had contacted the bank and/or sent a letter or documentation which caused the bank to discontinue deposits." (Id., Ex. D). By letter dated February 10, 1999, the Global Trust Management Team notified depositors that "the trade [the Management Team] authorized ran into problems having to do with [the Liechtenstein] privacy laws." (Compl., Ex. K). Defendants further stated, however, that the problems had been corrected and that they "ha[d] found the proper path to take and ... ha[d] committed to a trade, which should start in the next seven to ten business days." (Id., Ex. K). The letter concluded with a request for patience and cooperation as defendants tried to resolve the situation.
You are a valued participant and your patience, cooperation and understanding are greatly appreciated! All of the trial and tribulations, which we have gone through, are for your benefit. Once again, I ask you to hang in there. .... The...
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