Walco Investments, Inc. v. Thenen

• Decision Date: 23 October 1996
• Docket Number: No. 93-2534-CIV.,93-2534-CIV.
• Citation: 947 F.Supp. 491
• Parties: WALCO INVESTMENTS, INC., et al., Plaintiffs, v. Kenneth THENEN, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

Page 491

947 F.Supp. 491

WALCO INVESTMENTS, INC., et al., Plaintiffs, v. Kenneth THENEN, et al., Defendants.

No. 93-2534-CIV.

United States District Court, S.D. Florida.

October 23, 1996.

Harley S. Tropin, Miami, FL, Receiver for Premium Sales Corp.

Marc Cooper, Cooper & Wolfe, P.A., Miami, FL, for the Receiver.

David Berger, Stephen Whinston, Berger & Montagne, P.C., Steering Committee, Philadelphia, PA.

Michael A. Hanzman, Hanzman & Criden, P.A., Steering Committee, Miami, FL.

Dean Colson, Joseph M. Matthews, Enid Duany Mendoza, Colson, Hicks, Eidson, Colson & Matthews, P.A., Steering Committee, Miami, FL.

Aaron Podhurst, Podhurst, Orseck, Josefberg, Eaton, Meadow, Olin & Perwin, P.A., Miami, FL, for Liaison Entities.

Steve Turner, U.S. Department of Justice, Office of the U.S. Trustee, Miami, FL.

Charles Harper, U.S. Sec. & Exchange Comm'n, Miami, FL.

Edward Stamm, Ass't U.S. Attorney, S. District of Florida, Miami, FL.

Michael Stengel, Memphis, TN, for Kelly Thomas.

Steve Naturman, Jerry M. Markowitz, Markowitz, Davis and Ringle, Miami, FL, for County Nat'l Bank.

Neil Flaxman, Coral Gables, FL, for Mike Flynn.

Paul Singerman, Strook & Strook & Lavan, Miami, FL.

Laurie S. Whittaker, Whittaker and Whittaker, P.A., North Miami, FL, for Premium Sales of Miami, Ltd. and Premium Sales Management, Inc., Jack Yoches.

Mark P. Schnapp, Holly Skolnick, Greenberg, Traurig, Miami, FL, for Deckelbaum Defs.

Jane W. Moscowitz, Baker & Moscowitz, Miami, FL, for PSEC Defendants.

Richard E. Brodsky, P.A., Miami, FL, for Larry and Neil Sazant.

David M. Levine, McDermott, Will & Emery, Miami, FL, for Expo Associates, Inc.

Stanley Wakshlag, Akerman Senterfeit Eidson, P.A., Miami, FL, for Capital Bank.

Jeffrey H. Beck, Ruden, Barnett, McClosky, Smith, Schuster & Russell, P.A., Ft. Lauderdale, FL, for DBRN Limited Partnership and Meldin, Inc.

Charles Pugatch, Ft. Lauderdale, FL, for Demets.

David M. Fromer, New York City, Pro Se.

Larry D. Yogel, Bala Cynwyd, PA, Pro Se.

Alvin Davis, Steel, Hector & Davis, Miami, FL, for (92); Cimbs Inv. (92), Inc.; Hawco Equities, Inc.; & Henry and Leslie Weitzman.

Hugo L. Black, Jr., Joseph W. Beasley, Jr., Kelly, Black, Black, Byrne & Beasley, P.A., Miami, FL, for Pueblo Int'l.

Stephen H. Cypen, Cypen & Cypen, Miami Beach, FL, for Pueblo Int'l.

Eric Lee, Jan Douglas Atlas, Atlas Pearlman Trop & Borkson, P.A., Ft. Lauderdale, FL, for Hank Bleier and HB Investments, Inc., HB Investments, II.

Mel Brink, Livermore, CA.

Malcolm Fromberg, Gary Dumas, Fromberg, Fromberg, Lewis & Brecker, Aventura, FL, for Charlie Valvo.

Joel Hirschhorn, Coral Gables, FL, for Zvi Yuz, Peter Arak, Maccabi Food Corp., Carmel Food Corp., Maccabi Food Miami, Ltd., Carmel Food Miami, Ltd. & Golani Food Miami.

Andrew Cotzin, Broad and Cassel, Miami, FL, for Defs. Marvin Biltis; Prestige Inv. Ltd.; Miracle Inv. I; Miracle Inv. IA; Miracle Inv. IB; Parkland Inv.; Bilmar Capital; and Bilmar Sales, Inc.

Sue Price, Ft. Lauderdale, FL, Pro Se & for Marathon Enterprises.

Herbert Stettin, Miami, FL, for Def. Malone & Hyde, Inc. and Fleming Companies, Inc.

Reid E. Robison, McAfee & Taft, Oklahoma City, OK, for Fleming Co., Inc. and Malone & Hyde, Inc.

James F. Gilbride, Gilbride, Heller & Brown, P.A., Miami, FL, for Daniel Morris.

Stanley A. Beiley, Hornsby, Sacher, Zelman, Stanton, Paul & Beiley, P.A., Miami, Florida, for Premium Sales, 1990, Ltd.; Premium Special Purchases, Ltd.; Premium Income Advantage Fund, Ltd.; Can-Am; and General Partnership of Sherry Walde, Trustee.

Barry D. Hunter, Brown, Todd & Heyburn, PLLC, Lexington, Kentucky, for Premium Sales, 1990, Ltd.; Premium Special Purchases, Ltd.; Premium Income Advantage Fund, Ltd.; Can-Am; and General Partnership of Sherry Walde, Trustee.

Lawrence M. Schantz, Schantz, Schatzman & Aaronson, Miami, FL, for Stern.

Steven R. Woods, Miller & Woods, West Palm Beach, FL, for Longs Drug Stores of California, Inc.

Fred M. Cohen, Rancho Cucamonga, CA, for Shirley.

Isaac J. Mitrani, Mitrani, Rynor & Gallegos, P.A., Miami, FL, for Sherry Walde.

B. Wayne Olivie, Miami, FL, for Dean Henrichs.

John K. Aurell, Ausley & McMullen, Tallahassee, FL, for Cadwalader, Wickersham & Taft.

Vincent Connelly, Mayer, Brown & Platt, Chicago, IL, for Baker & McKenzie.

Michael Nachwalter, Kenny, Nachwalter, Seymour, Arnold, Critchlow & Spector, P.A., Miami, FL, for Baker & McKenzie.

Edward Moss, Anderson, Moss & Sherouse, P.A., Miami, FL, for Harris Mitchell; Harold Sazant; Irwin Altman ["The Marg Corp. directors"].

Mark Hicks, Hicks, Anderson & Blum, P.A., Miami, FL, for Harris Mitchell; Harold Sazant; Irwin Altman; The Marg Corp. ["directors"].

David Schatia, West Mount, Quebec, Canada, Pro Se.

Bernard W. Sultan, Creditors' Committee, North Miami Beach, FL.

Irving Canner, Creditors' Committee, North Miami Beach, FL.

Gary S. Brooks, Zack, Sparber, Kosnitzky, Truxton, Spratt & Brooks, P.A., Miami, FL, for County Nat'l Bank & Lawrence Robinette.

Steven Eisenberg, Hinshaw & Culbertson, Miami, FL, for The Burmans and The Bornsteins.

Daniel L. Silverberg, Los Angeles, CA, for Bernard Schachter, JASAB Inv. and TAJ Inv.

Edward R. Shohat, Bierman, Shohat, Loewy & Perry, P.A., Miami, FL, for Thenen.

S. Alan Stanley, Coconut Grove, FL, for Judith Krovetz.

Steven Mishan, Andrew B. Hellinger, Mishan, Sloto, Hoffman & Greenberg, Miami, FL, for Creditors Committee.

Howard I. Weiss, Henry B. Handler, Weiss & Handler, P.A., Boca Raton, FL, for Def. Feinberg.

Max M. Klass, Phoenix, AZ, for Dean Henrichs.

Bruce J. Berman, Weil, Gotshal & Manges, Miami, FL, for Stanford Trading, Inc.

Marty L. Steinberg, Holland & Knight, Miami, FL, for Fry's Food.

Paul Braid, Coconut Creek, FL, Pro Se.

Norman Malinski, Aventura, FL, for Birdman.

Charles H. Lichtman, Charles H. Lichtman & Assoc., P.A., Plantation, FL, for Consol. Fund of America.

Gary D. Fox, James B. Tilghman, Stewart Tilghman Fox & Bianchi, P.A., Miami, FL, for Lipson/Stern Partnerships.

William C. Hearon, Miami, FL, for Lipson/Stern Partnerships.

Jeffrey M. Weissman, Weissman & Dervishi, P.A., Ft. Lauderdale, FL, for Sheila Klee/Ira Posner and Alba/Arnold Oblonsky.

Kenneth G. Hausman, Helane L. Morrison, Matthew J. Jacobs, Howard Rice Nemerovski Canady Falk & Rabkin, San Francisco, CA, for Long's Drug.

Rudolph F. Aragon, Aragon, Martin, Burlington, Weil & Crockett, P.A., Miami, FL, for Long's Drug.

Stuart H. Singer, Daniel A. Casey, Kirkpatrick & Lockhart, Miami, FL, for The Vons Companies.

Gregory P. Stone, Munger, Tolles & Olson, Los Angeles, CA, for The Vons Companies.

Rosenthal, Rasco & Stok, N. Miami Beach, FL, for Equitable Bank.

Alex Hofrichter, Miami, FL, for Federal Ins. Co.

MEMORANDUM OPINION DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT REGARDING THE STANDING OF THE CLASS

MORENO, District Judge.

Class Plaintiffs are individual investors in numerous funding entities whose sole purpose was to provide funds for investment in the Premium Corporations, a diverter of grocery and beauty aid products. Unfortunately for the 1,400 members of the Plaintiff Class, the Premium Corporations were formed to conduct an elaborate "Ponzi" scheme involving sham grocery transactions whereby the funds of new investors were used to pay earlier investors. Both Plaintiffs and movant Defendants claim that the individual Funding Entities, through their promoters, were either participants in or had knowledge of this fraudulent scheme involving non-existent transactions. The Plaintiffs claim that Defendants The Vons Companies, Inc., Pueblo International, Inc., and Stanford Trading, Inc., through their agents or employees, confirmed fictitious grocery transactions, thereby creating the appearance of a legitimate grocery diverting business. Based on these false confirmations, Class members were fraudulently induced to make their funds available for investment in the Premium Corporations, and this complaint, alleging federal and Florida RICO violations as well as common law fraud, ensued. Because the investors suffered direct injury traceable to the unlawful conduct of the Defendants, including the Funding Entities, the Plaintiffs cannot be required to depend on the Funding Entities to properly pursue their claims. Therefore, the Court finds that the Class has standing to raise claims against all alleged participants in the fraud and DENIES the Defendants' Motions for Summary Judgment.

BACKGROUND

Lone Star Trading Corporation, Premium Sales Corporation, and Plaza Trading Corporation, and other subsidiaries (the "Premium Corporations") were founded by Ken Thenen and Dan Morris ("the Insider Defendants") in 1986. The Premium Corporations were in the "grocery diverting" business. Diverting involves the practice of buying large quantities of grocery items at discounts offered in limited geographical areas and then reselling these same products at a large profit in other parts of the country where such discounts are not available. Diverting is not in itself illegal.

In order to raise cash to meet their working capital needs, the Premium Corporations offered potential investors an exorbitant rate of return, typically between 25 to 60 percent. All such investments in the Premium Corporations were made through business entities ("Funding Entities") formed exclusively to make funds available for investment in the Premium Corporations which served as the conduit for the fraud orchestrated by the Insider Defendants.

The Funding Entities were organized in different forms. The Expo Associates and its related entities ("Expo") invested directly in the Premium Corporations. The Sazant Funding Entities, which split from Expo sometime in 1989, were limited partnerships, each offering their investors limited partnership shares. The Stern-Lipson Funding Entities were general partnerships, and its investors were general partners given exclusive rights to sue on behalf of the general partnerships. The Stern-Lipson partnerships...