Shams v. Fisher
| Decision Date | 13 July 2000 |
| Docket Number | No. 97 Civ. 8214 (CM)(MDF).,97 Civ. 8214 (CM)(MDF). |
| Citation | 107 F.Supp.2d 266 |
| Parties | Howard SHAMS; Joseph Shams; Robert Bonnett; Mac Swed, Inc.; Mac Swed, Inc. — Employees Pension Trust Fund; Phyllis Shams; Jeanette Shrem; Alexis Shantz; Ron Hyman; Gary Ginsberg; Elliot Ginsberg; Gertrude Linzer; Judi Bottoni; Phillip C. Bascle; Patsy Searcy; Jo Dweck; Merlin Seuzeneau; Jane Ariel; Evelyn Strouse; James M. Sullivan; Florence Posecai; Carolyn Kinemann; Elizabeth Murphy; Karla Sorenson; Karen Leavitt; and Henry Reinhart, Plaintiffs, v. Steven FISHER; Suri Fisher; Victor Fein; Hyman Fein; Fein Realty Management Corporation; and Winston Barrett Associates, Inc., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Kevin E. Maldonado, Pound Ridge, New York, for plaintiffs.
Suri Fisher, Monsey, New York, defendant pro se.
Steven K. Frankel, Frankel Rudder & Lowery, New York City, for Fein defendants.
Plaintiffs are 26 individuals who invested money in Bellerose Credit Corporation ("Bellerose"), based on their understanding that their investments were to provide secured financing for car loans extended by Bellerose. Defendant Steven Fisher is the sole officer of Bellerose, and the sole owner of Defendant Winston Barrett Associates, Inc., which has been dissolved. Defendant Pro Se Suri Fisher is Steven Fisher's wife. Defendant Hyman Fein is the father of Suri Fisher and Defendant Victor Fein. Hyman and Victor Fein each own 50 percent of Defendant Fein Realty Management Corporation. Plaintiffs allege that each of the individual Defendants engaged in a scheme to defraud them by diverting funds from Bellerose for Defendants' personal use and concealing the diversion of those funds. Before the Court are Plaintiffs' claims under the substantive and conspiracy provisions of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., as well as claims for fraudulent conveyance under New York Debtor and Creditor Law § 273, common law fraud and common law conversion.
All Defendants, except Steven Fisher, who has invoked the Fifth Amendment privilege against self-incrimination in this action, have moved for summary judgment. For the reasons that follow, their motions are granted.
The following facts, which are undisputed except as noted, are viewed in the light most favorable to Plaintiffs.
(1) Steven Fisher and the Operation of Bellerose
Defendant Steven Fisher, who is currently the subject of a criminal complaint filed by the United States Postal Inspector, has invoked the Fifth Amendment privilege against self-incrimination in declining to answer Plaintiffs' interrogatories. The Court may therefore draw an adverse inference against him. See Nabisco, Inc. v. P.F. Brands, Inc., 191 F.3d 208, 226 (2d Cir.1999) (citing Baxter v. Palmigiano, 425 U.S. 308, 318-320, 96 S.Ct. 1551, 47 L.Ed.2d 810 (1976)).
In or about 1991, Steven Fisher, with the aid of an $85,000 loan provided by his father-in-law, Hyman Fein, purchased Bellerose for approximately $150,000. Through that purchase, Fisher acquired Bellerose's license to finance car loans referred to Bellerose by various car dealerships. At the time Fisher purchased the corporation, Bellerose was one of a small number of finance companies licensed under New York State Banking Law Article XI-B to acquire installment contracts from retail installment sales of motor vehicles. Under this arrangement, consumers seeking to finance purchases of used cars who failed to qualify for conventional financing were referred to Bellerose. Pre-approved consumers were offered the opportunity to enter into a Finance Contract with their car dealer, who in turn would present the Contract to Bellerose for purchase.
Fisher then began to solicit loans from investors, including Plaintiffs. Specifically, each investor was mailed a Loan Agreement, Paragraph 3.1 of which stated that the proceeds of each loan "shall be utilized solely and exclusively [by Bellerose] to finance retail sales contracts," and that the loan proceeds "shall not be utilized by the Borrower for any other purposes, including but not limited to Borrower's operating expenses." (Loan Agreement, attached as Exhibit 1H to Memorandum of Defendant Suri Fisher.)
Fisher also executed Promissory Notes, as President of Bellerose, which he issued to Plaintiffs. The Notes provided that Bellerose was to repay the loan principal after three years with quarterly interest at a rate of 15-18 percent per annum.
In addition to the above-described Notes, from September through November of 1995, Bellerose issued a second series of Notes in a sum of approximately $125,000 with terms to maturity ranging from roughly one year to 18 months ("the Short Term Notes"). Fisher explained to the holders of the Short Term Notes that he was using the proceeds to repay a "certain other lender," and that the term of Plaintiffs' Notes would only be for the balance of the term of the Note, or Notes, of that undisclosed lender.
In total, the 26 Plaintiffs in this action together invested some $650,000 in Bellerose between 1991 and 1995.
The first loan repayments became due in late 1995. Despite repeated demands from Plaintiffs, Fisher refused to pay. Bellerose eventually sent checks to Plaintiffs, but those checks bounced. Fisher promised to send replacement checks and make direct deposits to certain Plaintiffs' accounts, but never did so. He made a number of false statements regarding the delay in repayment, including: (1) his co-signer was away on vacation and the checks could not be issued until the co-signer returned; (2) the Jewish holidays required him to delay issuing the checks; (3) Federal Express had failed to make proper delivery; and (4) Bellerose's bank had erred and returned checks for insufficient funds without justification. Fisher paid accrued interest to some of the Plaintiffs (precisely which of them received these payments is unclear from the record) but not principal, which was due on December 31, 1995.
Fisher and Bellerose again failed to make the scheduled quarterly interest payment due on March 31, 1996. Fisher admitted to certain unidentified Plaintiffs that he failed to take the necessary steps to make principal payments to the Plaintiffs, but claimed to have the ability to secure additional funds, either from new investors or bank financing, that would enable him to make the overdue repayments. Fisher also told Plaintiffs that he had set aside sufficient funds to make interest payments, but upon investigation, Plaintiffs discovered that Fisher was listed on "Check Systems," an interbank service used to identify potentially fraudulent customers or accounts, and that Fisher's accounts had been frozen. Fisher told the Plaintiffs that these were bank errors.
Additionally, at an unidentified point in time, Fisher agreed to collateralize loans to unspecified Plaintiffs with privately owned real property. He failed to deliver the title documents as promised, however, and subsequent title searches revealed that the real estate was fully encumbered with liens asserted by other Fisher creditors.
At about the same time, holders of the Short Term Notes contacted the unidentified individual whose Note Fisher claimed to have purchased with the $125,000 raised by the Short Term Notes. That individual's Note, the Short Term Note holders discovered, was for $10,000, not $125,000, as Fisher had told them.
Sometime afterwards, one Plaintiff (who is not identified) noticed that the payee on his check to Bellerose had been changed from "Bellerose Credit Corporation" to "Bellerose Credit Corporation and Steven Fisher."
In early September 1996, Fisher told the Plaintiffs that an undisclosed third party would repurchase the Notes of certain Plaintiffs, but withdrew the offer when Plaintiffs demanded an escrow.
On July 1, 1996, a group of Bellerose investors filed an involuntary petition for relief against Bellerose under Chapter 7 of the United States Bankruptcy Code. On September 20, the Debtor consented to the Order for Relief, and exercised its right under Code Section 706(a) to convert the involuntary proceeding to a case under Chapter 11 of the Code. In the course of that proceeding, Fisher submitted a false statement of assets and net worth of Bellerose to the Bankruptcy Court. Specifically, the statement represented that Bellerose maintained assets, in the form of secured loans, despite Fisher's knowledge that those loans had already been illegally converted to personal assets and no longer represented Bellerose's net worth.
At some point (that Plaintiffs do not specify) during the course of the bankruptcy proceedings, Fisher transferred title to a house that he owned in Rockland County from himself to Suri. According to Hyman Fein, neither Steven nor Suri ever lived in the Rockland County house, but rather, have lived in the same house with Hyman and his wife since 1993 or thereabouts. (Hyman Fein Dep. at 5-7.) Plaintiffs allege that Hyman Fein notarized certain documents in connection with the transfer of title, but Hyman testified that he did not recall doing so. (Id. at 7.)
(2) Suri Fisher
Suri Fisher's role at Bellerose was far less than was her husband's, although she clearly did some work for the company. Plaintiff Ron Hyman testified that, prior to Bellerose's bankruptcy, he saw Suri typing and answering phones on one occasion when he was in the Bellerose offices. (Ron Hyman Dep. at 14-15.) The parties dispute whether Suri Fisher solicited loans to Bellerose; however, the only evidence cited by Plaintiffs is the testimony of Plaintiff Jo Dwek, who said that Suri Fisher "made clear that [Bellerose] was a good investment" and told Dwek that "her sisters had invested and they're doing very well." (Jo Dwek Dep. at 14.)
After Bellerose was placed in bankruptcy, Suri...
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