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DAVID W. SCOFIELD - 4140 PETERS š SCOFIELD A Professional Corporation 7430 Creek Road, Suite 303 Sandy, Utah 84093-6160 Telephone: (801) 322-2002 Facsimile: (801) 912-0320 E-mail: [email protected]
Attorneys for Brian Bagley and L. Carol Bee, Creditors
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF UTAH
In re:
BARRY DON HUNTER; and Bankruptcy Case No. 12-26860WTT KIMBERLY CHAMPLIN HUNTER, (Chapter 7)
Debtors. ______
BRIAN BAGLEY AND L. CAROL BEE,
Plaintiffs, FIRST AMENDED COMPLAINT TO DENY -vs- DISCHARGE UNDER 11 U.S.C. § 727, TO DETERMINE NON-DISCHARGEABILITY BARRY D. HUNTER; KIMBERLY CHAMPLIN PURSUANT TO 11 U.S.C. § 523 AND HUNTER; PORTFOLIO MANAGER FURTHER RELIEF INTERNATIONAL L.L.C.; ONEIROS TECHNOLOGIES L.C.; MICHAEL J. WRIGHT; CYNTHIA L. WRIGHT; GREGORY B. MADSEN; LUCIDITY MANAGEMENT, LLC; VOLITION TRADING COMPANY, LLC; CHURCH OF SCIENTOLOGY OF UTAH; Adv. Proc. No. 12-02544 CYNTHIA L. WRIGHT; CHURCH OF SCIENTOLOGY MISSION OF SALT LAKE Honorable William T. Thurman CITY; CHURCH OF SCIENTOLOGY INTERNATIONAL; TOM BURTON; JAMES D'AREZZO; ALAN S. FARR; GEORGE [FILED ELECTRONICALLY] HITES; GREG KINGDON; DAVID PETERSEN; ROBBY J. STOWE; SANDOR SZANISZLO, JURY TRIAL DEMANDED
Defendants. Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 2 of 105
Plaintiffs Brian Bagley (“Bagley”) and L. Carol Bee (“Bee”), for their claims
against defendants Barry D. Hunter (“Hunter”); Kimberly Champlin Hunter (“Kimberly”);
Portfolio Manager International L.L.C. (“PMI”); Oneiros Technologies L.C. (“Oneiros”);
Michael J. Wright (“Wright”); Cynthia Wright (“Cynthia”); Gregory B. Madsen (“Madsen”);
Lucidity Management, LLC (“Lucidity”); Volition Trading Company, LLC (“Volition”);
Church of Scientology of Utah (“Utah Church”); Cynthia L. Wright (“Cynthia”); Church of
Scientology Mission of Salt Lake City (“Utah Mission”); Church of Scientology
International (“Church”); Tom Burton (“Burton”); James D’Arezzo (“D’Arezzo”); Alan S.
Farr (“Farr”); George Hites (“Hites”); Greg Kingdon (“Kingdon”); David Petersen
(“Petersen”); Robby J. Stowe (“Stowe”); Sandor Szaniszlo; (“Szaniszlo”), allege as
follows:
PARTIES
1. Bagley is an individual residing in the State of Utah.
2. Bee is an individual residing in the State of Utah.
3. Hunter is an individual residing in the State of Utah who, at all times
through the dissolution of PMI in October, 2011 was its sole or majority owner. Upon the
dissolution and winding up of PMI, the assets of PMI were required to be treated in
accordance with UTAH CODE ANN. § 48-2c-1308, which provides: (1) After dissolution,
and during winding up, the assets of the company shall be applied to pay or satisfy: (a)
first, the liabilities to creditors other than members, in the order of priority as provided by
law; (b) second, the liabilities to members in their capacities as creditors, in the order of
priority as provided by law; and (c) third, the expenses and cost of winding up. (2)
Company assets remaining after application under Subsection (1) shall be allocated and
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distributed to the members as provided in the articles of organization or operating agreement, or if not so provided, in accordance with the members' final capital account balances after allocation of all profits and losses including profits and losses accrued or incurred during winding up.” In all his acts alleged, Hunter acted as an agent for each of the conspiracy, the Church, the Utah Church, the Utah Mission, Wright, Oneiros and
PMI, and he acted within the course and scope of that agency.
4. Kimberly is an individual residing in the State of Utah, is a Co-Debtor in the main bankruptcy case, having filed a joint voluntary petition for relief under Chapter
7 of Title 11 of the UNITED STATES CODE on May 25, 2012. At material times hereto,
Kimberly was a member of the Board of Directors of the Utah Mission and controlled its operations under the oversight of the Utah Church and the Church. At all times,
Kimberly acted as an agent for the Church, the Utah Church and the Utah Mission and she acted within the course and scope of that agency.
5. PMI is a Utah limited liability company that was formed on June 21, 2005 and which expired on October 4, 2011. At all material times in its existence, PMI held an exclusive license from Oneiros to allegedly valuable software technology invented by
Wright and owned by Oneiros. PMI at all times was an alter ego of Wright, Oneiros, the
Church, the Utah Church and the Utah Mission and an agent of the conspiracy which acted within the course and scope of that agency.
6. Wright is an individual residing in the State of Utah who created a Utah limited liability company named Portfolio Manager, L.C., in 2002. At times material to this adversary proceeding Wright was the President of the Utah Church, in charge of all of its operations and the oversight of the Utah Mission under the direction of the Church.
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Wright also owns, with Cynthia, the building from which the Utah Church, the Utah
Mission, PMI and Oneiros operated. In all his acts alleged, Wright acted as an agent for each of the Church, the Utah Church, the Utah Mission, Hunter, Oneiros and the conspiracy, and he acted within the course and scope of that agency.
7. Madsen is an individual residing in the State of Utah who created a Utah limited liability company named Portfolio Manager, L.C., in 2002. Madsen was responsible, along with Wright, for the design and programming of Oneiros’ purported investment software by which the co-conspirators sought to solicit investment in PMI as part of their high-yield investment scheme. Madsen was also involved in discussions as early as 2004 with the co-conspirators to establish PMI as a source of soliciting investment funds.
8. Oneiros is a Utah limited liability company that was formed on April 23,
2002 under the name Portfolio Manager, L.C., with Wright and Madsen as its members.
On March 21, 2006, Madsen executed Articles of Amendment changing the company’s name to Oneiros Technologies L.C. Oneiros thereafter expired on or about July 31,
2007. Oneiros remained expired at least through January 26, 2010, thereby subjecting both Wright and Madsen to personal liability for all conduct of Oneiros between at least those dates. By May 2, 2011, Oneiros had been brought current and on that date
Articles of Amendment were filed to allow Oneiros to engage in FOREX trading activities involving the trading of foreign currencies in futures markets. That same date,
Oneiros filed its Annual Report, changing the principal address of Oneiros to the former principal business address of PMI, 353 East 400 South, Suite 302, Salt Lake City, Utah and changing the registered agent from Madsen to Wright. On information and belief,
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PMI had spent approximately $1 million purportedly building out those premises, when it occupied them. Oneiros at all times was an alter ego of Hunter, Wright, PMI, the
Church, the Utah Church and the Utah Mission.
9. Lucidity is a Utah limited liability company created on May 19, 2008, by
Christopher David Hales (“Hales”), a convicted felon now serving time in a federal penitentiary, Benjamin J. Davis (“Davis”) and Daniel Mark Burbank (“Burbank”). One purpose for the formation of Lucidity was for it to operate as a source of solicitation and procurement of investor funds directly for PMI and to funnel other funds obtained illicitly to PMI and others. Lucidity dissolved on September 1, 2009. For all intents and purposes, Lucidity was and is the alter ego of Wright, Oneiros, PMI and Hunter. Lucidity at all times was an alter ego of or agent acting for and within the scope of the agency granted by Hunter, Wright, PMI, Oneiros, the Church, the Utah Church and the Utah
Mission.
10. Volition Trading Company, LLC is a Utah limited liability company created on June 3, 2010 by convicted felon Hales and a putative Nevada corporation named
Epicenter Trading, Inc. One purpose for the formation of Volition was for it to operate as a source of solicitation and procurement of investor funds directly for PMI and to funnel other funds obtained illicitly to PMI and others. Volition dissolved on October 4, 2011, the same day that PMI expired. For all intents and purposes, Volition was and is the alter ego of Wright, Oneiros, PMI and Hunter. Epicenter Trading, Inc.’s principals include Kevin W. Jones and Matthew E. Poll, who, together with Epicenter Trading, Inc., are also the principals of a company known as Freedom Wealth Group, LLC (FWG).
FWG, not coincidentally, offers to teach investors how to FOREX trade and uses an
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advertisement that claims to reduce the amount of risk in FOREX trading just as PMI
claimed to eliminate the risk in stock trading. FOREX trading, as stated above, is the
new business of Oneiros. Two FWG marketing agents are currently under an
administrative order to show cause from the Division of Securities of the Department of
Commerce of the State of Utah why they should not be, among other things, ordered to
cease and desist their commission of securities fraud.1 Volition at all times was an alter ego of or agent acting for and within the scope of the agency granted by Hunter, Wright,
PMI, Oneiros, the Church, the Utah Church and the Utah Mission.
11. Utah Church is a Utah corporation organized on March 14, 1969. Co- schemer Wright was the President of the Utah Church during the time that solicitations
were made from the plaintiffs. Utah Church maintained its office in the same location as
PMI and Oneiros during that time.
12. Utah Mission is a Utah corporation organized on August 27, 2004. Utah
Mission is responsible for the lower-level “auditing” courses in Scientology and enjoys a tax exempt status under section 501(c)(3) as part of a “group exemption ruling” with the
Church. The Utah Mission, like all Scientology missions, operates the “front lines dissemination activity for Scientology” with the purpose of “actively sending a large flow of new public members to its local organization.”2 Utah Mission is required by the
Church to pay ten percent (10%) of its gross income to the Church.
13. Cynthia L. Wright was at all material times a member of the Board of
Directors of the Utah Mission and controlled its operations under the oversight of the
1In re Daly, Case No. SD 12-0017 & In re Johnson, Case No. SD 12-0018.
2http://en.wikipedia.org/wiki/Scientology_Missions_International
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Utah Church and the Church. Cynthia also owns, with Wright, the building from which the Utah Church, the Utah Mission, PMI and Oneiros operated.
14. The Church, a California corporation, within the worldwide network of
Scientology corporations and entities, is officially referred to as the “mother church” of the Church of Scientology. According to the official website of the Church of
Scientology, the Church “provides overall direction, planning and guidance for the network of churches, missions, field auditors and volunteer ministers which comprise the Scientology hierarchy it spans, and ensures these various organizations are all working effectively together.” The Church “broadly plans and coordinates Scientology expansion. This planning is then carried out by the individual networks of organizations which comprise ecclesiastical management at the continental echelon. Through CSI’s ecclesiastical management activities, Scientology churches receive guidance in applying the scriptures both technically and administratively.” The Church “addition[ally] guid[es] the growing Scientology hierarchy . . ..”
15. Burton is an individual and resident of the state of California. Burton was ostensibly an original managing member of PMI but was purportedly removed from that position as of December 31, 2007. At various times, including at the time of PMI’s dissolution, it has been represented that Burton is a member of PMI. At other times, he has been represented to be a creditor, having purported to loan PMI $44,500.00. Burton entered into an agreement with PMI to function as the “establishment officer” (a
Scientology term) to oversee all of the activities required to put the organization in place, including infrastructure, processes, technology and the like, to facilitate PMI’s operations. In exchange for this agreement, Burton ostensibly received $40 per hour
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plus investment opportunities and “special perks” under this agreement. Burton is a
control person of PMI, having been represented to be on its board of “advisers.”
16. D’Arezzo is an individual and resident of the state of California. D’Arezzo
is represented to be, as of the time of PMI’s dissolution, a member of PMI. At other times, he has been represented to be a creditor, having purported to loan PMI
$100,000.00. D’Arezzo is a control person of PMI, having been represented to be on its
board of “advisers” according to a Hunter email dated February 19, 2009. D’Arezzo
specifically advised PMI concerning its dealings with convicted felon co-schemer Hales.
17. Farr is an individual and resident of the state of Utah. Farr was at material
times a member of the Board of Directors of the Utah Mission. Farr is represented to be,
at the time of the dissolution of PMI, one of its members. At other times, he has been
represented to be a creditor, having purported to loan PMI $100,000.00. Farr’s wife,
Carol Farr, purports to have loaned PMI another $50,000.00. Farr is a control person of
PMI, having been represented to be on its board of “advisers.”
18. Hites is an individual and resident of the state of California. Hites is
represented to be a member of PMI as of the time of its dissolution. At other times, he
has been represented to be a creditor, having purported to loan PMI $85,000.00. Hites
purportedly entered a subscription agreement with PMI through his independent entity
Infinity Catamaran located in the Carribean on January 7, 2008. Hites is a control
person of PMI, having been represented to be on its board of “advisers.”
19. Kingdon is an individual and resident of the state of Utah. Kingdon is
represented to be, at the time of the dissolution of PMI, one of its members. At other
times, he has been represented to be a creditor, having purported to loan PMI
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$100,000.00. Kingdon is responsible for bringing Michael Baybak (“Baybak”) into PMI to invest. Baybak is a major contributor to the Church and a variety of its entities. At least one co-schemer has represented that Baybak contributed over $20 million to the
International Association of Scientologists (IAS). Kingdon solicited additional high- wealth investors in PMI. Kingdon is also a control person of PMI.
20. Petersen is an individual and resident of the state of Utah. Petersen was at material times a member of the Board of Directors of the Utah Mission. Petersen is represented to be, at the time of the dissolution of PMI, one of its members, ostensibly having invested $150,000.00 in PMI. At other times, he has been represented to be a creditor, having purported to loan PMI $300,500.00. Hunter solicited Petersen to become a managing member of PMI. Hunter also offered to give up a portion of
Hunter’s ownership of PMI, from the 100% Hunter represented he owned, such that
Hunter would keep somewhere between 70% to 90% of PMI. Petersen is a control person of PMI, having been represented to be on its board of “advisers.”
21. Stowe is an individual and resident of the state of Utah. Stowe is represented to be, at the time of the purported dissolution of PMI, one of its members.
22. Szaniszlo is an individual and resident of the state of California. Szaniszlo is represented to be, at the time of the dissolution of PMI, one of its members and was present during discussions in 2004 between the co-conspirators regarding the organization and establishment of PMI for the purpose of soliciting investment funds to trade using Oneiros’ software. Szaniszlo is a control person of PMI, having been represented to be on its board of “advisers.”
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JURISDICTION
23. Hunter is a Co-Debtor in the main bankruptcy case, Case No. 12-26860
WTT, having filed a joint voluntary petition for relief under chapter 7 of Title 11 of the
United States Code on May 25, 2012 with his wife, Co-Debtor Kimberly.
24. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(a)
and (b) and 28 U.S.C. § 157(a), (b) and (c). The present adversary proceeding is
brought pursuant to Federal Rules of Bankruptcy Procedure 7001(1)-(2), (6)-(7), (9) and
includes core proceedings as defined in 28 U.S.C. § 157(b)(2)(A), (F), (H)-(K) and (O).
This Court has jurisdiction over the non-core claims under 28 U.S.C. § 1334(b) and may
hear them pursuant to 28 U.S.C. § 157(c) as “otherwise related” proceedings. The core
proceedings require that the Court assess such matters as the disregard of corporate formalities in operating PMI and other entities, the use of PMI and other entities as
Hunter’s own pocket book, the use of PMI and other entities by Hunter and others for an
illegal and fraudulent purpose, viz., to operate High Yield Investment Programs and a
Ponzi scheme, that Hunter transferred money freely and without rhyme or reason
between PMI and himself and related persons and entities, that Hunter used other
persons and entities in an effort to evade the securities laws of the United States, ans
that Hunter violated the analogous securities laws of Utah as well as participating in
conspiracies to violate securities laws, claims arising under the Racketeer Influenced
and Corrupt Organizations (RICO) Act, 18 U.S.C. §§ 1961, et seq., and other intentional
torts and crimes. In the course of committing those violations, monies were procured,
used and transferred in such a fashion that all or a substantial part of such funds should
be recovered by the Debtors’ estate and used to pay plaintiffs and possibly other
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creditors who have not been named.3 The resolution of those other claims necessarily
relates to the determination of the objection to discharge generally and to the
dischargeability of the alleged debt in the core proceeding. The Court also has original jurisdiction over the claims asserted under 18 U.S.C. 1964(c) pursuant to 28 U.S.C. §
1331 in that they arise under the Constitution, laws, or treaties of the United States.
Finally, because all other claims are so related to claims in the action within the original jurisdiction of the district court under 28 U.S.C. §§ 1331 and 1334(a) that they form part of the same case or controversy under Article III of the United States Constitution, this court has jurisdiction over those claims pursuant to 28 U.S.C. § 1367.
25. This proceeding arises in and is related to Bankruptcy Case No. 12-
26860-WTT.
26. Venue is proper in this district pursuant to 18 U.S.C. § 1965(a), 28 U.S.C.
§§ 1331, 1391, 1409(a).
STATE COURT ACTION
27. On August 20, 2010, plaintiffs in this action filed a complaint against
Hunter, some of the other defendants in this adversary proceeding, and some other co-
schemers who, although not named in this adversary proceeding as parties, will be
identified for their roles in the overall criminal schemes, in the Third District Court, Salt
Lake County, State of Utah, Case No. 100915648 MI (the “State Court Action”). A
genuine copy of the Complaint in the State Court Action is attached hereto as Exhibit A,
and its allegations are incorporated herein by this reference.
3In addition to the powers of this court in proceedings under Title 11 to recoup assets of the debtor, 18 U.S.C. § 1964(a) explicitly authorizes equitable relief involving divestiture, dissolution and reorganization as remedies for violations of section 1962.
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28. On September 20, 2010, Hunter, along with co-schemers Wright, Oneiros
and PMI, through their counsel of record in the State Court Action, Richard F. Ensor
(“Mr. Ensor”), filed his answer in the State Court Action.
29. As of on May 25, 2012, when Hunter, as a Co-Debtor with his wife,
Kimberly, filed their petition for relief in the main bankruptcy, Case No. 12-26860 WTT,
Hunter had been litigating in the State Court Action with the same plaintiffs as in this adversary proceeding, for twenty (20) months, during all of which Mr. Ensor was
Hunter’s attorney.
30. When plaintiffs received notice, for the very first time, on July 24, 2012, that Hunter and Kimberly had filed bankruptcy, plaintiffs notified Mr. Ensor that his client had been in bankruptcy for two months. Mr. Ensor was as unknowledgeable as plaintiffs had been.
31. Plaintiffs immediately withdrew written discovery which had just recently been propounded in the State Court Action.
32. Much of the State Court Action involved attempts to pry loose from Hunter,
Wright, PMI and Oneiros documents that would reveal in more detail the scope and breadth of the Ponzi schemes they operated and were operating, the identities and roles of the participants and the source and trail of the monies and assets transported through the persons and entities involved.
HUNTER’S PARTICIPATION IN AND THE OPERATIONS OF HIGH YIELD INVESTMENT PROGRAMS AND PONZI SCHEMES FOLLOWED THE MODUS OPERANDI OF THE ORGANIZATION HE WORKED FOR– THE CHURCH OF SCIENTOLOGY
33. Scientology is an organization founded by science-fiction author L. Ron
Hubbard that focuses on the practice of Dianetics, or proclaimed spiritual healing
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“technology” by which “ailments such as unwanted sensations and emotions, irrational fears and psychosomatic illnesses” can be alleviated.4
34. Scientologists receive counseling, or “auditing,” from an “auditor” who is
“trained and expert in the exact techniques of Dianetics and Scientology.”5
35. “Auditing is done in a gradient series of steps, which improve the individual’s ability to confront and handle more and more parts of his existence and achieve higher levels of spiritual awareness and well-being.”6
36. Scientologists claim that “[t]he goal and end result of Dianetics is the state of Clear, attained through many hours of Dianetic auditing.”7
37. However, the “gradient series of steps” includes over 46 separate levels of auditing, 12 steps beyond one’s achieving the state of “Clear,” and at least 16 steps are remedial sessions for those who do not achieve “Clear” upon the first or subsequent attempts.8
38. The Church of Scientology was founded in 1954, and has grown to include more than 9,000 Scientology Churches, Missions, and affiliated groups in 165 nations.9
39. One factor of Scientology’s growth is the so-called “Birthday Game,” celebrated in honor of the birthday of L. Ron Hubbard (“Hubbard”), the founder of the religion.
4 http://faq.scientology.org/page02a.htm
5 http://faq.scientology.org/page02b.htm
6 http://faq.scientology.org/page02b.htm
7 http://faq.scientology.org/page04a.htm
8 http://www.whatisscientology.org/html/Part02/Chp06/pg01811.html
9 http://www.scientologynews.org/quick-facts/scientology.html
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40. Upon inquiry by a parishioner in 1974 as to what he wanted for his
birthday, Hubbard responded, “5x the stats,” which incited a yearly game to determine
the largest expansion, determined by such things as affluence and power, among the
local missions and Scientology organizations worldwide.10
41. Each year, near the date of Mr. Hubbard’s birthday, the Church of
Scientology holds an awards ceremony, at which the grand prize for the greatest
expansion worldwide is honored with a large horse-racing trophy, a jockey shirt, and a
kiss on each cheek from a pair of Scientology “virgins.”11
42. This is one way that Scientology pushes to increase its membership.
43. It is no surprise that Scientology places preeminent emphasis on
increasing membership, because each member must incur a minimum expenditure of
over $100,000.00 to reach the level of “Clear,” and multiple hundreds of thousands of
dollars to reach Operating Thetan XII, the highest level of training in Scientology.12
44. Auditing sessions cost as much as $1,000 an hour, or $12,500 for a 12 ½
hour intensive.13
45. New followers may earn commissions by recruiting in order to pay their
auditing fees, become auditors themselves, or enter into an agreement to receive free counseling in exchange for a “billion years” of labor.14
10 http://www.smi.org/features/glossary/index.htm
11 http://johnmm.bol.ucla.edu/lrh.pdf
12 http://www.bible.ca/scientology-price-list.htm
13 http://www.cs.cmu.edu/~dst/Fishman/time-behar.html
14http://www.cs.cmu.edu/~dst/Fishman/time-behar.html
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46. In order to obtain and maintain non-profit status with the Internal Revenue
Service (“IRS”), the Church refers to these costs as donations; however, the United
States Supreme Court has held that these so-called donations are not tax-deductible for parishioners, since “benefits” are received for the contributions “as part of a
quintessential quid pro quo exchange.”15
47. Former parishioners contend the Church in recent years pressures its
members to give more than they can reasonably afford.16
48. Despite the exorbitant expense to become “Clear,” Scientology claims that
becoming a member does not require high cost, but that “[a] person who donates for
auditing receives one-to-one personal and effective assistance to solve problems in life,
to communicate more freely with others and to handle the upsets of life preventing his
true and spiritual freedom. Having achieved these lower levels a parishioner moves on
to more advanced levels on which he is literally seeking immortality, which is
priceless.”17
49. Even upon achieving a state of “Clear,” followers are warned that grave
spiritual dangers are eminent unless they continue on to the higher and more expensive
levels.18
15 Hernandez v. Comm'r, 490 U.S. 680, 691 (1989). “The legislative history of the ‘contribution or gift’ limitation, though sparse, reveals that Congress intended to differentiate between unrequited payments to qualified recipients and payments made to such recipients in return for goods or services. Only the former were deemed deductible.” Id. at 690.
16http://www.tampabay.com/news/scientology/scientology-benefits-when-miami-dentist-runs-up-pa tient-bills/1135436
17 http://faq.scientology.org/cost.htm
18 http://www.cs.cmu.edu/~dst/Fishman/time-behar.html
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50. Each mission is required to pay 10% of its gross income to the larger
organization, a requirement exactingly enforced by the Church’s current leadership.19
51. Hubbard’s goal for the church was to “Make money. Make more money.
Make others produce so as to make money...However you get them in or why, just do
it.”20
52. Hubbard’s proclamation has been taken most literally, resulting in the
Church’s effort to gain influence and affluence by resorting to financial scams which act
as a front for recruitment and/or income for the Church.
53. The following are only some of the entities known to have been either
created by, or for direct benefit of, the Church of Scientology through its parishioners for this purpose: ABLECHILD.ORG, Able Inc., Akademie Fur Management Und
Kommunikation, ALERT International Inc., AMC Publishing, Bigotwatch, Bigotwatch.net,
Applied Scholastics Association for Better Living and Education, Author Services Inc.,
Bancorp Development Inc., Better Family Relations Association, Beverly Hills
Playhouse, Bridge Publications, Business Success Sales and Management Training,
California Ranch School, Calicchio & CO. Spa, Casa Dolce Casa, Celebrity Center Kids
on Stage for a Better World, Citizens Commission on Human Rights, Child Guidance
Centers, Center for Digital Government, Church of Spiritual Technology, Citizens for an
Alternative Tax System, Community Service Guild, Computer Ethics Institute,
Concerned Businessmen’s Association of America, CRIMINON, Citizens for Social
Reform, Cry Out, Delphian School, Distribution Video, Drug Free Marshals Program,
19 http://www.latimes.com/news/printedition/la-scientologysideb062490,1,7772622.story?col
20 http://www.cs.cmu.edu/~dst/Fishman/time-behar.html
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East Hollywood People Against Crime, Education Alive, effectivebusinesstools.com,
Effective Management Centers, Environmental Task Force, eRepublic, Federation of
Clubs of Professionals and Business Women, Foundation for the Advancement in
Science and Education, Foundation for Religious Tolerance, Freedom For Religion for
Everyone Everywhere (or F.R.E.E.), Freedom Magazine, Free Speech & Religious
Freedom Committee, Galaxy Press, Golden Era Productions, HappyHouse.org,
HealthMed, Helsinki Group, Hollander Consultants Inc, Hubbard Colleges of
Administration, Hubbard Organization of Women, I HELP (International Hubbard
Ecclesiastical League of Pastors), International Academy of Detoxification Specialists,
International Association of Scientologists, International Academy of Detoxification
Specialists, International Executive Technology Inc., Irons Marcus & Valko (formerly
David Singer Enterprises and Singer Consultants), Lead the Way to a Drug Free USA,
Library Donation Service, London Financial, Mad Hatter Studios, Meridian Consultants,
MIWA Environmental, Mojave Academy, Moxon & Bartilson (Law Firm in CA),
NARCODEX, NARCONON, stopaddiction.com, cocaineaddiction.com,
ecstacyaddiction.com, methamphetamineaddiction.com, alternative-sentencing.com,
addiction2.com, narcononcenter.com, narconon.org, National Association of Rights
Protection and Advocacy, National Coalition of IRS Whistleblowers, National Computer
Ethics & Responsibilities Campaigning, National Commission on Law Enforcement and
Social Justice, National Parents Association, Nations Foundation of Women Legislators,
Natural Health Food Associates, No-Treason.com, No-Hate.org, Office of Ethnic and
Cultural Affairs, Power Management Consultants, Progressive Academy Education
Society of Alberta, Prosperity Magazine, Psychiatric Institutes of America Survivors
17 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 18 of 105
Support Group, Realworld Corp., The Religious Freedom Crusade, Religious
Technology Center, Set A Good Example (SAGE), Scientology Missions International,
Second Chance, Silhouet Holland, Silhouet Profil Analysis, Silkin Management Group,
Singer Consultants, Social Coordination Committee, Social Betterment Properties
International, Social Betterment Development Company, Stellar Management, Sterling
Management Systems, Stop Torture of Mental Patients (STOMP), Stryker Systems Inc.,
Truth Seeker, U-Man Belgium, Uptrends, Volunteer Ministers Association, The Way to
Happiness Foundation, World Institute of Scientology Enterprises (“WISE”), Writers of
the Future, World Literacy Crusade, Youth for Human Rights International.21 Many of
these organizations are independently chartered and often do not publicize their
affiliation with Scientology despite being staffed by Scientologists and paying license
fees for use of Scientology technology and trademarks.22
54. WISE is a direct appendage of the Church of Scientology International that
“provides a service to help create, produce and distribute materials and products which
quote from the works of L. Ron Hubbard or use related trademarks.”23 WISE injects
Hubbard’s high-pressure sales and management techniques, or the “tech,” which is also
considered part of Scientology scripture, into the business world.
21 http://www.lermanet.com/frontgroups.html
22"Unwitting highschoolers lured to forum by Scientologists" (http://www.smh.com.au/news/national/unwitting-highschoolers-lured-to-forum-run-byscientologists/ 2007/03/27/1174761471748.html) . The Sydney Morning Herald. 2007-03-27. http://www.smh.com.au/news/national/unwitting-highschoolers-lured-to-forum-run-byscientologists/ 2007/03/27/1174761471748.html. Retrieved 2007-07-17.
McEwen, Alan (2004-03-18). "Scientology-link group is banned" (http://edinburghnews.scotsman.com/index.cfm?id=314912004) . Edinburgh Evening News. http://edinburghnews.scotsman.com/index.cfm?id=314912004. Retrieved 2007-07-17.
23 http://www.wise.org/en_US/membership/benefits/pg011.html
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55. Although claiming its independence from the Church, WISE is completely
staffed by Church workers who boast bringing numerous business people into
Scientology.24 The Church and its large network of corporations, non-profits, and other
legal entities bring in nearly $500 million annually.25
56. WISE promotes Hubbard’s “hard sell” mandate devised in 1961 for Church
members who sell Scientology auditing.
57. In a policy letter directed to the Church, Hubbard wrote, “[o]ne must
discover what is best for the applicant and then control him into obtaining it” and “[i]t’s against a person’s interests to let him decide for himself whether he wants the service.”26
58. Known management training companies which espouse Hubbard’s
business principles include Concerned Businessmen’s Association of America, Effective
Management Centers, eRepublic, Hollander Consultants, Irons Marcus & Valko and its
predecessors David Singer Enterprises and Singer Consulting, Meridian Consultants,
Power Management Consultants, Silkin Management Group, Stellar Management,
Sterling Management Systems, and Uptrends. These entities purportedly offer practice
management seminars and training to accounting, medical, dental, and other private
24http://www.tampabay.com/news/scientology/scientology-benefits-when-miami-dentist-runs-up-pa tient-bills/1135436
25Smith, L. Christopher (December 2008). "Scientology's Money Trail: Celebrities! Tax shelters! Bart Simpson! A glimpse into the finances of the secretive church" (http://www.portfolio.com/newsmarkets/national-news/portfolio/2008/11/19/Monetary-Value-of-Scientology) . Condé Nast Portfolio (2008 Condé Nast Inc). http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/19/Monetary- Value-of-Scientology. Retrieved 2008-11-19.
26http://www.tampabay.com/news/scientology/scientology-benefits-when-miami-dentist-runs-up-pa tient-bills/1135436
19 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 20 of 105
practice professionals, but are a front for recruitment of individuals who are better
situated to bring significant capital to the Church.
59. Hubbard exclaimed “[d]ishonest conduct is non-survival. Anything is
unreasonable or evil which brings out the destruction of individuals, groups, or inhibits
the future of the race.”27 However, Hubbard’s ideal of honesty is inconsistent with his
wife’s and ten other high-ranking Scientologists’ infiltration, burglarization, and wire
tapping of over 100 private and government agencies in an attempt to impede their
investigations of Scientology in the 1980s, the Church’s false claims on brochures that
Hubbard was a World War II hero who was crippled and blinded in action, twice
pronounced dead and miraculously cured through Scientology, or his representation
that his fake mail-order doctorate degree from Sequoia University was legitimate.28 In fact, a California judge once concluded that Hubbard himself was a pathological liar.29
Hubbard once said that “goodness and badness...are...considerations, and have no other basis than opinion.”30
60. Scientology not only condones but also mandates dishonesty through its
“Fair Game” policy, stating that “Suppressives” or “SPs” (critics, ex-members, or anyone
taking a position contrary to the Church) may be “sued, tricked, lied to, or destroyed.”31
27http://www.scientology.org/faq/scientology-attitudes-and-practices/scientology-system-of-ethics.h tml
28 http://www.cs.cmu.edu/~dst/Fishman/time-behar.html
29 http://www.cs.cmu.edu/~dst/Fishman/time-behar.html
30 Phoenix Lectures, p.180, Scientology Axiom 31.
31 http://www.apologeticsindex.org/f08.html
20 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 21 of 105
61. Although the use of the term “Fair Game” was effectively discontinued in
1968, the letter and spirit of the policy are still accepted practice.32 Thus, Scientologists
will protect the Church and its tenets (and assets) regardless of any outside influence to
the extremes of lying, bankrupting its perceived enemies through lawsuits, and even
committing murder and suicide (termed in the Church as EOC, or end of cycle).33
62. Based on L. Ron Hubbard’s philosophy that “the ‘power’ of the ‘society”
and ‘state’ is pretended and is made from an effort to be powerful where they actually
lack power,” Scientologists are strongly discouraged, if not completely prohibited, from
settling legal disputes with other Scientologists within the confines of the “Chaplain’s
Court,” the Church’s self-implemented method of conducting civil proceedings.34 As
Hubbard explained, “[w]hen we grant [society and state] too much beingness to their
‘power,’ we are granting validity to a falsehood and so it recoils on us.”35
63. Kimberly Hunter is a registered principal of the Church of Scientology of
Utah.
64. Co-schemer Wright is or was a Director of the Church of Scientology
Mission of Salt Lake City.
65. Co-schemer Wright’s wife, Cynthia, is a Director and Registered Agent for
the Church of Scientology Mission of Salt Lake City.
32 http://www.apologeticsindex.org/f08.html
33 http://www.cs.cmu.edu/~dst/Fishman/time-behar.html
34 L. RON HUBBARD, INTRODUCTION TO SCIENTOLOGY ETHICS 295, 334-35 (Bridge Pub. Inc. 2007) (1968).
35 Id. at 295.
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66. During Plaintiffs’ interactions with Hunter’s co-schemer, Wright, Wright
represented that he was the president of the local Church of Scientology.
67. Hunter’s co-schemer Wright also represented that Wright had been
instrumental in Hunter’s recruitment from the LDS faith to become a member of
Scientology.
68. Each of the members of PMI are also Scientologists.
69. Scientology has a reported long history of using Ponzi schemes and
HYIPs not only to generate funds for the various Scientology organizations but also to
use as recruitment tools for co-schemers.36 It also has a reported history of obstructing
efforts to uncover such schemes.37
70. In a letter dated October 23, 2006, Wright admitted to Burton that “[t]he
legal structure we have outlined in the past has only served to create some legal
insulation between the entities. This is completely arbitrary since everything we do could
just as well be contained within a single company.” Later in the letter, Wright wrote
“[y]ou all know our church needs our help and I do not know about you but I personally
see no other group of individuals than ourselves that have an actual workable plan
underway,” conceding that the co-conspirators’ scheme was simply a plan to funnel
money to the Utah Church and Mission.
36 See, e.g., http://en.wikipedia.org/wiki/Reed_Slatkin; United States v. Slatkin, Case No. 2:02-cr-00313-MMM-1, United States District Court for the Central District of California; http://en.wikisource.org/wiki/Why_the_United_States_must_investigate_the_crimes,_abuses_and_frauds_ of_the_Scientology_enterprise; United States v. Fishman, Case Nos. 3:1988-cr-00616-DLJ-1 & 3:1990-cr-00357-DLJ-1, United States District Court for the Northern District of California.
37See, e.g., http://www.justice.gov/usao/cac/Pressroom/pr2005/081.html; United States v. Janu, Case No. 2:03-cr-01222-MMM-1, United States District Court for the Central District of California.
22 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 23 of 105
71. In early 2008, co-schemer Hunter sent a letter to co-schemer Petersen in
which he highlighted the purpose of PMI: “PMI is just a mechanism to fund the
foundation so we’re not expecting some grand windfall of profits from PMI.”
72. Co-schemer Hunter, together with co-schemer Wright, persistently
recruited co-schemer felon Hales and co-schemer Markus Trinity Williams (“Williams”)38
to become members of the Church of Scientology.
73. Co-schemer convicted felon Hales represented that he went through all
but two days of “purification” but could not complete the training.
74. Co-schemer Williams represented to Bee that Hales was “sick and
emotional” and that co-schemer Wright had convinced Hales to submit to the 8-hour-a- day “purification” to help him overcome his infirmities.
75. Up until the time the State Court Action was filed, the Utah Church used the building located at 353 East 400 South, Salt Lake City, Utah, a commercial property owned by Wright and his wife, Cynthia, as its base of operations.
76. Not coincidentally, that building was the diabolical core of operations for the High Yield Investment Programs and Ponzi scheme as the building was also the office of PMI and Oneiros.
77. Just ten (10) days after co-schemer Wright filed his answer to the State
Court Action on September 20, 2010, Wright and Cynthia, on September 30, 2010, executed a promissory note secured by a trust deed on that building to effectively transfer control of its remaining equity to Herman L. Franks, Jr., Cynthia’s brother.
38Co-schemers Hales and Williams at all times were agents acting for and within the scope of the agency granted by Hunter, Wright, PMI and Oneiros.
23 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 24 of 105
78. The Church then moved its operations to a new location at 1921 South
1100 East in Salt Lake City.
79. Co-schemer Hunter has admitted to having paid the Church of Scientology
Mission of Salt Lake City for religious services, and that the Mission receives payment for the services it provides.
NATURE OF A HIGH YIELD INVESTMENT PROGRAM
80. A "High Yield Investment Program" ("HYIP") is a general term given to fraud schemes that are known by various specific names, including without limitation
"Medium Term Note Programs" and "Roll Programs."
81. Such programs do not exist as legitimate investment vehicles.
82. In these schemes, the fraud perpetrator claims to have privileged access to secret financial trading programs, which are falsely represented to be sanctioned by the Financial Industry Regulatory Authority, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the National Futures Association, state securities regulatory agencies, major brokerage houses and/or major financial institutions, often but not always international in nature.
83. Scientology has a reported long history of using Ponzi schemes and
HYIPs not only to generate funds for the various Scientology organizations but also to
[Intentionally Blank]
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use as recruitment tools for co-schemers.39 It also has a reported history of obstructing
efforts to uncover such schemes.40
84. Scheme operators typically make claims that a privileged few are invited
to participate in the trading program and/or notes, stocks, commodities or debentures,
which can be bought at a discount and sold at a premium.
85. It is often claimed that there are only a few “traders” or “commitment
holders” in the world who are authorized to resell these bank securities between the top
25 or 50 banks in the world, often falsely referred to as “Prime Banks.”
86. By conducting multiple “trades” in rapid succession, they claim to be able
to produce extraordinary rates of returns, far beyond any normal investment.
87. It is often further claimed that one of the primary reasons these proprietary trading programs exist is to generate funds for humanitarian purposes and that a portion of the investor’s profits must be used to provide humanitarian relief and aid somewhere.
88. Perpetrators of HYIPs claim that a high degree of secrecy is required of the unsuspecting investor in order to participate in the program, and require the execution of various documents which have no meaning in legitimate financial transactions.
89. Typically, the investor first is directed to provide a “Letter of Intent,” a
“Non-Solicitation Agreement,” a “Confidentiality Agreement,” a “Non-Circumvention
39See, e.g., http://en.wikipedia.org/wiki/Reed_Slatkin; United States v. Slatkin, Case No. 2:02-cr-00313-MMM-1, United States District Court for the Central District of California; http://en.wikisource.org/wiki/Why_the_United_States_must_investigate_the_crimes,_abuses_and_frauds_ of_the_Scientology_enterprise; United States v. Fishman, Case Nos. 3:1988-cr-00616-DLJ-1 & 3:1990-cr-00357-DLJ-1, United States District Court for the Northern District of California.
40See, e.g., http://www.justice.gov/usao/cac/Pressroom/pr2005/081.html; United States v. Janu, Case No. 2:03-cr-01222-MMM-1, United States District Court for the Central District of California.
25 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 26 of 105
Letter,” a “Bank Proof of Funds,” a “Client Information Summary,” and often a copy of the investor’s passport.
90. The investor is typically told that he or she must go through “compliance,” which will purportedly be done by the Federal Bureau of Investigation (FBI), Central
Intelligence Agency (CIA), Federal Reserve Bank (Fed) or some other government
“compliance officer.”
91. The investor is also told that his or her funds must be verified on a “bank to bank” basis to make sure that they do exist and that the funds must be “good, clean, clear funds of non-criminal origin.”
92. The investor typically is assured that his funds are absolutely safe and never at risk in any way.
93. The scheme is designed to gradually progress to its ultimate goal, which is for the co-schemers to gain control of all or a portion of the investor’s funds which are then stolen by the fraud perpetrators.
CO-SCHEMER WRIGHT’S HANDWRITTEN FRAUD ORGANIZATION CHART
94. In the very first meeting between co-schemers Wright and Hunter with Bee and Bagley, Wright drew out a handwritten organizational chart and gave it to Bee. A genuine copy of that chart is attached hereto as Exhibit B.
95. According to the chart that co-schemer Wright drew, and as he explained it to Bee and Bagley, Oneiros, which was owned by Wright, was at the top of the organization.
96. Exactly consistent with the model for HYIPs generally and as previously were used, plaintiffs are informed and believe, to pump millions into the Church, co-
26 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 27 of 105
schemer Wright represented that he had developed a secret and proprietary stock trading program which would read stock market activity and make investments in stocks according to parameters established by Wright.
97. Wright represented that he had transferred ownership of that secret trading program to Oneiros, the organization at the top of the chart.
98. Wright represented that Oneiros, in turn, had granted an exclusive license to PMI, owned by his co-schemer Hunter.
99. Wright then placed PMI on the chart directly under Oneiros and drew a line between the two companies to represent their relationship by virtue of the secret trading program license.
100. Wright represented to Bee and Bagley details about his co-schemer
Hunter’s future business plans for PMI, which Wright said was for PMI to trade in the range of $5 million for its customers through the Oneiros-licensed PMI stock trading program.
101. Co-schemers Wright and Hunter both represented that PMI needed extensive capital in order to commence its operations and needed to procure investors directly in PMI, so that it could acquire the needed hard assets to exploit the secret and proprietary trading program, and to solicit wealthy individuals to use the secret trading program, through which PMI would generate profits for itself.
102. Wright continued drawing the organizational chart, drawing another single line downward from PMI to two other companies, “Volition” and “Lucidity.” Wright represented that those entities were supposed to be “feeder funds” to facilitate trading.
27 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 28 of 105
Underneath Volition and Lucidity, Wright drew a line directly to “Bentley Equities.”41
Bentley Equities was to be used to recruit investors in PMI for capital investment and for
trading through the feeder funds. To the right of Bentley Equities, Wright drew in “RPM
Investment Co.,” with reporting lines back to both Bentley Equities and the Volition and
Lucidity levels.
103. These were explained in substance as differing levels of the primary
funding sources for PMI’s operations, all under the control of, and reporting to Hunter,
who in turn reported to Wright.
104. The United States government, starting at the lower levels of the fraud
organization chart, has already taken action against those levels. Co-schemer Hales,
who along with co-schemers Williams and former mayor of the City of Cedar Hills, Eric
Richardson (“Richardson”),42 operated the Bentley Equities level, was convicted of bank fraud. In co-schemer Hales’ Statement by Defendant in Advance of Plea of Guilt, genuine copy attached as Exhibit C, Hales’ agreement with the United States included this admission:
The United States agrees as follows: Waive on behalf of the U.S. Attorney's Office for the District of Utah any other criminal prosecution of the defendant for offenses regarding the defendant's conduct now under investigation, all of which were discussed during a recorded interview with the defendant on February 22 and 23, 2011, though this conduct provides a basis for the Court to accept the plea agreement and for determining restitution:
41There were several “Bentley” entities created by Hales and Williams, including without limitation, Bentley Equities, LLC, Bentley Holdings & Investments, LLC and Bentley Holdings, LLC. For the purposes of this Complaint the name “Bentley Equities” or “Bentley Co-Schemers” will be used. The Bentley Co- Schemers at all times were alter egos of or agents acting for and within the scope of the agency granted by Hunter, Wright, PMI, Oneiros, Volition, Lucidity, the Church, the Utah Church and the Utah Mission.
42Richardson at all times was an alter ego of or agent acting for and within the scope of the agency granted by Hunter, Wright, PMI, Oneiros, Lucidity, Volition, the Church, the Utah Church and the Utah Mission.
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• Investment schemes involving Bentley Equities, LLC . . ..
105. Co-schemer Richardson has also pleaded guilty to bank fraud. Richardson was just sentenced to one year and one day. See Judgment in Criminal Case, genuine copy attached as Exhibit D.
106. The United States Commodity Futures Trading Commission (“CFTC”) filed suit against co-schemers Hales, Richardson and Bentley Equities, alleging that they, along with their related entity Freedom Wealth Group, committed fraud. Freedom
Wealth Group’s principals include Epicenter Trading, Inc., one of the founders of
Volition. Co-schemer Hales is also a founder of PMI’s underling, Lucidity. A genuine copy of the CFTC’s complaint is attached hereto as Exhibit E.
JUST LIKE IN ALL HYIPs, PMI HAS A SECRET TRADING PLAN
107. PMI is a Utah limited liability company, organized on June 21, 2005, which purports to be engaged in the business of exploiting technology developed by Oneiros for the purpose of making investments on behalf of investors using a proprietary “trading plan.”
108. Sometime in 2004, co-schemer Wright introduced co-schemer Hunter to co-schemer Madsen and showed Hunter the results of the trading software Oneiros was developing before PMI was established. Wright represented to Hunter that Wright and
Madsen had developed the software owned by Oneiros. Co-schemer Wright discussed with Hunter the idea creating a PMI-type entity to utilize Oneiros’ purported trading software, and sparked Hunter’s interest in running PMI as Wright described it.
109. Also in 2004, co-schemers Wright, Hunter, Madsen, Szaniszlo, and
Burton and another individual, Steve Nemeth, met in Salt Lake City and discussed
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creating a PMI-like entity which would solicit investment funds for Wright’s Oneiros LLC
entity and to be traded through purported software being developed by Oneiros. During
the meeting, Wright's vision to fund philanthropic foundation and helping Scientology was discussed and incorporated in establishing the new PMI entity’s purpose.
110. PMI raised funds and simply transferred the money to Oneiros to purchase servers and equipment without receiving anything of value from Oneiros in return.
WRIGHT AND HUNTER SOLICIT SCIENTOLOGISTS AS MEMBERS OF PMI TO PREVENT LEGAL CLAIMS
111. Defendants Michael Wright and Barry Don Hunter, relying on Defendant
Wright’s position as President of the Church of Scientology of Salt Lake, solicited
Defendants Burton, D’Arezzo, Farr, Kingdon, Petersen, Stowe and Szaniszlo
(“Scientologist Defendants”), each being a member and subscriber to the tenets of
Scientology, to invest in PMI by making loans to the company. The following transactions are believed to have occurred:
a. On January 23, 2007, Barry Hunter sent an email to James
D’Arezzo and identified $346,000.00 in loans to PMI from Greg Kingdon, Michael
Wright and Barry Hunter and also references loans to PMI from David Peterson,
Alan Farr, Tom Burton and Sandor Szaniszlo. Each agreement equals a
$100,000.00 equity investment in PMI and offers a position to each investor as a
non-managing member of PMI.
b. On or about October 12, 2007, PMI and David Petersen entered a
Design Build Services and Earnest Money Agreement for $15,000.00 to be
tendered at time of signing and another $15,000.00 due on November 15, 2007.
30 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 31 of 105
In consideration of the up front costs to purchase equipment and labor costs, Mr.
Petersen agreed that $25,000.00 of the $30,000.00 investment is considered a
non-refundable fee.
c. On or about January 1, 2008, PMI and Infinity Catamaran Ltd., an
investment fund located in Road Town Tortola British Virgin Islands and owned
by George Hites, entered a Subscription Agreement in the amount of
$250,000.00.
d. On or about January 29, 2008, Barry Hunter communicated to Jim
D’Arezzo that PMI was managing $550,000.00 at that time.
e. On or about February 21, 2008, Alan Farr transferred $50,000.00 to
PMI, secured with a Promissory Note.
f. On or about March 5, 2008, Carol K. Farr, presumably Alan Farr’s
spouse or close relative of Alan Farr, transferred $50,000.00 to PMI, secured
with a Promissory Note.
g. On February 17, 2009, via an email communication with Barry
Hunter, Greg Kingdon committed to PMI an additional $23,611.95.
h. On or about March 3, 2009, Barry Hunter emailed David Petersen
with a spreadsheet attached showing payment from David Petersen to PMI in the
amount of $330,500.00.
i. On or about March 18, 2009, Barry Hunter and David Petersen
communicated via email regarding ownership interest in PMI and identifying
Barry Hunter initially as 100% owner of PMI and making reference to Barry
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Hunter’s CPA’s advice to include another managing member with at least 10%
ownership.
112. Plaintiffs are informed and believe that each of these Scientologist defendants were assured by Wright and Hunter that both PMI and Oneiros were
established for the purpose of providing financially for the local Church.
113. Wright’s and Hunter’s plan to use PMI as a source of funding for the local
Church thereby provided the Scientologist Defendants with the understanding that their investment in PMI would benefit the Church of Scientology International on the basis of mandatory contribution from the local Church to the Church of Scientology International and other associated Scientology entities.
114. Wright and Hunter represented to the Scientology Defendants that accumulated excess funds from PMI would be used as “donations” to Church foundation projects.
THE CONSPIRACY
115. In this particular case, it was the purpose of a conspiracy among the defendants that the defendants would unjustly enrich themselves, and particularly the
Church entities, through the promotion of a fraudulent high yield investment program by promising extremely high returns at little or no risk to principal.
116. The manner and means through which the purpose of the conspiracy was to be accomplished in substance were as follows:
a. It was a part of the conspiracy that Wright, in order to develop
credibility and trust, would and did falsely claim to be an investing genius who
had developed a special and secret software program over many years. The
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results of the tests on the development of such software were falsely represented
in PMI investor materials to be that "[e]arly on in our development we noticed
something interesting; the widely accepted idea that it takes more risk to
generate higher returns wasn't proving to be necessarily so." Further, "[i]n years
of running real-time test cycles, on every consecutive and improved version of
the software, we have repeatedly validated that our technology has the ability to
generate higher returns without amplifying risk."
b. PMI represented itself as follows: "Portfolio Manager International
LLC is a registered and licensed investment advisor providing remote automated
portfolio management and market timing services to investment advisers, private
wealth managers, hedge funds, and high net worth individuals.”
c. PMI further represented about itself: "We developed our
applications to provide clients with a way to reliably and consistently generate
superior returns with substantially reduced risk. Period. Everything we do is
aimed at serving your investment objectives."
d. PMI and Oneiros represented their relationship to be as follows:
"Portfolio Manager International (PMI) retains the exclusive United States
software usage rights to Oneiros Technologies' quantitative portfolio
management and market timing software applications. PMI is licensed by
Oneiros Technologies to operate its software applications in the PMI data center.
PMI's technical staff is trained and certified by Oneiros Technologies."
e. In a twist on the classic HYIP fraud schemes, rather than
suggesting that the world's best financial institutions were part of the program,
33 Case 12-02544 Doc 39 Filed 04/26/13 Entered 04/26/13 16:49:33 Desc Main Document Page 34 of 105
defendants pointed to those institutions as models for their own program: First
the defendants discussed the pre-eminent banks: "Many large banks with
proprietary trading departments, investment houses and hedge funds have spent
hundreds of millions of dollars developing extremely sophisticated technologies
that manage their portfolio monitoring and market timing operations. With
superior stock selection methods and real-time analytics of market data they are
able to gain a significant edge in the market, an edge most investors will never
be able to replicate." Then the defendants proffered themselves as having
identical capabilities: "Using real-time stock selection processes, we are able to
rapidly locate and take advantage of opportunities that would have otherwise
been missed. By constantly screening and evaluating securities that have a
higher than average expectancy for outperforming the market, we are able to
build optimally diversified portfolios. This helps reduce overall market risk and
generate better returns."
f. Defendants then falsely cloaked Wright's company, Oneiros, with
legitimacy and credibility, attributing to it the supposedly proprietary system
which allowed PMI to operate like the big banks: "The Oneiros system monitors
real-time up and down price movements in all stocks contained within an
optimally diversified portfolio. Tens of thousands of quantitative and analytic
calculations are applied to a portfolio each market day. These processes are
constantly working to capture exploitable pricing inefficiencies. During periods of
relatively little movement in a single stock or in the market, defensive aspects
built into the system protect and preserve accumulated equity."
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g. Defendants utilized a chart ostensibly showing the performance of
PMI active management using the Oneiros system with respect to 50 randomly
chosen stocks, versus using a "buy and hold" strategy on those same stocks,
and also purporting to show the performance of "the S&P 500 Index" all during
the same three-month time period between January 1, 2008 and March 27, 2008.
The chart purported to show negative returns on investment of (9.7%) and
(14.1%) for the S&P 500 Index and the buy and hold strategy, while showing a
15.7% return over those same three months using the PMI active management
strategy.
h. Defendants then repeated "Lower Risk Higher Returns" and stated:
"Lower volatility of returns indicates that the superior returns were created with
substantially reduced risk. This dispels the idea that an investor must take on
more risk if he wishes to receive a better return. Our software and electronic
infrastructure have essentially inverted this concept by showing it can provide a
far better return with considerably less risk."
i. It was a further part of the conspiracy that defendants PMI,
Oneiros, Wright, Hunter, Williams, Hales and Richardson would and did falsely
represent to plaintiffs that they had access to High Yield Investment Programs
that could yield anywhere between 5% per month to 24% per month with
extremely low risk.
j. At least the following representations about high yield returns were
made to plaintiffs, either for the purpose of inducing investment or in the process
of executing lulling schemes:
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i. In May 2008, Hales and Williams, at their Wylie Drive
residence, represented to Bagley, on the first occasion they spoke about
the investment opportunity, showed Bagley a PMI portfolio brochure
stating that investing money in the opportunity would provide a 5% to 8%
return on investment each month.
ii. In July 2008, Williams represented to Bee, in his first
conversation with her, that PMI was a good investment and that Bagley
and Bee could see an 8% to 12% return on investment each month and
that a 5% return on investment was guaranteed.
iii. In September 2008 Hales provided to Bagley, for the
purpose of showing to Bee, a PMI brochure which stated that a 15.7%
return over a three month period of paper trading was observed. During
the same time period, Hales represented to Bee that even if PMI didn't
make a 5% per month return on investment, which, he stated, was highly
unlikely, that Hales and Williams through Bentley Holdings and Bentley
Equities, would guarantee a 5% per month return on investment so that
Bee and Bagley had no need to worry about their money.
iv. On or about January 12, 2009, Bee and Bagley met with
Wright, Hunter, Hales and Williams at the PMI office. Wright gave a 45
minute presentation with several color bar graphs illustrating returns on
investment. Wright represented that PMI, through paper trading test runs,
had made up to 72% in a 3 month period. Wright represented that the
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potential was there for investors to make an excellent profit with relatively
no risk involved.
v. On or about January 16, 2009 Bee met with Williams at a
Beans and Brews. Williams represented that from the continual paper
trading tests that PMI was conducting a return on investment of 10% per
month could be expected.
vi. In or about July 2009, Richardson met with Bee and Bagley
at Mimi's Café at 5400 South and State Street in Salt Lake City.
Richardson represented that Bee and Bagley could expect a return on
investment of 5% to 10% per month once PMI got off the ground and that
PMI just needed to get all the documentation to cover certain Securities
and Exchange Commission requirements.
vii. In addition, during the period from May 2009 through
December 2009, Williams, Hales and Richardson sent multiple text
messages to Bee and Bagley, representing that similar high yield returns
on investment would be forthcoming.
k. It was a further part of the conspiracy that the ostensible
relationship between Williams, Hales, Erickson, Bentley Holdings & Investments,
LLC, Bentley Holdings, LLC, and Bentley Equities LLC (the "Bentley Co-
Schemers"), on the one hand, and PMI, Oneiros, Wright and Hunter ("the "PMI
Defendants"), on the other hand, was that the Bentley Co-Schemers would act in
the role of investment advisers who would bring (1) investors who would invest
directly in PMI; and (2) investors for the PMI/Oneiros trading program to PMI.
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l. It was a further part of the conspiracy that Wright would and did
falsely represent to plaintiffs that he had in fact realized a 72% return on
investment over a 3 month period in paper trading test runs.
m. It was a further part of the conspiracy that defendants would and
did use Richardson's position as a former registered representative of Fidelity
Investments to give their fraudulent scheme the appearance of legitimacy and
credibility.
n. It was a further part of the conspiracy that defendants, in an attempt
to give the appearance of legitimacy, would and did present confidentiality
agreements to plaintiffs before revealing to them the information about PMI,
Oneiros, the trading program and the terms of the investment program.
o. It was a further part of the conspiracy that defendants, in an attempt
to give the appearance of legitimacy, would and did suggest that PMI was
awaiting final documentation from the Securities and Exchange Commission to
commence trading.
p. It was a further part of the conspiracy that defendants would, and
did, hold an investor meeting at the offices of PMI, in an effort to cloak PMI( with
the appearance of legitimacy.
q. It was a further part of the conspiracy that defendants would, and
did, represent that a portion of the proceeds of the operation of PMI would be
used for humanitarian purposes, through the donation of water purification
systems and the building of housing in Africa, which Plaintiffs now understand to
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be related to the defendants’ plans to unjustly enrich the Church entities by using
investments in PMI as a funnel of funds to the Church entities.
r. It was a further part of the conspiracy that defendants would, and
did, claim to be honest, church going, legitimate business people.
s. It was a further part of the conspiracy that defendants would and
did ostensibly allow plaintiffs to invest in a "special" manner not available to other
investors, by allowing investment over time rather than a lump sum. Part of this
"special" manner of investing consisted of having Bagley use his good credit to
obtain a loan on a recreational vehicle, with the proceeds to go to Hales, in
exchange for Hales and Williams putting up $20,000.00 of Bagley's investment.
t. It was a further part of the conspiracy that when plaintiffs began to
inquire about their investments that the Bentley Co-Schemers, as investment
advisers, were to divert such inquiries by the use of fraudulent Note Trading
investment opportunities as a lulling scheme which they were to and did
represent would recoup monies quickly despite the delays in PMI's operations
commencing.
u. It was a further part of the conspiracy that defendants, in an attempt
to lull plaintiffs, represented that their investment funds remained intact and
secure in PMI and falsely representing that the delays being encountered in
getting PMI up and running were nothing unusual.
v. It was a further part of the conspiracy that defendants, in an attempt
to lull plaintiffs, represented that progress was being made toward completion of
the investment.
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w. It was a further part of the conspiracy that defendants, in an attempt
to lull plaintiffs, falsely agreed to return the investment funds.
x. It was a further part of the conspiracy that defendants in an attempt
to lull plaintiffs, represented that plaintiffs could obtain current high yield on new
investments in Note Trading.
y. It was a further part of the conspiracy that defendants, on
information and belief, would and did divert and convert to their own personal use
and benefit, or for other unauthorized purposes, the funds fraudulently obtained
from plaintiffs.
117. PMI solicited investments in it from Bagley and Bee, ostensibly so as to obtain working capital to purchase and/or lease "servers" which constituted necessary hardware for the operation of software and the execution of trade orders for its future customers. Such investments in PMI were directly solicited from both Bagley and Bee by each of Wright, Hunter, Hales and Williams. At the time of such solicitations and all other actions and omissions described throughout this complaint, Wright was acting within the course and scope of his agency for both Oneiros and PMI; Hunter was acting within the course and scope of his agency for PMI; and Hales and Williams were acting in the course and scope of their agency for PMI, and also for the Bentley Co-Schemers, which entities in turn were acting within the course and scope of their agency for PMI; and each of the defendants was acting in the course and scope of their agency to the conspiracy which binds all of them together.
118. At the time of such solicitations, no registration statement for the sale of securities in PMI was on file with the Utah Department of Commerce, Division of
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Securities ("Securities Division"), as required by UTAH CODE ANN. § 61-1-7, and no exemptions applied to the requirements of that section.
119. Further, Wright, Hunter, PMI, Williams, Hales and Bentley Equities were not, at the time of the solicitations, licensed with the Securities Division as broker-dealers or agents, nor as investment advisers under UTAH CODE ANN. § 61-1-3.
120. Following certain false representations which had been made as described above for the purpose of providing a false appearance of legitimacy, solvency and credibility to defendants and the trading scheme, the first direct solicitation to
Bagley was made by Williams and Hales, who induced Bagley to invest $30,000.00 on
August 21, 2008. The circumstances surrounding that first investment are that, at the urging of Williams and Hales, on July 17, 2008 Bagley wrote an equity line check to himself in the amount of $30,000.00 from Wachovia Bank. He deposited that check into his Wells Fargo account. Wells Fargo put a hold on the check because is was such a large sum and verification of funds had to be completed before it could be withdrawn.
On August 21, 2008 Bagley was working at the Verizon store at the University Mall.
Bagley went to the University Mall Wells Fargo Branch on his break. Bagley obtained a cashier's check in the amount of $20,000.00 payable to Williams and Bentley Holdings, he also withdrew $10,000.00 cash. Bagley met Williams at the mall. Williams stated that the cashier's check was made out incorrectly. He said it needed to be divided into two separate cashier's checks, one payable to Hales for $10,000.00 and the other payable to Williams for $10,000.00. Bagley had to return to work and the bank was closing so
Bagley met Williams after he finished working at the Wells Fargo branch inside the
Smith's Marketplace on 11400 South and State Street. Bagley deposited the cashier's
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check back into his account and had two new separate cashier's check issued as
Williams requested.
121. During October through December 2008 Hales and Williams put pressure
on Bagley to get Bee to invest in PMI.
122. Following certain false representations which had been made as
described above for the purpose of providing a false appearance of legitimacy, solvency
and credibility to defendants and the trading scheme, the first direct solicitation to Bee
was made in a meeting at Oneiros and PMI's offices, on or about January 11, 2009, attended by Bagley, Bee, Wright, Hunter, Williams and Hales. During the meeting,
Wright identified himself as the Chief Executive Officer of Oneiros and Hunter identified
himself as the President, Program Manager and Director of PMI. The meeting had been
arranged by Williams and Hales for the purpose of having PMI solicit investments of
Bagley and Bee's retirement savings.
123. PMI required Bee and Bagley to execute Confidentiality Agreements prior
to the beginning of the meeting. During the meeting, Wright described the
interrelationship of Oneiros, PMI and Bentley Equities. Wright made it sound as though
Bentley Equities and its principals, Williams and Hales, were an integral part of the
trading business that was to be conducted using the computer servers. It was further
disclosed by Wright that a proprietary stock trading program had been developed which
would read stock market activity and make investments in stocks according to
parameters established by Wright. Wright made representations about PMI's future
plans for its business and numbers in the range of $5 million were discussed as
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amounts that were expected to be traded for customers through the PMI stock trading program.
124. Bee and Bagley expressed concern in light of the fact that they were investing funds earmarked for their retirement and due to the fact that neither Bee nor
Bagley had any substantial background in investing in the stock market.
125. It was then explained to Bee and Bagley that they could invest directly in
PMI, through the servers, or that they could invest in the stock market through the proprietary PMI trading program.
126. Either way, it was represented to Bee and Bagley that Bentley Equities’ role would be to receive investment monies directly from Bee and Bagley on behalf of
PMI for the purpose of channeling it to PMI, as had been done for other investors. PMI,
Wright, Hunter and Oneiros thereby cloaked Hales and Williams, and their companies including without limitation Bentley Equities, LLC, Bentley Holdings & Investments, LLC and Bentley Holdings, LLC with the appearance of legitimacy and solvency and with an agency relationship with PMI, Oneiros, Wright and Hunter, whom they had agreed to act for as agents in collecting Bee and Bagley's investment funds. All of the representations made by Wright during the meeting were confirmed by Hunter, Williams and Hales overtly or through their silence.
127. The January 11, 2009 meeting was left off with Williams and Hales to pursue the investment by Bagley and Bee.
128. Following up on the January 11, 2009 meeting, Williams arranged for a meeting with Bee. Williams met with Bee or about January 16, 2009 at Beans and
Brews to deliver paperwork for Bee and Bagley to investment in PMI. Williams did not
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have the paperwork on him at the time of this meeting. Williams told Bee to make her check payable to Hales and that the paperwork would be delivered within a week. Bee gave Williams a check payable to Hales in the amount of $30,00.00, she also gave
Williams $20,000.00 in cash. The cash was money Bee had been saving up for emergencies for the past 10 years.
129. Shortly thereafter, Hales requested of Bagley that he obtain financing secured by a recreational vehicle by way of a loan from Zions Bank, for the purpose of giving the financed funds to Hales for investment in PMI. Bagley was to receive from
Hales the sum of $20,000.00 for providing the creditworthiness for the transaction and
Hales agreed to apply that sum towards Bagley's investment in PMI. Bagley procured such financing on or about January 31, 2009 and Bagley gave all the proceeds of that loan, in the approximate amount of $45,071.29, to allow Hales to invest in PMI.
130. The January 2009 meeting with Williams was followed by an investor open house at PMI in or about February, 2009. Wright, Hunter, and some persons represented to be PMI technicians were in attendance. New servers appeared to be in place and new technical personnel were represented to have been hired. Both Wright and Hunter expressed excitement about getting the stock trading program started. At the open house, Wright represented to Bee and Bagley that Richardson, the manager of
BE, had been an experienced and licensed stock broker with experience through a major stock brokerage, Fidelity Investments.
131. Williams represented that PMI needed the funds now for the servers that were needed before PMI could get on line. However, he assured Bee that she would be paid on the investment just like the people who were investing in the actual trading plan.
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132. Hales and Williams wanted a $100,000.00 investment from Bee and
Bagley. Bagley and the defendants agreed that Brian would purchase an RV for the
benefit of the defendants. Defendants would pay the monthly payments and insurance
on the RV. After a few months the RV would be sold, the loan on the RV paid off and
Brian would receive $20,000.00 to invest in PMI for his assistance in obtaining the loan
and helping defendant's gain capital that they could invest. The original amount of the
RV loan was $45,071.29.
133. Promissory Note dated October 1, 2009 shows that Bentley Holdings &
Investments borrowed $100,000.00 from BeeBag Holdings & Investments LLC.
134. Bee and Bagley were also involved with note trading with Hales and
Williams for investing with Otis Oil. On April 22, 2009 Plaintiffs gave Hales a cashier's
check in the amount of $15,000.00. Plaintiffs were reimbursed without interest on April
27, 2009, but that check bounced. A new check in the amount of $15,000.00 was
deposited on May 11.
135. On May 13, 2009 plaintiffs gave Hales a cashier's check in the amount of
$15,000.00. Plaintiffs were reimbursed and deposited a check from Vision Capital in the
amount of $17,500.00, the amount of the original investment plus $2,500.00 in interest.
136. On May 22, 2009 plaintiffs gave Hale a cashier's checks in the amount of
$10,000.00 and $15,000.00 for a total of $25,000.00. Plaintiffs were reimbursed with a check in the amount of $30,000.00. At that time Hales asked Bagley for $1,000.00 cash.
Bagley deposited the $30,000.00 into his Wells Fargo account and gave Hales
$1,000.00 in cash.
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137. On May 27, 2009 plaintiffs gave Hales a cashier's check in the amount of
$40,000.00. Defendants have failed to repay the principal amount and any interest.
138. On June 2, 2009 plaintiffs gave Hales cashiers checks for $8,000.00 and
$7,000.00. Defendants have failed to repay the principal amount and any interest
139. On June 10, 2009 plaintiffs gave Hales a cashier's check payable to Todd
Smith in the amount of $11,000.00. Defendants have failed to repay the principal amount and any interest.
140. On June 18, 2009 plaintiffs gave a cashier's check to Hales in the amount of $8,000.00. Defendants have failed to repay the principal amount and any interest.
141. Plaintiffs have given Williams, Hales and Smith $130,000.00. Plaintiffs have received $55,000.00 back along with $6,500.00 in interest.
142. Bagley's original balance on the RV loan was $45,071.29, the payoff as of
August 31, 2010 was $37,717.67. As of this date the defendants have failed to make any payments on the loan.
143. Each of the following payments represents an investment in securities by
Bee or Bagley which was induced by the conspirators in furtherance of the conspiracy,
and which was caused through the use of misrepresentations and omissions of material
fact:
Date Initial Repayment Interest Paid To Investment Paid 08.21.08 $10,000.00 -0- -0- Cashier=s check to M. Williams 08.21.08 $10,000.00 -0- -0- Cashier=s Check to C. Hales 08.21.08 $10,000.00 -0- -0- Cash to Williams 01.16.09 $30,000.00 -0- -0- Cashier=s check to Hales
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01.16.09 $20,000.00 -0- -0- Cash to Williams $20,000.00 -0- -0- RV Credit TOTAL: $100,000.00 -0- -0-
Date Initial Repayment of Interest Paid To Investment Principal Paid 04.22.09 $15,000.00 -0- Cashier=s Check to M. Williams 04.27.09 $15,000.00 -0- 05.13.09 $15,000.00 Cashier=s check to C. Hales 05.22.09 $15,000.00 $2,500.00 05.22.09 $10,000.00 Cashier=s check to C. Hales 05.22.09 $15,000.00 Cashier’s check to C. Hales 05.27.09 $40,000.00 Cashier=s check to C. Hales 05.29.09 $25,000.00 $5,000.00 05.29.09 $1,000.00 Cash to C. Hales 06.02.09 $8,000.00 Cashier=s check to C. Hales 06.02.09 $7,000.00 Cashier=s check to C. Hales 06.10.09 $11,000.00 Cashier=s check to Todd Smith 06.18.09 $8,000.00 Cashier=s check to C. Hales TOTAL $130,000.00 $55,000.00 $7,500.00 GRAND TOTAL $67,500.00
The repayments, in turn, were in furtherance of the conspiracy's lulling scheme, and again were made to create the appearance of legitimacy of misrepresentations of material fact and/or to cover up such misrepresentations and omissions.
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144. Since June 2009, Bagley and Bee have requested information from
Williams about PMI. Bagley and Bee were told not to “bother” PMI or to talk with Wright
“because Mike is a hot-head and loses his temper. He doesn't even know what he says
when he gets mad.” Bee related that comment to Wright about the $100,000.00 investment with PMI. Wright attempted to deny involvement, stating: “Hell, I don't know what Chris did with your money. He may have paid a house payment with it.” At this
juncture, in June 2009, Bee suspected for the first time that something might be awry.
145. In July 2009 Bee met with Richardson at Mimi's Café to find out
information as to why there were so many delays on monthly payouts from PMI and
what the expectations for payouts would be. Richardson stated that it looked possible
for Bee and Bagley to make 5% to 10% per month once PMI got off the ground and that
they were just needing to get all the documentation to cover certain SEC requirements.
Richardson said he did not have the documentation with him but that he would bring it
with him the next time they met. Bagley met with Richardson the following week in the
Oyster Bar parking lot in Cottonwood Heights, Utah, where Richardson said he would
deliver documentation for Bee and Bagley to fill out to show that they were accredited
investors.
146. Bee spoke with Hunter in December 2009 at which time Hunter explained
that the real time live trading had not occurred until November 4, 2009, ran for two
weeks, then there had been a Thanksgiving break, and it had just been up for two days
when prior to the conversation. Hunter stated that December was slow and that not a
lot of activity would be going on until after January 1, 2010.
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147. Richardson called Bagley to set up a meeting after several requests from
Bagley to get documentation on PMI and the Bee and Bagley investments with PMI.
The meeting date was December 28, 2009. Bee and Bagley arrived early and could not get in the door, so they texted Richardson, who in turn called Hunter, who unlocked the door. Bee and Bagley went upstairs with Hunter and advised Wright that his headlights were on in the parking lot. Bee and Bagley sat at the meeting table and waited for
Richardson. Hunter gave a brief overview of how PMI was supposedly functioning. Then
Wright discussed Oneiros as the parent company with PMI a branch off of it. Wright asked what contacts plaintiffs had with Hales, and amounts of money that plaintiffs had invested in PMI through Hales. Wright confirmed that Hales had “invested money” with
PMI but asserted that it was “not anywhere near the amount you are talking about.” Bee asked whether her call to Wright in July had been the first “red-flag” and if he had others. Wright said that there was another couple who had spoken to him about investments they had made in PMI through Hales. Wright attempted to divert attention from he and PMI, stating that he, Wright, was “concerned” that Hales and Williams were operating a fraudulent investment scheme. Wright then asked Bee and Bagley to indemnify Wright, Hunter, PMI and Oneiros in exchange for helping Bee and Bagley go after Hales and Williams. Wright said that he would then have his attorneys present Bee and Bagley's situation to “the Utah Court system” as well as the similar situation of other people. Wright said that he felt that there may be several more people who have
“invested money” through Hales and Williams and that there might be a “Ponzi scheme.” Wright asked that Bee and Bagley turn over to him all of their documentation of their dealings with Hales and Williams. Wright said that he was concerned that his
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company could be misconstrued as having been a part of a fraudulent investment scheme.
148. At or around the same December 2009 meeting at PMI about 5 or 6 minutes before Richardson had to leave, Bee mentioned money that Bee and Bagley had given Hales and Williams for investing in Otis Oil. Richardson said he did not think
Hales invested money there unless it was through yet another company, called Vision
Capital.
COUNT I (NON-DISCHARGEABILITY OF BEE’S AND BAGLEY’S CLAIMS AGAINST DEBTOR UNDER 11 U.S.C. § 523 (a)(2)(A), (A)(4) - AGAINST DEBTORS BARRY DON AND KIMBERLY CHAMPLIN HUNTER)
149. Bagley and Bee incorporate all previous allegations.
150. 11 U.S.C. § 523(a)(2)(iii) provides, in pertinent part:
(a) A discharge under section 727 of this title does not discharge an individual debtor from any debt- - (2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by- - (A) False pretenses, false representation or actual fraud other than a statement respecting the Debtor’s or an insider’s financial condition.
151. The representations Hunter made referenced herein concerned presently existing material facts that were false and that Hunter either knew to be false or made recklessly knowing that he had insufficient knowledge upon which to base such representations.
152. Hunter as an investment advisor for Bagley and Bee, was a fiduciary at the time of making representations.
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153. Hunter made the representations to Bee and Bagley to induce them to rely on those misrepresentations. But for those misrepresentations, Bee and Bagley would not have acted as they did in reliance thereon.
154. As a result of the false pretenses, artifices, false representations and actual fraud described above, Bee and Bagley, acting reasonably and in ignorance of the facts gave money and other things of value to Hunter as described above, acting reasonably and in ignorance of the facts.
155. Bee and Bagley thereby were damaged in amounts to be proven at trial for which they are entitled to recovery.
156. Bee and Bagley’s losses and damages were proximately caused by
Hunter’s false pretenses, artifices, false representations and actual fraud.
157. Accordingly, Bee and Bagley’s claims against Hunter as set forth herein, as well as those alleged in the State Court Action, are not dischargeable pursuant to 11
U.S.C. § 523(a)(2)(A).
158. All of the co-conspirators are liable for all of the damages caused to Bee and Bagley in furtherance of the Conspiracy an award of full restitution, damages against the defendants, jointly and severally, resulting from their fraud and/or material misrepresentations, in the sum of $1,000,000.00, together with all reasonably foreseeable consequential damages, prejudgment interest thereon, plus all of the costs, including attorneys’ fees. Bee and Bagley are also entitled to an appropriate award of punitive damages against each of those defendants as the proof may show.
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COUNT II (DENIAL OF DISCHARGE OF DEBTORS UNDER 11 U.S.C. § 727 (a)(2)(A), 727(a)(3), 727(a)(4) - AGAINST DEBTORS BARRY DON AND KIMBERLY CHAMPLIN HUNTER)
159. Bagley and Bee incorporate all previous allegations.
160. 11 U.S.C. § 727(a) provides, in pertinent part:
(a) The court shall grant the debtor a discharge, unless- . . . (2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed- (A) property of the debtor, within one year before the date of the filing of the petition; or (B) property of the estate, after the date of the filing of the petition; (3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case; (4) the debtor knowingly and fraudulently, in or in connection with the case- (A) made a false oath or account; (B) presented or used a false claim; (C) gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act; or (D) withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records, and papers, relating to the debtor's property or financial affairs; (5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities;
161. Under Utah law, all property of a limited liability company which has been dissolved, after winding up, belongs to the members.
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162. On their Statements and Schedules filed with the Court on May 25, 2012,
Hunter and Kimberly, in paragraph 18 of the Statement of Financial Affairs (Bankruptcy
Case No. 12-26860, Docket No. 2, at page 27 of 36), under penalty of perjury, falsely and fraudulently described Hunter’s business, PMI, as having the nature of business being “Business Consulting” and so operating between January 2006 and October
2011. The false and fraudulent description of the nature of PMI’s business, the millions of dollars of assets that flowed into or were controlled by it during its operations and the absolute failure to explain what happened to the hundreds of thousands of dollars of
PMI’s hard assets, in the form of computer servers and equipment, at least some and perhaps all of which is Hunter’s sole property upon PMI’s winding up and therefore part of the debtors’ estate, the willful concealment of the existence of these assets by failing to list as creditors or even give notice of the bankruptcy to Bee and Bagley until after the
Trustee filed his no asset report, which was done deliberately with the intent to conceal the true facts from the Trustee, the failure to turn over documents evidencing the assets of the dissolved PMI that belong to Hunter, the failure to disclose that Wright and
Oneiros have taken their proprietary trading program which was exclusively licensed to
PMI and now seek to “license” it in conjunction with the continuing FOREX trading, ongoing component of the Ponzi scheme all fit within the statutory bases to deny a discharge to the debtors.
163. There has been no account given for the assets of PMI remaining upon its dissolution and winding up, which assets are part of the debtors’ estate.
164. Accordingly, the Court should deny a discharge to the debtors under 11
U.S.C. § 727(a).
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COUNT III (FRAUDULENT TRANSFER - AGAINST ALL DEFENDANTS)
165. Bagley and Bee incorporate all previous allegations.
166. Some or all of the assets of PMI were transferred to one or more
defendants who are “insiders” as that word is defined in UTAH CODE ANN. § 25-6-2(7).
167. As to those insider transfers made by PMI, they are fraudulent as to Bee
and Bagley to the extent they were made after Bee and Bagley’s claims against PMI
arose and they were made to such insiders for an antecedent debt.
168. PMI was insolvent at all times because it was operated as a Ponzi scheme
and all the insiders knew it.
169. PMI’s transfers were made, or obligations incurred by it, without receiving
a reasonably equivalent value in exchange for the transfers or obligations.
170. In addition, all transfers of PMI and obligations incurred by it were made
with actual intent to hinder, delay, or defraud the creditors of PMI; or without receiving a reasonably equivalent value in exchange for the transfer or obligation and PMI: (I) was
engaged or was about to engage in a business or a transaction for which the remaining
assets of PMI were unreasonably small in relation to the business or transaction; or (ii)
intended to incur, or believed or reasonably should have believed that it would incur,
debts beyond its ability to pay as they became due.
171. Bee and Bagley are entitled to all such relief under the Utah Fraudulent
Transfer Act and or in equity or otherwise for all transfers made by PMI and obligations
incurred by PMI to others, directly or indirectly, with respect to Wright, Oneiros, Hunter,
Kimberly, the Church, the Utah Church, the Utah Mission, Madsen, Lucidity, Volition,
Cynthia, Burton, D’Arezzo, Farr, Hites, Kingdon, Petersen, Stowe and Szaniszlo,
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whether for alleged services, employment, repayment of debt, distribution of capital or
otherwise.
COUNT IV (CIVIL LIABILITY FOR VIOLATIONS OF RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, 18 U.S.C. § 1964(c) - AGAINST ALL DEFENDANTS EXCEPT KIMBERLY CHAMPLIN HUNTER AND CHURCH OF SCIENTOLOGY INTERNATIONAL)
172. Bagley and Bee incorporate all previous allegations.
THE PERSONS
173. Each of the named defendants are "persons" within the meaning of 18
U.S.C. § 1961(3). Defendants Barry D. Hunter; Kimberly Champlin Hunter; Portfolio
Manager International L.L.C.; Oneiros Technologies L.C.; Michael J. Wright; Gregory B.
Madsen; Lucidity Management, LLC; Volition Trading Company, LLC; Church of
Scientology of Utah; Cynthia L. Wright; Church of Scientology Mission of Salt Lake City;
Church of Scientology International; Tom Burton; James D'Arezzo; Alan S. Farr; George
Hites; Greg Kingdon; David Petersen; Robby J. Stowe; Sandor Szaniszlo shall be referred to collectively, from time to time, in this Count, as the “co-conspirator defendants.”
174. Each of the co-conspirator defendants entered into an agreement to violate the provisions of 18 U.S.C. § 1962(a), (b) and (c), and to commit two or more predicate acts in furtherance thereof. The predicate acts are described in the section on predicate acts below, which is incorporated herein in its entirety.
THE ENTERPRISE
175. The "Enterprise" as that term is defined in 18 U.S.C. § 1961(4) consists of an association-in-fact of entities as depicted in the Handwritten Fraud Organization
Chart drawn by defendant Wright and attached hereto as Exhibit B. In the alternative,
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the association-in-fact consists of Oneiros, PMI, Wright, Hunter, Hales, Williams,
Richardson, Volition, Lucidity, the Church, the Utah Mission, the Utah Church and other persons who performed specific functions in the organization that formed a criminal organization with a defined structure, that was ultimately led by the Church, is the
Enterprise or, as the final alternative, PMI itself is not a “person” but instead is the
Enterprise.
PLAINTIFFS' STANDING TO SUE
176. Plaintiffs have standing to pursue claims against the co-conspirator defendants for violations of 18 U.S.C. § 1962, because they have been injured in their property by reason of those violations, as follows:
INVESTMENT INJURY INCURRED BY REASON OF VIOLATION OF 18 U.S.C. § 1962(a)
177. Each of the co-conspirator defendants operated as a funding source for the Enterprise and has, in furtherance of the conspiracy, received income, directly or indirectly, from a pattern of racketeering activity consisting of, inter alia, mail fraud, wire fraud, Theft by Deception under UTAH CODE ANN. § 76-6-405, chargeable as a felony
under UTAH CODE ANN. § 76-6-405, in that each occurrence of theft involved the
obtaining of a thing of value exceeding $1,000.00, Communications Fraud chargeable
as a felony under UTAH CODE ANN. § 76-10-1801 in that each occurrence of the
obtaining of a thing of value was for a value exceeding $1,000.00, Money Laundering
under UTAH CODE ANN. § 76-10-1903, chargeable as a felony under UTAH CODE ANN. §
76-10-1904, Unlawful Dealing of Property by a Fiduciary, under UTAH CODE ANN. §
76-6-513, chargeable as a felony under that section in that each occurrence of the obtaining of a thing of value was for a value exceeding $1,000.00, Securities Fraud
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under UTAH CODE ANN. § 61-1-1, -2, -3, -7, -16, each chargeable as a felony under UTAH
CODE ANN. § 61-1-21(2). The defendants reinvested the funds obtained from plaintiffs
and other victims, directly or indirectly, in the Enterprise, for use in funding further
fraudulent activities and procuring funds from additional victims and thus to operate the
Enterprise, the activities of which affect interstate commerce, in violation of 18 U.S.C. §
1962(a). The predicate acts involved numerous wire transfers, text messages and e-mails, transmitted across state lines and over the interstate wires, each such transmission being an essential step in the plot and/or related to subsequent lulling
schemes.
178. By reason of the defendants’ use and investment of the racketeering
proceeds in the Enterprise, the Enterprise was capable of surviving, maintaining its
operations and entering into multiple fraudulent transactions with plaintiffs which directly
injured plaintiffs in form of (1) the loss of plaintiffs' monies invested; (2) the incurring of
debt by Bagley for which he is responsible to Zions First National Bank, NA; (3) the
incurring of mental anguish and emotional distress over the loss of their funds, as with
other victims. But for the pattern of racketeering activity through which those illicit
proceeds of racketeering were generated, the Enterprise would have failed and plaintiffs
would not have been injured in such a fashion.
PREDICATE ACT INJURY INCURRED BY REASON OF THE CONDUCT OF THE AFFAIRS OF AN ENTERPRISE, IN VIOLATION OF 18 U.S.C. § 1962(c)
179. Plaintiffs also have been injured by reason of the co-conspirator
defendants' employment by or association with the Enterprise, because their
participation, directly or indirectly, in the conduct of the Enterprise's affairs, through a
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pattern of racketeering activity has directly resulted in the plaintiffs'(1) accumulation of debt without receiving any benefit; and (2) losing the funds they invested through the persons who committed the crimes alleged.
PREDICATE ACTS OF RACKETEERING ACTIVITY
180. All of the actions of each co-conspirator defendant were taken for and on behalf of the Enterprise thereby making each person chargeable for the predicate acts of each other person.
181. Each time the defendants procured monies from either of the plaintiffs or other victims and invested such funds in the Enterprise the defendants, together and as co-conspirators, committed each of the predicate acts described above.
182. Each defendant has engaged in the commission of at least two predicate acts in furtherance of the object of the conspiracy and operation of the enterprise that
form part of the pattern of racketeering activity as defined in 18 U.S.C. § 1961,
evidenced by at least the following known specific acts and communications in violation
of 18 U.S.C. § 1341 (Mail Fraud); 18 U.S.C. § 1343 (Wire Fraud); 18 U.S.C. § 2314
(Transportation of stolen goods, securities, moneys, fraudulent State tax stamps, or
articles used in counterfeiting); or a violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7,
-17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition
imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7), which violations are chargeable
under UTAH CODE ANN. § 61-1-21 as a third degree felony:
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BARRY D. HUNTER/PMI/SALT LAKE MISSION
Date Summary of Documentary Evidence Predicate Act under § 1961
Early 2005 Hunter (UT) had a phone conversation with Tom Wire Fraud 18 U.S.C. §1343 Burton (CA) about Hunter being appointed as the CEO of PMI.
11.01.06 - Email communications between T. Burton (CA) and B. Wire Fraud 18 U.S.C. §1343; 11.02.06 Hunter (Mike and Greg)(UT) re. referencing David Violation of 18 U.S.C. § 2314 Petersen's investment of $150K and budget projections to draw $276,500.00.
11.06.06 Email from B. Hunter (UT) to D. Petersen (UT) with an Wire Fraud 18 U.S.C. §1343 attached operating agreement for Burton in his role as the “Establishment Officer” and states that “I know Alan [Farr] is especially impressed with Tom [Burton] and wants his involvement. This might be a good [sic] to show Alan to put him more at ease.”
01.26.07 Email from B. Hunter (UT) to A. Farr (UT) re. Wire Fraud 18 U.S.C. §1343 investment funding.
11.22.06 Email communications between Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343; Tom Burton (CA) in which Co-Conspirator Burton Violation of 18 U.S.C. § 2314; explains his efforts to recruit Montecito Hedge Fund Violation of UTAH CODE ANN. Managers and claiming that “[t]he story and positioning §§ 61-1-1(2), -3(1), -7, -17(2), is so easy now.” Co-Conspirator Burton also mentioned and/or a rule or order under his efforts to contact Co-Conspirators Szaniszlo and UTAH CODE ANN. § 61-1-15, Hites to update them on “the new plan,” and requested and/or a condition imposed a withdrawal of $75,000 from the “TradeStation under UTAH CODE ANN. §§ corporate account.” Co-Conspirator Hunter stated that 61-1-10(4) or 11(7). he would “continue to push the comm lines out on this end so we can get the funds we need” and requests the routing number and account number in addition to the name on the account “that I will be wiring the funds to.”
11.30.06 Email comm. between B. Hunter (UT) and T. Burton Wire Fraud 18 U.S.C. §1343; (CA) with attached master plan explaining the Violation of 18 U.S.C. § 2314; organization of PMI and Oneiros, including the Violation of UTAH CODE ANN. “Oneiros Offshore Expansion Plan,” the co- §§ 61-1-1(2), -3(1), -7, -17(2), conspirators’ long-range plan for PMI and Oneiros to and/or a rule or order under expand trading capital to “$100-150 million.” UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
08.28.06 Email from B. Hunter (UT) to A. Farr (UT) re. offering Wire Fraud 18 U.S.C. §1343 position as a managing member of PMI
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01.23.07 B. Hunter (UT) sent an email to James D’Arezzo (CA) Wire Fraud 18 U.S.C. §1343; and identified $346,000.00 in loans to PMI from Greg Violation of 18 U.S.C. § 2314; Kingdon, Michael Wright and Barry Hunter and also Violation of UTAH CODE ANN. references loans to PMI from David Peterson, Alan §§ 61-1-1(2), -3(1), -7, -17(2), Farr, Tom Burton and Sandor Szaniszlo and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
01.23.07 Barry Hunter (UT) sent an email to James D'Arezzo Wire Fraud 18 U.S.C. §1343; (CA) regarding inclusion into PMI as a way for key Violation of 18 U.S.C. § 2314; members to trade their own accounts and help in Violation of UTAH CODE ANN. directing PMI business activities and indicating that Mr. §§ 61-1-1(2), -3(1), -7, -17(2), D'Arezzo can be part of the LLC or take a more and/or a rule or order under informal role. UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
11.13.07 Email between B. Hunter (UT) and D. Petersen (UT) re. Wire Fraud 18 U.S.C. §1343; $15,000.00 invoice and slot to invest. Violation of 18 U.S.C. § 2314; Violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
12.17.07 Email from Barry Hunter (UT) to David J. Petersen (UT) Wire Fraud 18 U.S.C. §1343; showing $200,000.00 added to PMI in December 10, Violation of 18 U.S.C. § 2314; 2007 and requesting permission to use Petersen’s Violation of UTAH CODE ANN. “trading data, symbol names and results in preparing a §§ 61-1-1(2), -3(1), -7, -17(2), promo piece.” and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
04.29.07 Email from B. Hunter (UT) to A. Farr (UT) Wire Fraud 18 U.S.C. §1343; which included an attached letter purported to be Violation of 18 U.S.C. § 2314; (Hunter, answers from Wright, Hunter, Madsen, and Steve Violation of UTAH CODE ANN. PMI and Wyatt, PMI’s CPA, to questions asked about the PMI §§ 61-1-1(2), -3(1), -7, -17(2), Salt Lake business plan and its software application. The letter and/or a rule or order under Mission states that “[i]nvestment capital at this point would be UTAH CODE ANN. § 61-1-15, Cont.) going into PMI operations and infrastructure. and/or a condition imposed Additionally, the PMI 500K brokerage account will be under UTAH CODE ANN. §§ used to validate the trading algorithms released by 61-1-10(4) or 11(7). Oneiros in automated live funded trading before it is approved for any client accounts.” The letter memorializes the co-conspirators’ intent that “the majority of the profits will be earmarked to profit sharing plans with the bulk of the capital being used to fund a philanthropic foundation,” and that “[t]he system will ultimately be used to fund the foundation.”
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10.16.08 Email from B. Hunter (UT) to C. Hales (UT) in which he Wire Fraud 18 U.S.C. §1343; provided account and routing numbers for PMI’s bank Violation of 18 U.S.C. § 2314 account with Wells Fargo. Hunter also forwarded a message from Wright to Hales in the email, in which Wright states “We are assuming, based on the last few days of absent communication, that you are trying as best you can to get things resolved on your end. I want to make sure that you know we are also working as well to resolve things too. The main thing I want to stress is that we must stay in complete communication of any vital data each of us may need. Vital data can be good news or bad news...[t]he hallmark of our group’s agreement is that each one of us can and will confront and handle any barrier that is presented.”
11.13.08 - Email communications between Barry Hunter (UT) to Wire Fraud 18 U.S.C. §1343; 11.19.08 Tom Burton (CA) re. "Fat Cats" that Chris Hales Violation of 18 U.S.C. § 2314; brought in, references funds that PMI has agreements Violation of UTAH CODE ANN. with including PMI board of Advisors, David Petersen, §§ 61-1-1(2), -3(1), -7, -17(2), Rusty Tweed, Chris Hales, George Hites, Mike and/or a rule or order under Schwartz, Steve Garhardt, Peter Lowden. Involves UTAH CODE ANN. § 61-1-15, Mike Ricks and states that Barry Hunter and Michael and/or a condition imposed Wright are aware that Ricks plead guilty to insider under UTAH CODE ANN. §§ trading. 61-1-10(4) or 11(7).
11.19.08 Hunter (UT) responded to Burton’s (CA) late email the Wire Fraud 18 U.S.C. §1343; night before and informed him that “[h]ere’s the funds Violation of 18 U.S.C. § 2314; (Hunter, that we have agreements with. PMI Board of Advisers Violation of UTAH CODE ANN. PMI and David Petersen’s own fund. Rusty Tweed (Rusty’s §§ 61-1-1(2), -3(1), -7, -17(2), Salt Lake going to be in Utah next week for Thanksgiving) Chris and/or a rule or order under Mission Hales (He’s the you [sic] young guy(28) who brought us UTAH CODE ANN. § 61-1-15, Cont.) the fat cat and is partnering in the deal). On a side and/or a condition imposed note: Chris is starting his Purif next Wednesday. We under UTAH CODE ANN. §§ introduced him to Scientology. George Hites. Possible, 61-1-10(4) or 11(7). Mike Schwartz (Oregon $10 Million Fat Cat) Dr. Steve Garhardt (Las Vegas high net worth investor) Peter Lowden, Hedge fund from Reno.” That same day, Burton responded to Hunter’s email: “Barry - Are you aware of Ricks past? Looks like he pleaded guilty to insider trading. See link below. What do you think of his ethics level. -Tom http://www.usps.com/postalinspectors/nrdoj0406.htm.”
01.08.09 Email between B. Hunter (UT), Jean Hammer (Sage Wire Fraud 18 U.S.C. §1343 Financial)(NV) and Mel Myer re. looking forward to being of service to you, Dr. Rodney Howard Browne.
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01.09.09 Email communications from Barry Hunter (UT) to Jim Wire Fraud 18 U.S.C. §1343; D'Arezzo (CA) discussing an email which PMI sent out Violation of 18 U.S.C. § 2314; “to shut the door on any future guys who might come Violation of UTAH CODE ANN. back and say you promised me that I could set up my §§ 61-1-1(2), -3(1), -7, -17(2), own server. We have two fat cat clients who could and/or a rule or order under easily bring in over $500 Million each so we’re not UTAH CODE ANN. § 61-1-15, really wanting more small clients. The 50K fee is and/or a condition imposed actually a partially refundable Earnest Money under UTAH CODE ANN. §§ Agreement. They have been fairly easy to come by with 61-1-10(4) or 11(7). clients who have large amounts of liquid cash.”
01.08.09- Between January 6, 2009 and January 8, 2009 Barry Wire Fraud 18 U.S.C. §1343; 01.09.09 Hunter and David Petersen communicated via email Violation of 18 U.S.C. § 2314; Hunter's anticipation that PMI would receive Violation of UTAH CODE ANN. $90,000.00 from Mike Ricks in the next four days. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
01.22.09 Hunter sent an email to Hales with an attached Wire Fraud 18 U.S.C. §1343; statement of residual compensation for sales with PMI Violation of 18 U.S.C. § 2314; and a copy of the solicitor agreement with PMI. Hunter Violation of UTAH CODE ANN. states that “[i]n order to receive revenue on a residual §§ 61-1-1(2), -3(1), -7, -17(2), basis from a client, you must pass the Series 65 Exam. and/or a rule or order under This allows us to designate you personally as an IAR UTAH CODE ANN. § 61-1-15, Investment Adviser Representative of PMI and allows and/or a condition imposed you to receive residual compensation for clients that under UTAH CODE ANN. §§ you introduce to PMI... [i]n doing the math, even with 61-1-10(4) or 11(7). the introductions you’ve made thus far, this should be a $Million+ yearly game in and of itself. Of course the biggest compensation should come through strategic alliance and building up your own fund.”
[Intentionally Blank]
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01.23.09 Hunter emailed a copy of a “Management Agreement Wire Fraud 18 U.S.C. §1343 Template,” stating “Chris here’s a copy of the Management Agreement Template that potential clients can look [sic]”. The Management Agreement Template included wire information for PMI’s account with Wells Fargo and outlines a “Master Fund Feeder Fund Business Model” and claims “PMI can in some cases act as the Portfolio Manager for other fund managers, its [sic] PMI’s responsibility to be actively involved with the all [sic] the other entities that compose the various possible business models that PMI may become affiliated with or be a part. Without this understanding of the Master Fund Feeder Fund structure and PMI’s role in it, it could be easily construed that all the parties are ‘in business’ with each other, when the truth is that each entity is autonomous and has its own responsibilities, functions and compensations.”
02.15.09 Email from B. Hunter (UT) to C. Hales (UT) with Wire Fraud 18 U.S.C. §1343; attached list contained the following names of Violation of 18 U.S.C. § 2314; individuals purportedly introduced by Hales or by Violation of UTAH CODE ANN. another individual introduced to PMI by Hales. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
02.19.09 Email from B. Hunter (UT) to M. Williams (UT) re. Live Wire Fraud 18 U.S.C. §1343 paper trading test to pass on to appropriate parties.
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02.19.09 Hunter (UT) sent an email to Williams (UT) with an Wire Fraud 18 U.S.C. §1343; attached “schematic Mike [Wright] put together on the Violation of 18 U.S.C. § 2314; Strategic Alliance Idea.” The schematic outlined the Violation of UTAH CODE ANN. process by which the co-conspirators obtained a loan §§ 61-1-1(2), -3(1), -7, -17(2), for their LLC entity from an investor. The schematic and/or a rule or order under explains the following process: “Lender and the UTAH CODE ANN. § 61-1-15, Borrower both set up a two signature bank wire and/or a condition imposed restricted bank account. This account becomes the under UTAH CODE ANN. §§ originating account that funds a brokerage account. 61-1-10(4) or 11(7). The brokerage cannot cross wire and must wire back through the originating account so any funds that come from the brokerage account will be locked up in the two signature bank wire only bank account which protects the lender. The brokerage account is funded with the $10 million via the bank account. A $1 million cash reserve account is set up inside the brokerage account. The brokerage account is then leveraged to 18 million which is 180%. PMI with its software and electronic infrastructure build the portfolios and manage the 18 million and set a total liquidation account trigger at 5% or $900,000 on the 18 million being managed. The borrower or another 3rd party agrees to fund a one million dollar reserve account inside the brokerage account-via the two signature bank wire only account. Since PMI has total liquidation trigger of 5% on $900K on the 18 million, in the brokerage account this million dollars would be used to offset such a loss and so restore the lender back to 10 million.”
02.20.09 Email from B. Hunter (UT) to M. Williams (UT) re. Wire Fraud 18 U.S.C. §1343 attached Portfolio Design Build Services & Earnest Money Agreement
02.27.09 Email from B. Hunter (UT) to M. Williams (UT) re. List Wire Fraud 18 U.S.C. §1343 of people who have been in the office and raising operating capital.
03.10.09 Email between G. Kingdon (UT) and B. Hunter (UT) re. Wire Fraud 18 U.S.C. §1343 email from M. Baybak to M. Wright and B. Hunter and PMI operations.
02.23.09 Email from B. Hunter (UT) to C. Hales (cc. Eric Wire Fraud 18 U.S.C. §1343 Richardson)(UT) re. Trade Station Securities contact Jake Hinkle in Florida.
03.21.08 Email from B. Hunter (UT) to J. Hinkle (FL) re. New Wire Fraud 18 U.S.C. §1343 client, Chris Hales needs brokerage account. Also considerable expansion.
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11.18.08 Email from Hunter (UT) to Burton (CA) to provide an Wire Fraud 18 U.S.C. §1343; update on PMI, and stating that “I’ve been on the Violation of 18 U.S.C. § 2314; phones the last two days generating interest for our Violation of UTAH CODE ANN. initial PMI fund. I’m at about $2.7 Million in §§ 61-1-1(2), -3(1), -7, -17(2), commitments thus far.” Later that day, Burton and/or a rule or order under responded to Hunter’s email and inquired as to UTAH CODE ANN. § 61-1-15, Hunter’s availability for December 5 and 6, 2008, to and/or a condition imposed visit with Burton and David P[etersen]. Hunter under UTAH CODE ANN. §§ responded that evening and informed Burton that “Mike 61-1-10(4) or 11(7). and I are fully engaged in finishing up the legal for our agreement with the Fat Cat who has agreed verbally to fund the build out. He’s agreed to about $700K in infrastructure costs and his intent is to trade up to $500 Million over the next few years.” Burton responded late on November 18, stating that “[i]t is really important that we confront and handle the operating agreement BEFORE you actually start trading the funds. This is critical for all of our protection now that substantial money is being traded. Also I know that I am the co- signor on a number of documents related to Tradestation and I believe on some docs related to the investor registration. If you want to send what you have done so far on the operating agreement I can start looking at what will need to be modified.”
03.08.09 Email from B. Hunter (UT) to C Hales (UT) re. Eric Wire Fraud 18 U.S.C. §1343 [Richardson] good addition to team.
03.09.09 Michael Baybak43, a prominent Scientologist and Wire Fraud 18 U.S.C. §1343; potential investor for PMI, sent an email to Hunter and Violation of 18 U.S.C. § 2314; Wright thanking them “for forwarding your write-up on Violation of UTAH CODE ANN. the strategic vision you folks have for your group’s §§ 61-1-1(2), -3(1), -7, -17(2), grand goals as well as the interdependent structure of and/or a rule or order under the four entities you have in mind to carry forth UTAH CODE ANN. § 61-1-15, successful accomplishment of your (emerging favorite and/or a condition imposed word here) audacious and, dare I say, exteriorizing under UTAH CODE ANN. §§ mission. I can certainly buy into the grand vision and 61-1-10(4) or 11(7). the enlightened purposes of your intended activity, and I do rather like your conception of the structural elements, including the “hub and spoke” concept of the various funds that would [sic] structured to operate under, if I get this rightly, PMI operations. Seems to me that you are really maximizing the structure to milk the global market’s cow maximally - and for the greater good.”
43 See http://www.cs.cmu.edu/~dst/Fishman/time-behar.html
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05.08.09 Hunter (UT) sent an email to Hales (UT) to memorialize Wire Fraud 18 U.S.C. §1343; investments received by PMI from Hales or investors Violation of 18 U.S.C. § 2314; whom Hales introduced to PMI. Hunter states “Here Violation of UTAH CODE ANN. are the records of Investment received by PMI that §§ 61-1-1(2), -3(1), -7, -17(2), were not for Design-Build Service Agreements. 11-8- and/or a rule or order under 2008 $10,000 You dropped this off at the office. 1-26- UTAH CODE ANN. § 61-1-15, 2009 $5,000 I picked it up at your home. 2-18-0009 and/or a condition imposed $5,000 Ben and Dan dropped this off. Let me know under UTAH CODE ANN. §§ who the promissory note(s) need to written [sic] to and 61-1-10(4) or 11(7). I’ll draft the document(s). FYI, Ben had mentioned when he dropped off the $5,000 that he was responsible for some of the money that Bentley had written to PMI earlier. I don’t know if he was talking about the $30K Design/Build or not, it was just a comment he made.”
05.21.09 Email from Barry Hunter (UT) to Craig Garhardt (NV), Wire Fraud 18 U.S.C. §1343; Jean Hammer (NV), Steve Garhardt (NV) with Violation of 18 U.S.C. § 2314; attachment titled "Strategic Alliance Performance Fee Violation of UTAH CODE ANN. Calculation" Hunter states that “Our understanding §§ 61-1-1(2), -3(1), -7, -17(2), from our previous discussions is that in an Strategic and/or a rule or order under Alliance, interest charges that are incurred by Sage UTAH CODE ANN. § 61-1-15, monthly on raising capital would be deducted from the and/or a condition imposed increase in the trading account before performance under UTAH CODE ANN. §§ fees were paid. PMI would also receive a fee to go 61-1-10(4) or 11(7). towards its monthly operating costs. When we are up and running, we anticipate our monthly costs will be $60,000 and our idea was to have our Strategic Alliance with Sage pay for 1/3rd of that or $20,000.”
06.05.09- Email communications between B. Hunter (UT), M. Wire Fraud 18 U.S.C. §1343; 06.09.09 Baybak (CA), (cc. Rob Rainer, George Duggan, M. Violation of 18 U.S.C. § 2314 Wright) forwarded to G. Kingdon re. Trading Baybak’s $2 Million pension on PMI system. Eric Richardson referred to as Compliance Officer.
06.29.09 Email communication between B. Hunter (UT), C. Wire Fraud 18 U.S.C. §1343 and Hales (UT) and E. Richardson (UT) a copy of the 07.07.09 “Portfolio Management Subscription Agreement Template” and stated that “This should be much more thorough and it is what we will need to use in the agreements with Lucidity and Volition.”
07.07.09 Hunter (UT) sent an email to Hales (UT) with an Wire Fraud 18 U.S.C. §1343 attached “Management Agreement Template that I sent to Eric last week.”
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07.13.09 Email from Greg Kingdon (UT) to Barry Hunter (UT) Wire Fraud 18 U.S.C. §1343; referencing a $2 Million investment in PMI from Michael Violation of 18 U.S.C. § 2314; Baybak Violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
08.04.09- Email communication between Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343; 08.05.09 Greg Kingdon discussed via email Eric Richardson Violation of 18 U.S.C. § 2314; getting $4 Million dollars from Christopher Hales and Violation of UTAH CODE ANN. allocating $2 Million to PMI and also PMI having §§ 61-1-1(2), -3(1), -7, -17(2), obtained $50,000.00 from Chris Hales in the previous and/or a rule or order under year. UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
08.10.09 Email from Barry Hunter (UT) to Greg Kingdon (UT) Wire Fraud 18 U.S.C. §1343 with an attachment outlining the PMI Fee Structure
10.14.09 Email communication from Greg Madsen (UT) to Greg Wire Fraud 18 U.S.C. §1343 Kingdon (UT) and Barry Hunter (UT) confirming an order for servers and attached an invoice and receipt for payment in the amount of $7,291,47.
10.23.09 Hunter sent an email to Steve Gerhardt, Jean Hammer Wire Fraud 18 U.S.C. §1343; and Craig Gerhardt, stating that “This letter is to Violation of 18 U.S.C. § 2314; reconfirm the terms and conditions on which we Violation of UTAH CODE ANN. accepted your funds for a slot in the data center. As we §§ 61-1-1(2), -3(1), -7, -17(2), communicated, we have a data center capacity for only and/or a rule or order under one Strategic Alliance and have several interested UTAH CODE ANN. § 61-1-15, parties whom are working on funding this opportunity. and/or a condition imposed In that there is only one of these Strategic Alliance under UTAH CODE ANN. §§ slots, the offer is open on a first come first serve basis 61-1-10(4) or 11(7). only. In the event another party performs by securing a sizeable account, the slot and Strategic Alliance we have with you will become null and void. While the opportunity to have a dedicated slot for your S.A. will have been terminated, you will still have the opportunity to come into our master fund, feeder fund set up. The money you tendered for servers plus the interest on that money will be refunded to you our can be used to offset any fee splits that may become due to PMI...All arrangements for management going forward will be done on a case by case basis and at our sole discretion.”
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10.26.09 Email communications between Barry Hunter (UT) to Wire Fraud 18 U.S.C. §1343 and Craig Garhardt (NV), Jean Hammer (NV), Steve 10.28.09 Garhardt (NV) of Sage Financial Holdings LLC efforts of Sage towards securing funds for the Strategic Alliance and Craig Garhardt stating "we are ready on our end and able to handle the $45 million."
12.31.09 Email from G. Kingdon (UT) to B. Hunter (UT) re. Wire Fraud 18 U.S.C. §1343 withdrawing portion of funds, will add funds in the new year.
12.31.09 Email from Rusty Tweed (CA) to B. Hunter (UT) in the Wire Fraud 18 U.S.C. §1343; form of a letter of intent for Tweed Financial Services, Violation of 18 U.S.C. § 2314; Inc. to place $1,000,000.00 with PMI and another Violation of UTAH CODE ANN. $5,000,000.00 by end of first quarter of 2010. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
01.01.10 Email from Barry Hunter (UT) to Jim D'Arezzo (CA) Wire Fraud 18 U.S.C. §1343 stating Sandor has been paid back.
01.05.10 Email from Barry Hunter (UT) to David Petersen (UT), Wire Fraud 18 U.S.C. §1343; Greg, Kingdon (UT) with attached December 31, 2009 Violation of 18 U.S.C. § 2314; letter from Eric Richardson, President RPM Violation of UTAH CODE ANN. Investments Company LLC to Barry Hunter, PMI §§ 61-1-1(2), -3(1), -7, -17(2), stating, "Based on our agreements with PMI and the and/or a rule or order under achievement of performance metrics, we have obtained UTAH CODE ANN. § 61-1-15, investment commitments for Volition Fund currently in and/or a condition imposed excess of $17,000,000." under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
01.11.10 Email from Barry Hunter (UT) to Craig Garhardt (NV) of Wire Fraud 18 U.S.C. §1343; Sage Strategic Alliance, LLC in reference to Hunter’s Violation of 18 U.S.C. § 2314 and Wright’s changes to a Letter of Intent document attached to the email for Sage Financial Holding’s intent to execute a PMI Strategic Alliance Management Agreement. The letter states that Sage “will be increasing the funding of the account after this initial funding state to approximately $5-8 million by the end of the second quarter and $25 million by year end.”
01.15.10 Email communications between Tom Burton (CA) and Wire Fraud 18 U.S.C. §1343; Barry Hunter (UT) indicating that Rusty Tweed will Violation of 18 U.S.C. § 2314; have $1.5 Million dollars ready to trade before February Violation of UTAH CODE ANN. and another client Sage called and would have $2 §§ 61-1-1(2), -3(1), -7, -17(2), Million dollars before February 1st as well as debt and/or a rule or order under consolidation on some notes that have come due in an UTAH CODE ANN. § 61-1-15, amount between $250,000.00 to $300,000.00. and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
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02.02.10 Email from B. Hunter (UT) to Rusty Tweed (CA) re. Wire Fraud 18 U.S.C. §1343; restructuring Master Fund and excited to start trading Violation of 18 U.S.C. § 2314; your brokerage account. And $265K is deposited in Violation of UTAH CODE ANN. PMI Quant Pool Account. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
02.03.10 Email communication between Barry Hunter (UT), Greg Wire Fraud 18 U.S.C. §1343; Kingdon (UT) and Rusty Tweed (CA) including the Violation of 18 U.S.C. § 2314; attached “Conceptual Process and Procedure for a Violation of UTAH CODE ANN. Master-Fund” to Kingdon and stated that “Eric §§ 61-1-1(2), -3(1), -7, -17(2), [Richardson] put this together some time ago to show and/or a rule or order under how a Master Fund needs to be set up. I’d like to work UTAH CODE ANN. § 61-1-15, with you and Eric on a new structure for the and/or a condition imposed Quantitative Analytics Master Fund.” The attachment under UTAH CODE ANN. §§ includes a chart explaining how funds are to be 61-1-10(4) or 11(7). transferred via wire transfer to the separate feeder funds from the PMI Prime Fund master fund.
06.30.10 Email communications between B. Hunter (UT) and J. Wire Fraud 18 U.S.C. §1343 and D’Arezzo (CA) re. Chris needs to distribute funds. 07.06.10 “Mike [Wright] and I [Hunter] have gone after other sources of funding.”
09.14.10 Email communication between Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343 and Greg Kingdon (UT) which referenced a letter from 09.15.10 James D'Arezzo identifying his role in "orchestrating a danger handling on Oneiros/PMI" and identifying efforts to bypass Greg Madsen, Jean Hammer, Eric Richardson and Michael Wright in decision making for PMI
01.06.09 Email communication between B. Hunter (UT) and D. Wire Fraud 18 U.S.C. §1343; and Petersen (UT) re. postulating will receive $90K from Violation of 18 U.S.C. § 2314; 01.08.09 Mike Ricks. Conf. Call with large financial planner out Violation of UTAH CODE ANN. of Tampa. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
01.23.07 Email communication between B. Hunter (UT) and J. Wire Fraud 18 U.S.C. §1343; D’Arezzo (CA) re. Petersen, Farr Burton and Szaniszlo Violation of 18 U.S.C. § 2314; together have loaned PMI $346,000.00. Also potential Violation of UTAH CODE ANN. users with high net worth. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
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02.21.08 Email from Hunter to Alan Farr with attached draft of Wire Fraud 18 U.S.C. §1343; promissory note to Farr $50,000.00 (unsigned). Violation of 18 U.S.C. § 2314; Violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
03.03.09 Email from Barry Hunter (UT) to David Petersen (CA) Wire Fraud 18 U.S.C. §1343; stating he believes he found the $30,000.00 spent on Violation of 18 U.S.C. § 2314; trading slot. A spreadsheet attached to the email Violation of UTAH CODE ANN. shows payment from David Petersen to PMI in the §§ 61-1-1(2), -3(1), -7, -17(2), amount of $330,500.00. and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
03.05.08 Promissory Note from Carol Farr $50,000.00 Violation of 18 U.S.C. § 2314 (unsigned)
03.08.10 - Email communications between Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343; 03.10.10 Greg Kingdon (UT) communicated via email regarding Violation of 18 U.S.C. § 2314; an investment by Chris McCormack of $500,000.00 in Violation of UTAH CODE ANN. PMI and $1.5 million in Oneiros, and that he has §§ 61-1-1(2), -3(1), -7, -17(2), committed $50 Million in the Sage account. The email and/or a rule or order under communications also highlight a transfer $600,000.00 UTAH CODE ANN. § 61-1-15, into a new "Master Fund." and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
03.18.09 Email communications between B. Hunter (UT) and Wire Fraud 18 U.S.C. §1343 David Petersen (UT) regarding ownership interest in PMI and identifying Barry Hunter initially as 100% owner of PMI and making reference to Barry Hunter's CPA's advice to include another managing member with at least 10% ownership.
08.08.08 Email from Hunter to Steve Wyatt with attached Wire Fraud 18 U.S.C. §1343; Promissory Note to Wyatt ($200,000.00). Hunter Violation of 18 U.S.C. § 2314; states: “We’d like to get this signed as soon as is Violation of UTAH CODE ANN. convenient for you so that we can close out 2008 for §§ 61-1-1(2), -3(1), -7, -17(2), PMI. and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
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09.01.10 Email from B. Hunter (UT) to Hilton Bell with attached Wire Fraud 18 U.S.C. §1343; 08.31.10 Promissory Note between PMI and Hilton and Violation of 18 U.S.C. § 2314 Lee Ann Bell ($200,000.00).
10.03.06 Email from Barry Hunter (UT) to Sandor Szaniszlo (CA) Wire Fraud 18 U.S.C. §1343 regarding payment to Szaniszlo and Capital Unicorn Integrity, an entity apparently owned in whole or in part by Mr. Szaniszlo, in the amount of $5,000.00.
10.12.07 Design Build Services and Earnest Money Agreement, Violation of 18 U.S.C. § 2314 unsigned, between David Petersen and PMI in the amount of $15,000.00 to be tendered at time of signing and another $15,000.00 due on November 15, 2007 and in consideration of the up front costs to purchase equipment and labor costs Mr. Petersen agreed that $25,00.00 of the $30,00.00 is considered a non-refundable fee.
12.21.09 Email communication between Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343; Christy Fenton ([email protected]), Eric Violation of 18 U.S.C. § 2314; Richardson (UT), Boyd Cook, Mickey Fenton Violation of UTAH CODE ANN. ([email protected]) and others stating $94,000 §§ 61-1-1(2), -3(1), -7, -17(2), will be transferred back to the Volition account and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
01.29.08- Email communications between B. Hunter (UT) and J. Wire Fraud 18 U.S.C. §1343; 01.30.08 D’Arezzo (CA) re. PMI results and D’Arezzo request Violation of 18 U.S.C. § 2314; summary to give to his contacts. Hunter asking Violation of UTAH CODE ANN. D’Arezzo for “resources and comm lines that could help §§ 61-1-1(2), -3(1), -7, -17(2), us. . . ” Asking for $100k and some additional capital and/or a rule or order under and want to create a "strategic alliance" with D'Arezzo. UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
MICHAEL WRIGHT/ONEIROS/ PMI/UTAH CHURCH / SALT LAKE MISSION
Date Summary of Documentary Evidence Predicate Act under § 1961
10.23.06 Letter possibly sent via email attachment from Mike Mail Fraud 18 U.S.C. §1341; [Wright] (UT) to T. Burton (CA) re. organizations, Wire Fraud 18 U.S.C. §1343 funding and loan proceeds.
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1.22.07 Email from M. Wright (UT) to Jim D’Arezzo (CA) via Wire Fraud 18 U.S.C. §1343; Barry Hunter (UT) outlining terms of D’Arezzo’s Violation of 18 U.S.C. § 2314; investment including without limitation an access rights Violation of UTAH CODE ANN. license with PMI that allows him to use the PMI §§ 61-1-1(2), -3(1), -7, -17(2), management market timing software and a personal and/or a rule or order under trading account “in the amount of 10 times your UTAH CODE ANN. § 61-1-15, investment capital or $1,000,000" with a preferential fee and/or a condition imposed structure. under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
Letter possibly sent via email attachment from Mike Mail Fraud 18 U.S.C. §1341; [Wright] (UT) to T. Burton (CA) re. putting together a Wire Fraud 18 U.S.C. §1343 group that would “help us financially.”
04.30.08 Letter possibly sent via email attachment to C. Hales Mail Fraud 18 U.S.C. §1341; (UT) from M. Wright (UT) re. setting [Hales and the Wire Fraud 18 U.S.C. §1343 Bentley Entities] up properly. Wright states: “For ease of managing your LLC, you can designate one member/manager of the LLC to initiate bank wire requests to pay PMI fees from the brokerage to the LLC account. Once the funds hit the LLC account you can bank wire them to the PMI account.”
03.09.09 Michael Baybak44, a prominent Scientologist and Wire Fraud 18 U.S.C. §1343; potential investor for PMI, sent an email to Hunter and Violation of 18 U.S.C. § 2314; Wright thanking them “for forwarding your write-up on Violation of UTAH CODE ANN. the strategic vision you folks have for your group’s grand §§ 61-1-1(2), -3(1), -7, -17(2), goals as well as the interdependent structure of the four and/or a rule or order under entities you have in mind to carry forth successful UTAH CODE ANN. § 61-1-15, accomplishment of your (emerging favorite word here) and/or a condition imposed audacious and, dare I say, exteriorizing mission. I can under UTAH CODE ANN. §§ certainly buy into the grand vision and the enlightened 61-1-10(4) or 11(7). purposes of your intended activity, and I do rather like your conception of the structural elements, including the “hub and spoke” concept of the various funds that would [sic] structured to operate under, if I get this rightly, PMI operations. Seems to me that you are really maximizing the structure to milk the global market’s cow maximally - and for the greater good.”
03.10.09 Email between G. Kingdon (UT) and B. Hunter (UT) re. Wire Fraud 18 U.S.C. §1343 email from M. Baybak (CA) to M. Wright (UT) and B. Hunter (UT) and PMI operations.
07.20.09 Email from Michael Baybak to Wright regarding time and Wire Fraud 18 U.S.C. §1343; costs lining up legal set-ups and availability of Violation of 18 U.S.C. § 2314; investment capital. Baybak acknowledges: “I don’t think Violation of UTAH CODE ANN. it’s workable to contort the fund’s operations and payout §§ 61-1-1(2), -3(1), -7, -17(2), schemes to a monthly basis so as to primarily serve and/or a rule or order under your overhead necessities.” UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
44 See http://www.cs.cmu.edu/~dst/Fishman/time-behar.html
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10.30.09 Email from Craig Gerhardt (Sage)(NV) to Wright and Wire Fraud 18 U.S.C. §1343; Hunter re conference call scheduled for 11.04.09 with Violation of UTAH CODE ANN. Andress Enterprises, potential investors, and includes §§ 61-1-1(2), -3(1), -7, -17(2), call number and conference code. and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
CYNTHIA L. WRIGHT/UTAH CHURCH/SALT LAKE MISSION
Date Summary of Documentary Evidence Predicate Act under § 1961
03.28.2009 Email from M. Wright to M. Baybak using Cynthia Wire Fraud 18 U.S.C. §1343; Wright’s hotmail account discussing Baybak’s visit to Violation of 18 U.S.C. § 2314 the PMI/Oneiros facility.
03.30.2009 Email from M. Baybak to M. Wright using Cynthia Wire Fraud 18 U.S.C. §1343; Wright’s hotmail account regarding Baybak’s visit to Violation of 18 U.S.C. § 2314 Salt Lake “in the April 10-15 time frame.” Baybak states “Don’t worry about any meddling by me in your software release or the operability of your system timed for my trip.”
GREG KINGDON/PMI
Date Summary of Documentary Evidence Predicate Act under § 1961
03.07.09 Email chain between B. Hunter and G. Kingdon Wire Fraud 18 U.S.C. §1343; regarding a presentation to the “Las Vegas Group” and Violation of 18 U.S.C. § 2314 investment from Michael Baybak of $40k per month for a few months and $30k to “run[] [Kingdon’s] gold fund” and that “the gold miners have $5 mill together for trading and another $20 mill lined up.” Kingdon states “I am poised and ready to appear on stage and deliver my lines.”
[Intentionally Blank]
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03.10.09 Email between G. Kingdon (UT and Thailand) and B. Wire Fraud 18 U.S.C. §1343; Hunter (UT) re. email from M. Baybak to M. Wright and Violation of 18 U.S.C. § 2314; B. Hunter and PMI operations. Hunter states “We met Violation of UTAH CODE ANN. again with the Gold Fever Boys yesterday. They also §§ 61-1-1(2), -3(1), -7, -17(2), brought us a $40,000 check to pay for the rest of their and/or a rule or order under server slot. I think I told you that we raised the price of a UTAH CODE ANN. § 61-1-15, slot to 60K. They will be ready very soon. Mike Wright is and/or a condition imposed on the second review of his letter to Michael under UTAH CODE ANN. §§ Baybak...Sorry for the quick note but we’ve had the 61-1-10(4) or 11(7). Boys from Vegas here most of the day.”
06.05.09- Email communications between B. Hunter (UT), M. Wire Fraud 18 U.S.C. §1343; 06.09.09 Baybak (CA), (cc. Rob Rainer, George Duggan, M. Violation of 18 U.S.C. § 2314; Wright) forwarded to G. Kingdon re. Trading Baybak’s Violation of UTAH CODE ANN. $2 Million pension on PMI system. Eric Richardson §§ 61-1-1(2), -3(1), -7, -17(2), referred to as Compliance Officer. and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
07.13.09 Email from Greg Kingdon (UT) to Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343; Michael Wright (UT) referencing a $2 Million investment Violation of 18 U.S.C. § 2314; in PMI from Michael Baybak and Cortez Violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
08.04.09- Email communication between Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343; 08.05.09 Greg Kingdon discussed via email Eric Richardson Violation of 18 U.S.C. § 2314; getting $4 Million dollars from Christopher Hales and Violation of UTAH CODE ANN. allocating $2 Million to PMI and also PMI having §§ 61-1-1(2), -3(1), -7, -17(2), obtained $50,000.00 from Chris Hales in the previous and/or a rule or order under year. UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
08.10.09 Email from Barry Hunter (UT) to Greg Kingdon (UT) with Wire Fraud 18 U.S.C. §1343 an attachment outlining the PMI Fee Structure.
10.14.09 Email communication from Greg Madsen (UT) to Greg Wire Fraud18 U.S.C. §1343 Kingdon (UT) and Barry Hunter (UT) confirming an order for servers and attached an invoice and receipt for payment in the amount of $7,291,47.
12.31.09 Email from G. Kingdon (UT) to B. Hunter (UT) re. Wire Fraud 18 U.S.C. §1343 withdrawing portion of funds, will add funds in the new year.
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02.03.10 Email communication between Barry Hunter (UT), Greg Wire Fraud 18 U.S.C. §1343 Kingdon (UT) and Rusty Tweed (CA) including the attached “Conceptual Process and Procedure for a Master-Fund” to Kingdon and stated that “Eric [Richardson] put this together some time ago to show how a Master Fund needs to be set up. I’d like to work with you and Eric on a new structure for the Quantitative Analytics Master Fund.” The attachment includes a chart explaining how funds are to be transferred via wire transfer to the separate feeder funds from the PMI Prime Fund master fund.
09.14.10 Email communication between Barry Hunter (UT) and Wire Fraud and Greg Kingdon (UT) which reference a letter from James 18 U.S.C. §1343 09.15.10 D'Arezzo identifying his role in "orchestrating a danger handling on Oneiros/PMI." and identifying efforts to bypass Greg Madsen, Jean Hammer, Eric Richardson and Michael Wright in decision making for PMI.
02.17.09 Email from Greg Kingdon (UT) to Barry Hunter (UT) Wire Fraud stating he an come up with an additional $23,611.95 this 18 U.S.C. §1343; week for second Kingdon slot. Violation of 18 U.S.C. § 2314
03.08.10 - Email communications between Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343; 03.10.10 Greg Kingdon (UT) communicated via email regarding Violation of 18 U.S.C. § 2314; an investment by Chris McCormack of $500,000.00 in Violation of UTAH CODE ANN. PMI and $1.5 million in Oneiros, and that he has §§ 61-1-1(2), -3(1), -7, -17(2), committed $50 Million in the Sage account. The email and/or a rule or order under communications also highlight a transfer $600,000.00 UTAH CODE ANN. § 61-1-15, into a new "Master Fund." and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
TOM BURTON/PMI
Date Summary of Documentary Evidence Predicate Act under § 1961
10.3.06- Hunter sent an email to Burton and Petersen to address Wire Fraud 18 U.S.C. §1343 10.6.06 legal requirements of registering as investment advisors to meet both federal and state regulations. On October 6, 2006, Petersen responded “I am in Dallas, and will be back on Sat. So I will review this and then get back with you next week.”
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10.23.06 Letter sent either as attachment to email or through first- Mail Fraud 18 U.S.C. §1341; class mail from Mike [Wright](UT) to T. Burton re. Wire Fraud 18 U.S.C. §1343 organizations, funding and loan proceeds. “I personally want you to know that it’s not just about your helping provide the financing which is of course a great help. But I feel the greater value comes in having a group of thetans with some horsepower on board pushing together with us as a single determined entity. Money can’t make a postulate.” “I know, you all know our church needs our help and I do not know about you but I personally see no other group of individuals other than ourselves that have an actual workable plan underway.”
11.01.06 - Hunter sends an email communication purportedly from Wire Fraud 18 U.S.C. §1343; 11.02.06 Hunter, Wright and Kingdon to Burton outlining Burton's Violation of 18 U.S.C. § 2314; contribution to "building the professional trading system Violation of UTAH CODE ANN. and management team," and stating a proposal for §§ 61-1-1(2), -3(1), -7, -17(2), "preferential trading terms" for Burton, Petersen and and/or a rule or order under Hites for their involvement with PMI and Oneiros and the UTAH CODE ANN. § 61-1-15, proposal that outstanding debt owed to Szaniszlo be and/or a condition imposed repaid and referencing David Petersen's investment of under UTAH CODE ANN. §§ $150K and budget projections to draw $276,500.00. 61-1-10(4) or 11(7).
Letter from Mike [Wright](UT) to T. Burton re. putting Mail Fraud 18 U.S.C. §1341; together a group that would help us financially. Wire Fraud 18 U.S.C. §1343
11.6.06 Hunter sent an email to Petersen with an attached Wire Fraud 18 U.S.C. §1343 operating agreement for Burton in his role as the "Establishment Officer" and states that "I know Alan [Farr] is especially impressed with Tom [Burton] and wants his involvement. This might be a good [sic] to show Alan to put him more at ease."
11.22.06 Email communications between Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343; Tom Burton (CA) in which Co-Conspirator Burton Violation of 18 U.S.C. § 2314 explains his efforts to recruit Montecito Hedge Fund Managers and claiming that “[t]he story and positioning is so easy now.” Co-Conspirator Burton also mentioned his efforts to contact Co-Conspirators Szaniszlo and Hites to update them on “the new plan,” and requested a withdrawal of $75,000 from the “TradeStation corporate account.” Co-Conspirator Hunter stated that he would “continue to push the comm lines out on this end so we can get the funds we need” and requests the routing number and account number in addition to the name on the account “that I will be wiring the funds to.
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11.30.06 Email comm. between B. Hunter (UT) and T. Burton Wire Fraud 18 U.S.C. §1343 (CA) with attached master plan explaining the organization of PMI and Oneiros, including the “Oneiros Offshore Expansion Plan,” the co-conspirators’ long- range plan for PMI and Oneiros to expand trading capital to “$100-150 million.”
11.13.08 - Email communications between Barry Hunter(UT) to Wire Fraud 18 U.S.C. §1343 11.19.08 Tom Burton (CA) re. "Fat Cats" that Chris Hales brought in, references funds that PMI has agreements with including PMI board of Advisors, David Petersen, Rusty Tweed, Chris Hales, George Hites, Mike Schwartz, Steve Garhardt, Peter Lowden. Involves Mike Ricks and states that Barry Hunter and Michael Wright are aware that Ricks plead guilty to insider trading.
11.18.08 Email from Hunter (UT) to Burton (CA) to provide an Wire Fraud 18 U.S.C. §1343; update on PMI, and stating that “I’ve been on the Violation of 18 U.S.C. § 2314; phones the last two days generating interest for our Violation of UTAH CODE ANN. initial PMI fund. I’m at about $2.7 Million in commitments §§ 61-1-1(2), -3(1), -7, -17(2), thus far.” Later that day, Burton responded to Hunter’s and/or a rule or order under email and inquired as to Hunter’s availability for UTAH CODE ANN. § 61-1-15, December 5 and 6, 2008, to visit with Burton and David and/or a condition imposed P[etersen]. Hunter responded that evening and informed under UTAH CODE ANN. §§ Burton that “Mike and I are fully engaged in finishing up 61-1-10(4) or 11(7). the legal for our agreement with the Fat Cat who has agreed verbally to fund the build out. He’s agreed to about $700K in infrastructure costs and his intent is to trade up to $500 Million over the next few years.” Burton responded late on November 18, stating that “[i]t is really important that we confront and handle the operating agreement BEFORE you actually start trading the funds. This is critical for all of our protection now that substantial money is being traded. Also I know that I am the co-signor on a number of documents related to Tradestation and I believe on some docs related to the investor registration. If you want to send what you have done so far on the operating agreement I can start looking at what will need to be modified.”
[Intentionally Blank]
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11.19.08 Hunter (UT) responded to Burton’s (CA) late email the Wire Fraud 18 U.S.C. §1343; night before and informed him that “[h]ere’s the funds Violation of 18 U.S.C. § 2314; that we have agreements with. PMI Board of Advisers Violation of UTAH CODE ANN. David Petersen’s own fund. Rusty Tweed (Rusty’s going §§ 61-1-1(2), -3(1), -7, -17(2), to be in Utah next week for Thanksgiving) Chris Hales and/or a rule or order under (He’s the you [sic] young guy(28) who brought us the fat UTAH CODE ANN. § 61-1-15, cat and is partnering in the deal). On a side note: Chris and/or a condition imposed is starting his Purif next Wednesday. We introduced him under UTAH CODE ANN. §§ to Scientology. George Hites. Possible, Mike Schwartz 61-1-10(4) or 11(7). (Oregon $10 Million Fat Cat) Dr. Steve Garhardt (Las Vegas high net worth investor) Peter Lowden, Hedge fund from Reno.” That same day, Burton responded to Hunter’s email: “Barry - Are you aware of Ricks past? Looks like he pleaded guilty to insider trading. See link below. What do you think of his ethics level. -Tom http://www.usps.com/postalinspectors/nrdoj0406.htm.” Hunter responded on November 19, stating that “I too did a Google search some time ago on Mike Ricks. Mike Wright and I are aware of it. In fact we were speaking with the director of compliance and licensing with the State of Utah Dept of Securities this morning about it. He has looked into it and found that we are not precluded from working with him. I would put his tone level at strong interest. I would suspect he has a very high IQ...[w]e’ll be talking with him one on one about this before signing any agreements.”
01.15.10 Email communications between Tom Burton and Barry Wire Fraud 18 U.S.C. §1343; Hunter (UT) indicating that Rusty Tweed will have $1.5 Violation of 18 U.S.C. § 2314; Million dollars ready to trade before February and Violation of UTAH CODE ANN. another client Sage called and would have $2 Million §§ 61-1-1(2), -3(1), -7, -17(2), dollars before February 1st as well as debt consolidation and/or a rule or order under on some notes that have come due in an amount UTAH CODE ANN. § 61-1-15, between $250,000.00 to $300,000.00. and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
[Intentionally Blank]
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JAMES D’AREZZO/PMI
Date Summary of Documentary Evidence Predicate Act under § 1961
Prior to Sometime before January 23, 2007, whether by email or Mail Fraud 18 U.S.C. §1341; January U.S. mail, Wright caused to be sent to D'Arezzo a letter Wire Fraud 18 U.S.C. §1343 23, 2007 offering D'Arezzo a non-managing member interest in PMI. In the letter, Wright states that "[t]he first and main reason [PMI was organized] was to be a legal insulator or buffer to Oneiros Technologies...The second reason was to provide a way for individuals who were helping us in terms of finance and advice to have a way to use our technology without requiring PMI to get involved in the licensing requirements of the SEC...[s]ince PMI has been organized as an LLC, its member's [sic] liability is limited and because it would have a limited number of assets, it would be a much less juicy target for some possible SP's actions."
01.23.07 B. Hunter (UT) sent an email to James D’Arezzo (CA) Wire Fraud 18 U.S.C. §1343; and identified $346,000.00 in loans to PMI from Greg Violation of 18 U.S.C. § 2314; Kingdon, Michael Wright and Barry Hunter and also Violation of UTAH CODE ANN. references loans to PMI from David Peterson, Alan Farr, §§ 61-1-1(2), -3(1), -7, -17(2), Tom Burton and Sandor Szaniszlo and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
01.23.07 Barry Hunter (UT) sent an email to James D'Arezzo Wire Fraud 18 U.S.C. §1343 (CA) regarding inclusion into PMI as a way for key members to trade their own accounts and help in directing PMI business activities and indicating that Mr. D'Arezzo can be part of PMI or take a more informal role.
01.09.09 Email communications from Barry Hunter (UT) to Jim Wire Fraud 18 U.S.C. §1343; D'Arezzo (CA) discussing an email which PMI sent out Violation of 18 U.S.C. § 2314; “to shut the door on any future guys who might come Violation of UTAH CODE ANN. back and say you promised me that I could set up my §§ 61-1-1(2), -3(1), -7, -17(2), own server. We have two fat cat clients who could easily and/or a rule or order under bring in over $500 Million each so we’re not really UTAH CODE ANN. § 61-1-15, wanting more small clients. The 50K fee is actually a and/or a condition imposed partially refundable Earnest Money Agreement. They under UTAH CODE ANN. §§ have been fairly easy to come by with clients who have 61-1-10(4) or 11(7). large amounts of liquid cash.”
01.01.10 Email from Barry Hunter (UT) to Jim D'Arezzo (CA) Wire Fraud 18 U.S.C. §1343 stating Szaniszlo has been paid back.
06.30.10 Email communications between B. Hunter (UT) and J. Wire Fraud 18 U.S.C. §1343 and D’Arezzo (CA) re. Chris needs to distribute funds. Mike 07.06.10 and I [Hunter] have gone after other sources of funding.
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01.29.08- Email communications between B. Hunter (UT) and J. Wire Fraud 18 U.S.C. §1343; 01.30.08 D’Arezzo (CA) re. PMI results and D’Arezzo request Violation of 18 U.S.C. § 2314; summary to give to his contacts and Hunter asking Violation of UTAH CODE ANN. D’Arezzo for “resources and comm lines that could help §§ 61-1-1(2), -3(1), -7, -17(2), us. . . ” asking for $100k and some additional capital and and/or a rule or order under want to create a "strategic alliance" with D'Arezzo. UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
DAVID PETERSEN/PMI/SALT LAKE MISSION
Date Summary of Documentary Evidence Predicate Act under § 1961
11.06.06 Email from B. Hunter (UT) to D. Petersen (UT) with an Wire Fraud 18 U.S.C. §1343 attached operating agreement for Burton in his role as the “Establishment Officer” and states that “I know Alan [Farr] is especially impressed with Tom [Burton] and wants his involvement. This might be a good [sic] to show Alan to put him more at ease.”
08.25.06 Email from B. Hunter to D. Petersen referencing a Wire Fraud 18 U.S.C. §1343; transfer of $50,000 from the Tradestation account to the Violation of 18 U.S.C. § 2314; PMI account to be transferred online to Petersen. Violation of UTAH CODE ANN. Hunter states “Since we will be transferring funds in §§ 61-1-1(2), -3(1), -7, -17(2), great quantity, I’d like to set up an online transfer to your and/or a rule or order under accounts.” UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
08.28.06 Email from B. Hunter (UT) to D. Petersen(UT)re. offering Wire Fraud 18 U.S.C. §1343 position as a managing member of PMI
09.12.06 Email from Hunter to Petersen. Hunter states: I spoke Wire Fraud 18 U.S.C. §1343; with Mike [Wright] about changing the letter to be Violation of 18 U.S.C. § 2314; addressed to you personally. He agreed. I believe that Violation of UTAH CODE ANN. positions you better as the insider (trusted adviser) that §§ 61-1-1(2), -3(1), -7, -17(2), you are. I believe it’s time to push out all our and/or a rule or order under communication lines until we find the right investor to UTAH CODE ANN. § 61-1-15, help take us over the top. My good friend Kevin and/or a condition imposed Calderwood is coming to see the system next Tuesday. under UTAH CODE ANN. §§ He has a personal net worth of over $100 Million ans is 61-1-10(4) or 11(7). presently the CEO of a Geothermal Energy company based in Salt Lake City. He is also a Stake President in Washington D.C., a very theta guy and could be an excellent ally for ridding the LDS church of Psychiatry and Psychology.”
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02.27.07 Response email from Petersen to Hunter: “I’m still at Wire Fraud18 U.S.C. §1343; flag and would go along with the rest of the group. They Violation of 18 U.S.C. § 2314 are keeping me real busy which is great but I haven’t been able to keep up on any other stuff. It was great to get the good update from you the other day. On another note I understand Janet [Petersen] is trying to get Robin and her boy friend in to see you at the Mission. They are great people, I sure [sic] they will make it and sign up for a course or some auditing.”
07.17.07 Email from J. D’Arezzo (CA) to B. Hunter (UT), S. Wire Fraud 18 U.S.C. §1343 Szaniszlo (CA), Alan Farr (UT), D. Petersen (UT), T. Burton (CA) regarding M. Wright’s “State of the Union” memo and insight into performance of PMI system.
10.12.07 Design Build Services and Earnest Money Agreement, Violation of 18 U.S.C. § 2314 unsigned, between David Petersen and PMI in the amount of $15,000.00 to be tendered at time of signing and another $15,000.00 due on November 15, 2007 and in consideration of the up front costs to purchase equipment and labor costs Mr. Petersen agreed that $25,00.00 of the $30,00.00 is considered a non-refundable fee.
11.13.07 Email between B. Hunter (UT) and D. Petersen (UT)re. Wire Fraud 18 U.S.C. §1343; $15,000.00 invoice and slot to invest. Violation of 18 U.S.C. § 2314; Violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
12.17.07 Email from Barry Hunter (UT) to David J. Petersen (UT) Wire Fraud 18 U.S.C. §1343; showing $200,000.00 added to PMI in December 10, Violation of 18 U.S.C. § 2314 2007 and requesting permission to use Petersen’s “trading data, symbol names and results in preparing a promo piece.”
05.21.08 Email from Hunter to Petersen regarding “large client Wire Fraud 18 U.S.C. §1343; cycles going on. A hedge fund manager out of Las Violation of 18 U.S.C. § 2314; Vegas, $100 Million plus under management met with Violation of UTAH CODE ANN. us on Monday. His partner followed up with Mike §§ 61-1-1(2), -3(1), -7, -17(2), yesterday. Interest is high in forming a strategic and/or a rule or order under alliance.” UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
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10.20.08 Email chain between Petersen and Hunter. Hunter Wire Fraud 18 U.S.C. §1343; stated: “I got this text from Chris [Hales] today ‘Got Violation of 18 U.S.C. § 2314; funds in my one hundred percent possession. I really Violation of UTAH CODE ANN. apologize for the lack of communication but will be back §§ 61-1-1(2), -3(1), -7, -17(2), tomorrow....talk to you soon.’ Chris followed up with a and/or a rule or order under call to David Wright and said that he has 5.1 million for UTAH CODE ANN. § 61-1-15, PMI. $1 Million will go to the move and build out and the and/or a condition imposed remaining amount is for a trading account. So the under UTAH CODE ANN. §§ money is in the bank as we postulated.” 61-1-10(4) or 11(7).
01.06.09 Email communication between B. Hunter (UT) and D. Wire Fraud 18 U.S.C. §1343; and Petersen (UT) re. postulating will receive $90K from Violation of 18 U.S.C. § 2314; 01.08.09 Mike Ricks. Conf. Call with large financial planner out of Violation of UTAH CODE ANN. Tampa. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
01.09.09 Invoice for $6,000.00 from PMI for consulting services to Violation of 18 U.S.C. § 2314 Cottontree Management, David Petersen
01.12.09- Email chain between Hunter, Kingdon and Petersen. Wire Fraud 18 U.S.C. §1343; 01.13.09 Hunter states: “Greg, In the list you brought in of the Top Violation of 18 U.S.C. § 2314; 50 US Hedge Fund Groups in 2006 a familiar name Violation of UTAH CODE ANN. jumped out at number 31 31. Renaissance §§ 61-1-1(2), -3(1), -7, -17(2), Technologies Corp. East Setauket NY 24.00 Billion and and/or a rule or order under 175.86%. Renaissance was developed by Jim UTAH CODE ANN. § 61-1-15, Simmons. He’s the best of the best until we unseat him. and/or a condition imposed He’s the guy we are after with our tech. If I’m figuring under UTAH CODE ANN. §§ right, 175% on $24 Billion is $42 Billion in profits. That 61-1-10(4) or 11(7). seems to be more like the orders of magnitude that we should be operating on. Well, let’s get on with it then.” Petersen writes: “I agree let’s get going”. Hunter writes: “David, Have a great trip to the Ship. It’s very pro- survival for our group that you [sic] businesses are prospering...We’ll be creating a large flow here while you are gone.”
03.03.09 Email from Barry Hunter (UT) to David Petersen (UT) Wire Fraud 18 U.S.C. §1343; stating he believes he found the $30,000.00 spent on Violation of 18 U.S.C. § 2314 trading slot. A spreadsheet attached to the email shows payment from David Petersen to PMI in the amount of $330,500.00.
03.18.09 Email communications between B. Hunter (UT) and Wire Fraud 18 U.S.C. §1343 David Petersen (UT) regarding ownership interest in PMI and identifying Barry Hunter initially as 100% owner of PMI and making reference to Barry Hunter's CPA's advice to include another managing member with at least 10% ownership.
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03.24.09 Email chain forwarded from Michael Baybak to Wright, Wire Fraud 18 U.S.C. §1343; Hunter, and Kingdon to Petersen. Hunter states: “David, Violation of 18 U.S.C. § 2314; This is an E-Mail we received from Michael Baybak Violation of UTAH CODE ANN. today. This is very confidential but I wanted to share the §§ 61-1-1(2), -3(1), -7, -17(2), information with you and get your perspective. Greg and/or a rule or order under Kingdon gets back today so I’m sure he will be heavily UTAH CODE ANN. § 61-1-15, involved in this. Just keeping you in the loop!!!” Baybak and/or a condition imposed writes: “One concomitant aspect of my professional under UTAH CODE ANN. §§ work is that I do tend to work on a personal basis with 61-1-10(4) or 11(7). hundreds if not thousands of high-net worth investors and institutional money managers, and perhaps this potential resource could be of interest in connection with your own plans.”
SANDOR SZANISZLO/PMI
Date Summary of Documentary Evidence Predicate Act under § 1961
09.13.06 Email from Barry Hunter to S. Szaniszlo re repayment of Wire Fraud 18 U.S.C. §1343; $10,000.00 and request for a phone call from Szaniszlo. Violation of 18 U.S.C. § 2314; Violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
10.03.06 Email from Barry Hunter (UT) to Sandor Szaniszlo (CA) Wire Fraud 18 U.S.C. §1343; regarding payment to Szaniszlo and Capital Unicorn Violation of 18 U.S.C. § 2314; Integrity, an entity apparently owned in whole or in part Violation of UTAH CODE ANN. by Mr. Szaniszlo, in the amount of $5,000.00. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
[Intentionally Blank]
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02.27.07 Email from Barry Hunter (UT) to Sandor Szaniszlo (CA), Wire Fraud 18 U.S.C. §1343; David Petersen (UT), and Tom Burton (CA) expressing Violation of 18 U.S.C. § 2314; appreciation for advice, loans and referrals to PMI. “In Violation of UTAH CODE ANN. January of 2006 $400,000 was deposited into the §§ 61-1-1(2), -3(1), -7, -17(2), TradeStation PMI Corporate account, $100,000 each and/or a rule or order under from Alan, David, Tom and Sandor...[a] various times UTAH CODE ANN. § 61-1-15, during the year David, Alan and Tom all transferred and/or a condition imposed funds from the Corporate Accounts to PMI which were under UTAH CODE ANN. §§ used for operations. Since that time we discontinued 61-1-10(4) or 11(7). trading in August, each member of the group requested that their remaining trading funds be returned to them. David was sent $50,000 in August, Sandor was sent $100,000 in October, Tom was sent his remaining $75,000 in November and David transferred his remaining $25,000 directly to PMI in October. At various times during the year, Alan transferred $75,000 of his funds directly to PMI to be used for operations.”
07.17.07 Email from J. D’Arezzo (CA) to B. Hunter (UT), S. Wire Fraud Szaniszlo (CA), Alan Farr (UT), D. Petersen (UT), T. 18 U.S.C. §1343 Burton (CA) regarding M. Wright’s “State of the Union” memo and insight into performance of PMI system.
07.24.07 Email from Barry Hunter (UT) to Sandor Szaniszlo (CA) Wire Fraud outlining PMI plans moving forward and update from 18 U.S.C. §1343 Mike [Wright]
10.02.07 Email from Barry Hunter (UT) to Sandor Szaniszlo (CA) Wire Fraud 18 U.S.C. §1343; with attached sales commission agreement between Violation of 18 U.S.C. § 2314; PMI and Szaniszlo, which states “On any amount of Violation of UTAH CODE ANN. Investment in or Loans that Sandor secures for PMI §§ 61-1-1(2), -3(1), -7, -17(2), operations, Sandor receives a onetime commission of and/or a rule or order under 6%.” UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
ALAN FARR/PMI
Date Summary of Documentary Evidence Predicate Act under § 1961
01.26.07 Email from B. Hunter (UT) to A. Farr (UT) re. investment Wire Fraud 18 U.S.C. §1343 funding.
08.28.06 Email from B. Hunter (UT) to A. Farr (UT) re. offering Wire Fraud 18 U.S.C. §1343 position as a managing member of PMI, with attached unsigned letter offering a position as a managing member of PMI to Farr.
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04.29.08 Email from B. Hunter (UT) to A. Farr (UT) which Wire Fraud 18 U.S.C. §1343; included an attached letter purported to be answers from Violation of 18 U.S.C. § 2314; Wright, Hunter, Madsen, and Steve Wyatt, PMI’s CPA, Violation of UTAH CODE ANN. to questions asked about the PMI business plan and its §§ 61-1-1(2), -3(1), -7, -17(2), software application. The letter states that set up fees and/or a rule or order under for a new client “are based on several costs. UTAH CODE ANN. § 61-1-15, Commission base compensation to the sales person and/or a condition imposed who may solicit the client and the amount of money the under UTAH CODE ANN. §§ fund wants to allocate and, the money being allocated 61-1-10(4) or 11(7). effects [sic] the number of computer data servers that will be needed as well as dictating how much custom programming and personnel will be required to create custom or replicated investment portfolios within the system. This is all done on a case by case basis. In some cases a portion of the setup fees are recoverable.” The letter further states that “[i]nvestment capital at this point would be going into PMI operations and infrastructure. Additionally, the PMI 500K brokerage account will be used to validate the trading algorithms released by Oneiros in automated live funded trading before it is approved for any client accounts.”
02.21.08 Email from Hunter to Alan Farr with attached draft of Wire Fraud 18 U.S.C. §1343; promissory note to Farr $50,000.00 (unsigned). Violation of 18 U.S.C. § 2314; Violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
03.05.08 Promissory Note from Carol Farr $50,000.00 (unsigned) Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314; Violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
CHRISTOPHER HALES/LUCIDITY/VOLITION/PMI
Date Summary of Documentary Evidence Predicate Act under § 1961
04.30.08 Ltr. To C. Hales (UT) from M. Wright (UT) re. setting Mail Fraud18 U.S.C. §1341; [Hales] up properly Wire Fraud 18 U.S.C. § 1343
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10.16.08 Email from B. Hunter (UT) to C. Hales (UT) in which he Wire Fraud 18 U.S.C. §1343 provided account and routing numbers for PMI’s bank account with Wells Fargo. Hunter also forwarded a message from Wright to Hales in the email, in which Wright states “We are assuming, based on the last few days of absent communication, that you are trying as best you can to get things resolved on your end. I want to make sure that you know we are also working as well to resolve things too. The main thing I want to stress is that we must stay in complete communication of any vital data each of us may need. Vital data can be good news or bad news...[t]he hallmark of our group’s agreement is that each one of us can and will confront and handle any barrier that is presented.”
01.23.09 Hunter emailed a copy of a “Management Agreement Wire Fraud 18 U.S.C. §1343 Template,” stating “Chris here’s a copy of the Management Agreement Template that potential clients can look [sic]”. The Management Agreement Template included wire information for PMI’s account with Wells Fargo and outlines a “Master Fund Feeder Fund Business Model” and claims “PMI can in some cases act as the Portfolio Manager for other fund managers, its [sic] PMI’s responsibility to be actively involved with the all [sic] the other entities that compose the various possible business models that PMI may become affiliated with or be a part. Without this understanding of the Master Fund Feeder Fund structure and PMI’s role in it, it could be easily construed that all the parties are ‘in business’ with each other, when the truth is that each entity is autonomous and has its own responsibilities, functions and compensations.”
[Intentionally Blank]
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02.15.09 Email from B. Hunter (UT) to C. Hales (UT) stating, Wire Fraud 18 U.S.C. §1343; “[h]ere is the list of people that have come in our office. I Violation of 18 U.S.C. § 2314; need phone numbers and E-Mail addresses on each of Violation of UTAH CODE ANN. them.” The attached list contained the following names §§ 61-1-1(2), -3(1), -7, -17(2), of individuals purportedly introduced by Hales or by and/or a rule or order under another individual introduced to PMI by Hales: Joe UTAH CODE ANN. § 61-1-15, Freed, Dustin Wilcox, Cameron Cox, Aaron Browning, and/or a condition imposed Scott Alldredge, Carol Bee, Brian Bagley, Dan Burbank, under UTAH CODE ANN. §§ Brett Candiotti, Andrew Chudd, Ben Davis, Phillip Davis, 61-1-10(4) or 11(7). Ryan Davis, Todd De Bic, Gavin Dickson, Brent Garrison, Eric Garrison, Ashton Gifford, Lloyd Gleave, John Grealish, Derrett Harding, Lynn Hirschi, Joel Jeffrey, Robbie Kauo, Garret Kelsch, randy Kurek, Brad Labarm, Gary McDonald, Troy Morgan, Kit Morrison, Andrew Mullen, Roy Nelson, Nixon Pierre, David Fank, Kenny Andam, Kevin Price, Ren Richards, Mike Ricks, Colton Rogers, Michael Showhaus, Michael Stewart, Todd Smith, Tyler Tarpenning, Greg Tarpenning, Joel M. Vanderhoof, Josh Watson, Jeff White, Marcus Williams, David Youmans, Jean Hammer, Peter Lowden, Steve McCarty, Melvin Myer, (Hedge Fund Manager getting data), Rodney Howard Brown, Mike Pappas, Palm Springs Group, Brian King ODL Securities, Andrew Harris - Jones and Jones, Steve Garhardt, Craig Garhardt, Michael Peros EX (CIA), Carmine Avino, and Margaret Petersen.
02.23.09 Email from B. Hunter (UT) to C. Hales (cc. Eric Wire Fraud 18 U.S.C. §1343 Richardson) (UT) re. Trade Station Securities contact Jake Hinkle in Florida.
03.08.09 Email from B. Hunter (UT) to C Hales (UT) re. Eric Wire Fraud 18 U.S.C. §1343 [Richardson] good addition to team.
06.29.09 Email communication between B. Hunter (UT), C. Hales Wire Fraud 18 U.S.C. §1343 and (UT) and E. Richardson (UT) a copy of the “Portfolio 07.07.09 Management Subscription Agreement Template” and stated that “This should be much more thorough and it is what we will need to use in the agreements with Lucidity and Volition.”
07.07.09 Hunter (UT) sent an email to Hales (UT) with an Wire Fraud 18 U.S.C. §1343 attached “Management Agreement Template that I sent to Eric last week.”
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01.22.09 Hunter sent an email to Hales with an attached Wire Fraud 18 U.S.C. §1343; statement of residual compensation for sales with PMI Violation of 18 U.S.C. § 2314; and a copy of the solicitor agreement with PMI. Hunter Violation of UTAH CODE ANN. states that “[i]n order to receive revenue on a residual §§ 61-1-1(2), -3(1), -7, -17(2), basis from a client, you must pass the Series 65 Exam. and/or a rule or order under This allows us to designate you personally as an IAR UTAH CODE ANN. § 61-1-15, Investment Adviser Representative of PMI and allows and/or a condition imposed you to receive residual compensation for clients that you under UTAH CODE ANN. §§ introduce to PMI... [i]n doing the math, even with the 61-1-10(4) or 11(7). introductions you’ve made thus far, this should be a $Million+ yearly game in and of itself. Of course the biggest compensation should come through strategic alliance and building up your own fund.”
05.08.09 Hunter (UT) sent an email to Hales (UT) to memorialize Wire Fraud 18 U.S.C. §1343; investments received by PMI from Hales or investors Violation of 18 U.S.C. § 2314; whom Hales introduced to PMI. Hunter states “Here are Violation of UTAH CODE ANN. the records of Investment received by PMI that were not §§ 61-1-1(2), -3(1), -7, -17(2), for Design-Build Service Agreements. 11-8-2008 and/or a rule or order under $10,000 You dropped this off at the office. 1-26-2009 UTAH CODE ANN. § 61-1-15, $5,000 I picked it up at your home. 2-18-0009 $5,000 and/or a condition imposed Ben and Dan dropped this off. Let me know who the under UTAH CODE ANN. §§ promissory note(s) need to written [sic] to and I’ll draft 61-1-10(4) or 11(7). the document(s). FYI, Ben had mentioned when he dropped off the $5,000 that he was responsible for some of the money that Bentley had written to PMI earlier. I don’t know if he was talking about the $30K Design/Build or not, it was just a comment he made.”
12.21.09 Email communication between Barry Hunter (UT) and Wire Fraud 18 U.S.C. §1343; Christy Fenton ([email protected]), Eric Violation of 18 U.S.C. § 2314; Richardson (UT), Boyd Cook, Mickey Fenton Violation of UTAH CODE ANN. ([email protected]) and others stating $94,000 will §§ 61-1-1(2), -3(1), -7, -17(2), be transferred back to the Volition account and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
12.31.09 Eric Richardson authored a letter on behalf of RPM Violation of UTAH CODE ANN. Investments Company LLC, regarding commitments for §§ 61-1-1(2), -3(1), -7, -17(2), Volition Fund "currently in excess of $17,000,000.00." and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
07.17.08 Upon request by Hales for initial $30,000 investment, Wire Fraud 18 U.S.C. §1343; Bagley wrote an equity line check to himself in the Violation of 18 U.S.C. § 2314 amount of $30,000.00 from Wachovia Bank. He deposited that check into his Wells Fargo account. Wells Fargo put a hold on the check because is was such a large sum and verification of funds had to be completed before it could be withdrawn.
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08.21.08 Bagley obtained two separate cashier's checks, one Wire Fraud 18 U.S.C.§1343; payable to Hales for $10,000.00 and the other payable Violation of 18 U.S.C. § 2314 to Williams for $10,000.00. he also withdrew $10,000.00 cash and gave it to Williams.
01.16.09 Bagley Cashier’s Check to Hales for $30,000; $20,000 Wire Fraud 18 U.S.C. §1343; cash to Williams Violation of 18 U.S.C. § 2314
04.22.09 Bee Cashier’s check for $15,000 to M. Williams Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
05.13.09 Bee Cashier’s check for $15,000 to Hales Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
05.22.09 Check from Hales to Bee for $17,500. Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
05.22.09 Bee Cashier’s check for $10,000 to Hales; $15,000 cash Wire Fraud 18 U.S.C. §1343; to Hales Violation of 18 U.S.C. § 2314
05.27.09 Bee Cashier’s check for $40,000 to Hales Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
05.29.09 Check from Hales to Bee for $29,000. Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
05.29.09 Bee $1,000 cash to Hales. Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
06.02.09 Bee Cashier’s check for $8,000 to Hales Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
06.02.09 Bee Cashier’s check for $7,000 to Hales Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
06.10.09 Bee Cashier’s check for $11,000 to Hales Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
06.18.09 Bee Cashier’s check for $8,000 to Hales Wire Fraud 18 U.S.C. §1343; Violation of 18 U.S.C. § 2314
[Intentionally Blank]
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GREG MADSEN/PMI
Date Summary of Documentary Evidence Predicate Act under § 1961
08.12.09 Email from B. Hunter (UT) to G. Kingdon and copied to Wire Fraud 18 U.S.C. §1343 Greg Madsen (UT), Michael Wright (UT), and Andrew Kingdon about Madsen’s choice for naming a PMI feeder fund. “PMI could use its exclusive license relationship of the Oneiros AlphaGen System as a marketing advantage. It’s probably easier for PMI to promote the AlphaGen System than if Oneiros promoted it. We could have the groups putting feeder funds together, promoting the technology also. We could highlight the extreme out of the box thinking of Oneiros as a definite advantage and create some mystery.”
10.14.09 Email communication from Greg Madsen (UT) to Greg Wire Fraud 18 U.S.C. §1343 Kingdon (UT) and Barry Hunter (UT) regarding the order information for servers and hard drives.
01.14.10 Email from G. Kingdon to Barry Hunter (UT) and copied Wire Fraud 18 U.S.C. §1343 to Greg Madsen (UT), Michael Wright (UT) including L. Ron Hubbard quote: “Your success depends upon the production of an effect, your finance depends upon attracting interest. If you find finance faltering, you will discover immediately why if you realize that the financial system is a communications system and that communications systems are the background of what you are doing.”
01.25.10 Email from G. Kingdon to Barry Hunter (UT) and copied Wire Fraud 18 U.S.C. §1343 to Greg Madsen (UT), Michael Wright (UT) referring to a communication received by Kingdon from a representative of the International Association of Scientologists stating “I’m glad you’re doing everything you’re doing with amporn and the different campaigns. Definitely needed.” Kingdon writes: “This from the IAS rep on the ship chasing me for my next status. I sure am proud to be a Scientologist, and they sure do need our help.”
GEORGE HITES/PMI
Date Summary of Documentary Evidence Predicate Act under § 1961
01.01.08 PMI and Infinity Catamaran Ltd., located in Road Town Violation of 18 U.S.C. § 2314 Tortola British Virgin Islands and owned by George Hites, entered a Subscription Agreement in the amount of $250,000.00, which was forwarded via email to Hites by Hunter.
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03.21.07 Email from Hunter to Hites with attached Promissory Wire Fraud 18 U.S.C. §1343; Note to Hites for $85,000.00 (unsigned) with instructions Violation of 18 U.S.C. § 2314; to sign and fax and including PMI wire transfer Violation of UTAH CODE ANN. information §§ 61-1-1(2), -3(1), -7, -17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
ROBBY J. STOWE/PMI
Date Summary of Documentary Evidence Predicate Act under § 1961
Unknown Letter to Robby Stowe from Hunter requesting a Mail Fraud 18 U.S.C. §1341; financial commitment for a “four server slot in the Wire Fraud 18 U.S.C. §1343; new data center.” Hunter states “A client’s server Violation of 18 U.S.C. § 2314; set up like this could manage upwards of $30+ Violation of UTAH CODE ANN. million; however this is something that must be §§ 61-1-1(2), -3(1), -7, -17(2), negotiated at the time of activation. In other words, and/or a rule or order under we are not saying how much money we will run, UTAH CODE ANN. § 61-1-15, only that you have our commitment to give you and/or a condition imposed access to our tech and some portion of the under UTAH CODE ANN. §§ available capacity of our data center at the time 61-1-10(4) or 11(7). your operation is activated. Based on this, the $50,000 is a technology access fee, nothing else.”
12.05.06 Email from Hunter to R. Stowe re. Steve Nemeth, a Wire Fraud 18 U.S.C. §1343 friend of Wright and Hunter who is planning to work for PMI. Attached to the email is a narrative authored by Nemeth outlining his Scientology “auditing.”
05.13.08 Email from B. Hunter to R. Stowe providing update Wire Fraud 18 U.S.C. §1343; on “finalizing the first part of our funding package Violation of 18 U.S.C. § 2314; today which is an Earnest Money Agreement and Violation of UTAH CODE ANN. deposit.” Hunter also states: “ We have a long time §§ 61-1-1(2), -3(1), -7, -17(2), contact, fund manager in Oregon who is going and/or a rule or order under ahead with a trading account. He is managing $125 UTAH CODE ANN. § 61-1-15, million so the potential here is significant.” and/or a condition imposed under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
183. Plaintiffs are informed and believe, as see on the face of many of them, that the e-mail communications were transmitted over the internet and through multiple states using various national email servers and internet service providers.
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184. Each of the preceding predicate acts was an essential step in the plot
towards the execution, operation and fulfillment of the object of the conspiracy, either by
way of being an essential component of the fraud scheme or as an essential component
of lulling schemes designed to prevent and/or delay detection of the fraud.
185. Further, the foregoing is expressly not intended to encompass all of the
predicate acts committed by the defendants, for it is anticipated that additional acts will
be uncovered in discovery and that additional analysis of the structure, organization and operation of the enterprise and of the conspiracy will yield other bases to allege predicate acts, such as, by way of example only and not by way of limitation, the additional of felony charges under state law.
EXTERNAL PATTERN/MULTIPLE VICTIMS
186. Plaintiffs know that the predicate acts forming a pattern with respect to their victimization are only part of an external pattern of commission of predicate acts by which others have been victimized for the following reasons:
a. Plaintiffs met other target victims at the PMI function described
above;
b. Plaintiffs were told by Williams and Hales that those other victims
had likewise placed investments in PMI on behalf of other victims;
c. Email communications between the co-conspirators revealed the
following names of individuals purportedly introduced to the co-conspirators by
Hales or by another individual introduced to PMI by Hales: Joe Freed, Dustin
Wilcox, Cameron Cox, Aaron Browning, Scott Alldredge, Carol Bee, Brian
Bagley, Dan Burbank, Brett Candiotti, Andrew Chudd, Ben Davis, Phillip Davis,
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Ryan Davis, Todd De Bic, Gavin Dickson, Brent Garrison, Eric Garrison, Ashton
Gifford, Lloyd Gleave, John Grealish, Derrett Harding, Lynn Hirschi, Joel Jeffrey,
Robbie Kauo, Garret Kelsch, Randy Kurek, Brad Labarm, Gary McDonald, Troy
Morgan, Kit Morrison, Andrew Mullen, Roy Nelson, Nixon Pierre, David Fank,
Kenny Andam, Kevin Price, Ren Richards, Mike Ricks, Colton Rogers, Michael
Showhaus, Michael Stewart, Todd Smith, Tyler Tarpenning, Greg Tarpenning,
Joel M. Vanderhoof, Josh Watson, Jeff White, Marcus Williams, David Youmans,
Jean Hammer, Peter Lowden, Steve McCarty, Melvin Myer, Rodney Howard
Brown, Mike Pappas, Palm Springs Group, Brian King, ODL Securities, Andrew
Harris from Jones and Jones, Steve Garhardt, Craig Garhardt, Michael Peros,
Carmine Avino, and Margaret Petersen.
d. Wright admitted to plaintiffs that Williams and Hales had brought
other victims to invest in PMI.
CONTINUITY AND RELATEDNESS
187. The predicate acts described above are each related to the conduct of the
Enterprise and the objects of the conspiracy.
188. The predicate acts described above exhibit both open-ended and closed-ended continuity.
189. The predicate acts exhibit closed-ended continuity in that they occur regularly, they are high in number, they occur with frequency over an extended period of time and they involve multiple victims, of which the plaintiffs were only one pair.
190. The predicate acts also exhibit open-ended continuity, in that the fraud scheme could be perpetrated indefinitely and has shown no sign of abating, with Hales
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soliciting further investment from Bee just within one month of the filing of the State
Court Action.
191. Because the time frame of the schemes is indefinite and has the potential
to continue for months and years, the pattern of racketeering activity has open-ended
continuity.
192. Further, the recent amendment of the Oneiros filings with the state of Utah
evidence the intent to continue the scheme into the future at least with respect to
FOREX trading.
INJURY BY REASON OF CONSPIRACY TO VIOLATE 18 U.S.C. § 1962(a), (b) AND (c), IN VIOLATION OF 18 U.S.C. § 1962(d)
193. Each and every co-conspirator defendant herein agreed to commit, in furtherance of the conspiracy, two or more predicate acts.
194. The commission of predicate acts in furtherance of the conspiracy caused damage to the plaintiffs by reason of the respective violations of 18 U.S.C. § 1962(a),
(b) and (c), as described above.
195. Each co-conspirator defendant is, therefore, jointly and severally liable to the plaintiffs for all damages incurred by them and all relief available to the plaintiffs for the violations of each of those sections as set forth in more detail above.
196. Defendants violations have been the cause-in-fact and legal cause of damages to plaintiffs in the sum of not less than $300,000.00, or such other and greater sum as may be proven at trial.
197. In addition, a reasonably foreseeable consequential damage to each of the plaintiffs as the result of their financial devastation caused by the defendants is extreme emotional distress and mental anguish, for which plaintiffs are each entitled to
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judgment in the sum of not less than $1,000,000.00, or such other and greater sum as
may be proven at trial.
198. The plaintiffs are entitled to recover from the conspirator defendants,
jointly and severally, three times the amount of their damages plus pre-judgment
interest, together with all attorneys' fees, costs and expenses, under 18 U.S.C. §
1964(c).
COUNT V (BREACH OF FIDUCIARY DUTY - AGAINST PMI, ONEIROS, WRIGHT, HUNTER, HALES)
199. Bagley and Bee incorporate all previous allegations.
200. The co-conspirator defendants, together with their co-conspirators the
Bentley Entities, Hales, Richardson, Williams, Hunter, PMI, Lucidity and Volition,
purported to act as investment advisers for plaintiffs and therefore owed plaintiffs a
fiduciary duty.
201. The foregoing facts demonstrate that the co-conspirator defendants each breached such fiduciary duty.
202. One or more unlawful, overt acts were committed by each co-conspirator defendant in furtherance of the object of the Conspiracy.
203. Such breaches are the cause-in fact and legal cause of damages to plaintiffs in the sum of not less than $300,000.00, or such other and greater sum as may be proven at trial.
204. In addition, a reasonably foreseeable consequential damage to each of the plaintiffs as the result of their financial devastation caused by the defendants is extreme emotional distress and mental anguish, for which plaintiffs are each entitled to
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judgment in the sum of not less than $1,000,000.00, or such other and greater sum as may be proven at trial.
205. Plaintiffs are also entitled to an appropriate award of punitive damages against each of the conspirator defendants as the proof may show.
COUNT VI (CIVIL CONSPIRACY - AGAINST ALL DEFENDANTS)
206. Bagley and Bee incorporate all previous allegations.
207. Each co-conspirator defendant entered into a combination of two or more persons to accomplish the object of the Conspiracy as set forth above.
208. Each co-conspirator defendant reached a meeting of the minds on the object of the Conspiracy and on one or more courses of action as described above.
209. One or more unlawful, overt acts were committed by each co-conspirator defendant in furtherance of the object of the Conspiracy.
210. The unlawful, overt acts of the co-conspirators, in furtherance of the object of the conspiracy, have been the cause-in-fact and legal cause of damages to plaintiffs in the sum of not less than $300,000.00, or such other and greater sum as may be proven at trial.
211. In addition, a reasonably foreseeable consequential damage to each of the plaintiffs as the result of their financial devastation caused by the co-conspirator defendants is extreme emotional distress and mental anguish, for which plaintiffs are each entitled to judgment in the sum of not less than $1,000,000.00, or such other and greater sum as may be proven at trial.
212. Plaintiffs are also entitled to an appropriate award of punitive damages against each of the co-conspirator defendants as the proof may show.
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COUNT VII (CIVIL LIABILITY FOR VIOLATIONS OF THE UTAH UNIFORM SECURITIES ACT– UTAH CODE ANN. § 61-1-22 - AGAINST ALL DEFENDANTS EXCEPT CHURCH OF SCIENTOLOGY OF UTAH, CHURCH OF SCIENTOLOGY INTERNATIONAL, CYNTHIA AND KIMBERLY)
213. Bagley and Bee incorporate all previous allegations.
214. The named co-conspirator defendants, and each of them, offered or sold
securities to Bagley and Bee in violation of UTAH CODE ANN. §§ 61-1-1(2), -3(1), -7,
-17(2), and/or a rule or order under UTAH CODE ANN. § 61-1-15, which requires the
affirmative approval of sales literature before it is used, and/or a condition imposed
under UTAH CODE ANN. §§ 61-1-10(4) or 11(7).
215. The named co-conspirator defendants, and each of them, are liable to
Bagley and Bee.
216. Bagley and Bee elect to recover the consideration paid for the securities,
together with interest at 12% per year from the date of payment, costs, and reasonable attorney fees.
217. Bagley and Bee hereby tender the return of such securities to the co- conspirator defendants, and each of them.
218. In addition, because each of the violations of UTAH CODE ANN. § 61-1-1(2)
by each of the named co-conspirator defendants were reckless and intentional, Bagley
and Bee are each entitled to three times the consideration paid for the securities,
together with interest, costs, and attorney fees.
219. Each of the representations of material fact detailed above was false when
it was made, in that there was no viable software which virtually eliminated the risk of
securities investment and which guaranteed profits of no less that 5% per month and
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could make up to a 72% return on investment over three months. Moreover, all the
misrepresentations made to cloak the conspirators with legitimacy were false in that
none of the conspirators were legitimate business persons nor did any of the
businesses operate legitimately, having all been funded with the proceeds of fraud. The conspirators had not complied with the securities laws and had no intention of complying. The conspirators had no intention of supporting charities. Although representing themselves as investment advisers, none of the individual defendants in fact were registered with the state of Utah as investment advisers. The representations about the nearness of PMI commencing its wonderful program were all false. The representations about compliance with the securities laws were false in that no registration statements were filed, no adequate disclosures made and, of course, misrepresentations and omissions of material fact were being made.
220. Numerous material omissions were also made in conjunction with the offer and sale of securities to Bee and Bagley, including the failure to advise Bee and Bagley that the conspirators were defrauding them, that the High Yield Investment Program was a fraud scheme, that none of the conspirators had complied with the securities laws, that the idea of a trading program that could eliminate risk from market trading was a fantasy and not legitimate, that the investments were actually the highest risk investments which could be made, that they were unsuitable for plaintiffs' investment objectives, that the delays in implementation were the result of the true fact that no implementation would ever be made as represented, that no proprietary software in fact existed, that no legitimate licenses in fact existed, that Hales and Williams were operating numerous businesses and supporting their lifestyles through a pattern of fraud
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schemes, that Wright was a real estate developer and not a computer programmer or
securities expert, that the only "humanitarian" work that was going to occur was in the
interest of the conspirators, that the Note Trading was part of a lulling scheme as were
the assurances that the investments were secure and numerous others.
221. Plaintiffs are thus entitled to judgment against the named co-conspirator defendants for defendants' making of any untrue statements of material fact and defendants' omission to state material facts necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading with respect to is purchase of plaintiff's securities, pursuant to UTAH CODE ANN. § 61-1-22, for
all damages caused thereby, including consequential damages, in the sum of not less
than $300,000.00, or such other and greater sum as may be proven at trial, together
with interest thereon from July 2, 2007 forward at the statutory rate of 12% per annum,
together with all of plaintiff's reasonable attorney fees, costs and expenses incurred
herein.
222. Because the named co-conspirators’ conduct as pleaded was reckless or
intentional, plaintiff is entitled to have the judgment against plaintiff tripled in amount,
pursuant to UTAH CODE ANN. § 61-1-22(2), resulting in a judgment against defendant
and in favor of plaintiff in a total sum of not less than $900,000.00, or such other and
greater sum as may be proven at trial, together with interest thereon from July 2, 2007
forward at the statutory rate of 12 % per annum, together with all of plaintiff's
reasonable attorney fees, costs and expenses incurred herein.
223. In addition, a reasonably foreseeable consequential damage to each of
the plaintiffs as the result of their financial devastation caused by the co-conspirator
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defendants is extreme emotional distress and mental anguish, for which plaintiffs are
each entitled to judgment in the sum of not less than $1,000,000.00, or such other and
greater sum as may be proven at trial.
COUNT VIII (ALTER EGO– AGAINST WRIGHT, MADSEN, ONEIROS, CYNTHIA, CHURCH OF SCIENTOLOGY OF UTAH, CHURCH OF SCIENTOLOGY MISSION OF SALT LAKE CITY, CHURCH OF SCIENTOLOGY INTERNATIONAL)
224. Bagley and Bee incorporate all previous allegations.
225. PMI was formed to operate and did operate a high yield investment program as part of a series of Ponzi schemes.
226. From its formation through its cessation of business, PMI was undercapitalized.
227. Although PMI purported to be, at times, owned by Hunter, Burton,
D'Arezzo, Farr, Hites, Kingdon, Petersen, Stowe and/or Szaniszlo, and controlled by
Hunter, in fact PMI was formed and existed in order for Wright to oversee and control the generation of funds to be paid to one or more of the Church of Scientology of Utah, the Church of Scientology Mission of Salt Lake City and the Church of Scientology
International.
228. PMI failed to recognize the formalities of operating as a limited liability company, with irregular shifting of memberships, additions and withdrawals of members, unclear management, operating entirely within the offices of Oneiros, sharing personnel, and a variety of other sham factors.
229. Plaintiffs believe that no legitimate distributions were made to members and that any funds received by members were illegal repayments of capital.
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230. Plaintiffs believe that all material funds of PMI were largely siphoned off to
Wright and Oneiros, who were in actual control of PMI, and in turn siphoned in part to
Cynthia, Madsen, Church of Scientology of Utah, Church of Scientology Mission of Salt
Lake City, Church of Scientology.
231. Despite purporting to have multiple members, non-members Wright and
Oneiros provided the only true functional management of PMI.
232. PMI has an absence of adequate records to explain where the large pools
of capital that purported to be infused into it and the funds generated from its high yield
investment program actually went. In fact, it is believed that a part of PMI’s operations
were conduction through other entities which collected funds from victims and paid
some or all of those funds to PMI directly or indirectly in such a fashion as to scrub,
launder or conceal the sources and uses of funds.
233. PMI never operated as a legitimate business and plaintiffs believe that
PMI always operated as a facade for Wright, Madsen, Oneiros, Cynthia, Church of
Scientology of Utah, Church of Scientology Mission of Salt Lake City and Church of
Scientology International.
234. The misuse of PMI’s purported limited liability existence to further the
wishes of the persons who controlled it operated and operates to promote injustice and
fraud.
235. Plaintiffs are entitled to a declaration that PMI was and is an alter ego of,
at a minimum, and possibly more, Wright, Madsen, Oneiros, Cynthia, the Church of
Scientology of Utah, the Church of Scientology Mission of Salt Lake City and the
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Church of Scientology International and that each of those persons is fully liable for all of the debt of PMI, including all sums owing to plaintiffs.
WHEREFORE, plaintiffs demand judgment in their favor, and against defendants, jointly and severally as applicable, as follows:
A. For a determination of the debt owed to Bee and Bagley by Hunter and
Kimberly and a determination that such debt is non-dischargeable;
B. For a determination that the Debtors, Hunter and Kimberly, should be denied a discharge;
C. For such relief against each defendant as the particular proof may show entitlement, legally, equitably, by statute or otherwise, including without limitations all forms and nature of damages;
D. For trebling as may be allowed;
E. For punitive damages as may be allowed;
F. For orders of relief of rescission, alter ego, replevin, restitution, receivership, injunction or otherwise and for the avoidance and set aside of transfers and orders of turnover to the debtors’ estate of the assets transferred and of each such alter ego as needed to satisfy the estate’s creditors;
G. For all of plaintiffs' reasonable attorneys fees, costs and expenses, as may be allowed at law, in equity, by contract, statute, rule, inherent power of the Court or otherwise, both before and after judgment; and
H. For all such other and further relief to which the proof at trial may show entitlement or which the Court otherwise deems just, equitable and proper in the premises.
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DATED this 26th day of April, 2013.
PETERS š SCOFIELD A Professional Corporation
/s/ David W. Scofield DAVID W. SCOFIELD Attorneys for Plaintiffs
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CERTIFICATE OF SERVICE
I hereby certify that on the 26th day of April, 2013, the foregoing FIRST AMENDED COMPLAINT TO DENY DISCHARGE UNDER 11 U.S.C. § 727, TO DETERMINE NON- DISCHARGEABILITY PURSUANT TO 11 U.S.C. § 523 AND FURTHER RELIEF was electronically filed with the Court to be served via the Court's ECF/CM system upon the following:
Cameron Hancock: [email protected] Danny C. Kelly: [email protected] Michael R. Lofgran: [email protected] Lyle T. Millham: [email protected] Shawn T. Richards: [email protected] Stuart H. Schultz: [email protected]
and by e-mail to the following attorneys not yet appearing of record for the parties they represent as indicated:
Steven C. Russell: [email protected] for Greg Kingdon Richard C. Terry: [email protected] for Michael J. Wright Douglas J. Payne: [email protected] for Gary E. Jubber, Tr. and by United States mail, first class postage prepaid, to:
Sandor Szaniszlo 10290 Tujunga Canyon Boulevard, #305 Tujunga, CA 91042
Lucidty Management, LLC c/o Reg. Agent Benjamin J. Davis 9060 N. Lakeshore Drive Lakepoint, UT 84070
George Hites 5945 Bruce Drive Pleasanton, CA 94588
Tom Burton 5350 Paseo Rio Santa Barbara, CA 93111
Alan S. Farr 682 East 4129 South Salt Lake City, Utah 84107
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James D' Arezzo 7645 Rocky Mountain View Rd. Tujunga, CA91042
Cynthia L. Wright 1335 Colonial Circle Salt Lake City, Utah 84108
Gregory B. Madsen 2382 Pauline Way West Jordan, UT 84088
Church of Scientology Mission of Salt Lake City c/o Its Registered Agent Cynthia Wright 1335 South Colonial Circle Salt Lake City, Utah 84108
Volition Trading Company, LLC c/o Its Registered Agent, Christopher D. Hales #17419-081 FCI Safford Federal Correctional Institution P.O. Box 9000, Safford, AZ 85548
Oneiros Technologies L.C. c/o its Member Michael J. Wright 1335 South Colonial Circle Salt Lake City Utah 84108
Church of Scientology of Utah c/o Its Registered Agent Wendy L. Lauritzen 1931 South 1100 East Salt Lake City, Utah 84106
/s/ David W. Scofield DAVID W. SCOFIELD
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