Zigman v. Giacobbe
| Decision Date | 12 October 1996 |
| Docket Number | No. CV 96-1396 (ADS).,CV 96-1396 (ADS). |
| Citation | 944 F.Supp. 147 |
| Parties | Robert ZIGMAN, individually and on behalf of Finish Line Collision, Inc. and Finish Line Too, Inc., Plaintiffs, v. Michael GIACOBBE, Alyssa Dawn Giacobbe, Demetrio Giacobbe, Emil H. Schaefer, and Bobbie E. Gingold, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Murray & Hollander by Guy L. Heinemann, New York City, for Plaintiffs.
Brafman Gilbert & Ross, P.C. by Brett Gilbert, New York City, for Defendants Michael Giacobbe and Alyssa Dawn Giacobbe.
Capetola & Doddato by Anthony A. Capetola, Williston Park, NY, for Defendant Demetrio Giacobbe.
Richard S. Naidich, Bellmore, NY, for Defendants Emil H. Schaefer and Bobbie E. Gingold.
This lawsuit arises from the claims of the plaintiff, Robert Zigman (the "plaintiff" or "Zigman"), that the defendants have been "systematically looting" certain corporations in which he and several of the defendants maintain interests. According to Zigman, the defendants have deprived him of over $1.8 million in profits "principally by ... laundering vast amounts of income" through unrelated business entities. The plaintiff alleges that the defendants' unlawful conduct violates the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961-68 and New York Business Corporation Law §§ 626, 706(d), 716(c), 720, 1104 and 1202, and gives rise to common law claims for fraud, breach of contract, breach of fiduciary and other unidentified duties, and warrants imposition of a constructive trust.
The following facts are taken from the Complaint. The plaintiff, Robert Zigman is a resident of East Rockaway, New York and from July 1988 until May 1989 was married to the defendant Alyssa Dawn Giacobbe ("Alyssa"). The defendant Michael Giacobbe ("Michael") resides in Woodbury, New York and has been married to Alyssa since September 1993. The defendant Demetrio Giacobbe ("Demetrio") is a resident of Plainview, New York and is Michael's brother (collectively the "Giacobbes"). The defendant Emil H. Schaefer ("Schaefer") is a resident of Sands Point, New York and owns "Bay Bootery," a business located in Port Washington, New York. The defendant Bobbie Gingold ("Gingold") resides in Great Neck, New York and is Alyssa's mother.
In April 1992 Alyssa introduced Zigman to Michael for the purposes of opening and operating an auto body and repair shop in Valley Stream, New York. According to the Complaint, in June 1992 the plaintiff entered into a partnership (the "Body Shop Partnership") with Michael and Michael's brother Demetrio. According to the terms of the partnership agreement Zigman would invest $15,000 in cash and $17,000 in equipment in the business and was entitled to 35 percent of the profits. Michael was entitled to 35 percent of the profits and Demetrio was to receive the remaining 30 percent. In support of this allegation Zigman attaches to the Complaint a handwritten, unsigned, and undated page from what appears to be a calendar which states each partner's interest. Alyssa was to act as the partnership's bookkeeper and "de facto" treasurer.
On June 26, 1992, the parties incorporated Finish Line Collision, Inc. "Finish Line 1," the nominal owner of a body shop located in Valley Stream, New York. On June 21, 1993, the parties incorporated Finish Line Too, Inc. as the nominal owner of a body shop located in Garden City Park, New York. Apparently, both of these body shops do business under the name "Finish Line Collision."
According to the plaintiff, since 1992, the Giacobbes "took control of all of the corporate bookkeeping and accounting for Finish Line 1, and later Finish Line Too," and advised him that all income was necessary to meet expenses, thereby leaving no profit. In reality however, states Zigman, the Giacobbe defendants "concealed from laintiff the true amount of gross income and profits being earned by both body shops and, therefore, the Body Shop Partnership.
Zigman alleges that the Giacobbes would negotiate checks constituting claims payments from insurance companies or personal checks from customers through the bank accounts of third parties such as Bay Bootery, owned by defendant Schaefer. The customers' checks would be endorsed to a bank for Bay Bootery's account. Schaefer would then withdraw the money as cash, disburse it to Michael and Alyssa with a fee deducted to pay for Schaefer's assistance. As evidence of these transactions, Zigman alleges that between June 1992 and October 1995, and continuing thereafter, monthly bank statements reflect credits to Bay Bootery's account representing checks for "substantial sums" which were otherwise payable to the Body Shop Partnership. Further, on March 14, 1995, Michael and Alyssa caused a company referred to only as Traina Enterprise, Inc. to mail a check in the amount of $1,080, apparently for some type of automotive repair "to Michael Giacobbe to Finish Line Too." The check was then deposited in a Bay Bootery account. Similar schemes were used with the businesses' vendors including companies referred to as "American Auto Body Supplies" and "Albert Kemperle Auto Body Supplies, Inc.," although no specific examples with respect to these third parties are alleged.
In addition, Michael and Alyssa have used the bank account of Alyssa's mother, Bobbie Gingold to conceal income from the plaintiff. For example, according to Zigman, on January 24, 1996, Alyssa transferred an amount in excess of $20,000 to Gingold's bank account in order to conceal the money. Then on January 30, 1995, "Gingold caused a check to be issued by Aetna for repairs to a Lincoln automobile and thereafter caused said check for over $7,000 to be negotiated in a manner that the Body Shop Partnership and Finish Line did not receive the funds."
Similarly, according to the Complaint, Demetrio would have customers make checks out to him personally so that the money could be diverted from the Body Shop Partnership. For example, on December 3, 1993, Demetrio requested that a customer, referred to as Kathleen Kerr, pay a repair bill in the sum of $8,973.28 by a check payable to him personally. The check was then deposited in Demetrio's personal account in National Westminster Bank ("NatWest"). On April 15, 1994 Demetrio requested that a second customer referred to only as "Shane" pay for automotive services by a check for $1,000 payable to cash. This check was also deposited directly into Demetrio's NatWest account. On September 23, 1994, Demetrio had a third customer referred to as Beatrice Levine pay for services with a check made out to cash which was never deposited into a Finish Line Collision account.
Examples of Michael's alleged unlawful conduct include similar diversions. According to the Complaint, Michael maintained an "unusually close relationship with supervising adjusters at Federal Insurance Company." This relationship allowed him to obtain payment checks directly which he then negotiated to third parties "outside of the business accounts." According to Zigman, in September 1993, Michael and Alyssa processed a "flood damage claim" with Federal using false invoices of Graham Restoration Company. On May 11, 1994, Michael and Alyssa caused Federal Insurance Company to mail a check to Finish Line Collision jointly with Ford Motor Company. In July 1995 Michael caused an agent of Federal to mail an "approved estimate" authorizing the payment of over $27,000 in repairs to a "late model Mercedes" at Finish Line Too. On July 10, 1995 Federal issued a check in the amount of $27,796.37 for repairs to the Mercedes. The check however, was payable to a company identified only as Bristol Manor.
Although Zigman admits that he has been unable to obtain all of the financial records from Finish Line 1 and Finish Line Too, given the records he does have, he estimates that the profits unreported to him amount to over $1.8 million. According to the plaintiff this "wide scale embezzlement" permitted Michael and Alyssa to purchase a "large" home in Woodbury, a second home in Port Washington and lease "expensive" cars. Further, Zigman alleges that a third body shop, "Finish Line 3" was incorporated by the Giacobbe's on October 31, 1995. Although the plaintiff alleges that he has no involvement with this third shop, he contends that it was established with the proceeds from the first two locations.
In addition to these concealments, the plaintiff alleges that the defendants also made several unlawful misrepresentations to him in violation of their fiduciary obligations as "de facto" officers, agents and co-owners of closely held corporations, including their duty to disclose all relevant financial information and their duty of loyalty. These alleged misrepresentations include the following:
1. During the period from June 1992 throughout 1994, Alyssa continually misrepresented that the business was not making any profit.
2. In June 1993, Michael, in the presence of Demetrio, advised Zigman that Finish Line 1 was in such financial distress that the business would "have to be closed down."
3. In October 1993, Alyssa advised the plaintiff that Finish Line Too would have to "produce more income to be able to survive."
4. In March 1994 Alyssa informed Zigman that Finish Line Too was "paying ... the bills for Finish Line 1."
5. Also in March 1994 Michael and Alyssa represented that the business was in such distress that the plaintiff would have to use his own automobile for business purposes.
6. In January or February 1995, Alyssa stated that she had never misrepresented the companies' finances despite the evidence to the contrary.
7. In April 1995 Michael, while considering a site for a third shop...
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