| Richard L. Wynne (Bar No. 120349) R. Alexander Pilmer (Bar No. 166196) Christopher T. Casamassima (Bar No. 211280) Amanda J. Wong (Bar No. 211393) KIRKLAND & ELLIS 777 S. Figueroa Street Los Angeles, California 90017 Telephone: (213) 680-8400 Facsimile: (213) 680-8500 Attorneys for Plaintiffs
Plaintiffs, vs. UNION BANK OF CALIFORNIA, N.A.- COMERICA BANKCALiFORNIA; IMPERIAL MANAGEMENT INCORPORATED BANK OF ORANGE COUNTY; AND DOES 1-10 Defendants.
II. AIDING AND ABETTING FRAUD III. BREACH OF FIDUCIARY DUTY IV. FRAUD V. NEGLIGENT MISREPRESENTATION VI. CONSTRUCTIVE FRAUD VII. NEGLIGENCE VIII. VIOLATION OF CALIFORNIA BUSINESS AND PROFESSIONS CODE §§ 17200 ET SEQ.
1. Reed Slatkin is the mastermind behind a ponzi scheme that allowed him to bilk victims out of hundreds of millions of dollars. But he couldn't have executed his scheme without the help of Union Bank, Imperial Trust and Pacific Inland Bank ("Banks"). These Banks sent out fraudulent statements on their letterhead regarding the value of Mr. Slatkin's fictitious investments (which statements the Banks purported to "certify"), they made fraudulent oral and written representations to investors, Union Bank gave Mr. Slatkin millions of dollars in unsecured loans (even after Union Bank knew he was under investigation by the SEC), Union Bank permitted him routinely to overdraw his accounts by hundreds of thousands of dollars in order to pay investor withdrawal requests, the Banks allowed Mr. Slatkin to commingle his victims' assets within the Banks, and the Banks gave Mr. Slatkin the aura of legitimacy that he needed to continue to fool his victims. The Banks didn't support Mr. Slatkin's scheme for free, however. They earned millions of dollars in profits working side by side with Mr. Slatkin. One of the Banks' officers even accepted bribes from Mr. Slatkin. 2. The business practices followed by the Banks unfortunately have become all too familiar in corporations across the country: executives, motivated solely by profits and lining their own pockets, turned a willing blind eye to a massive financial scam, the results of which have caused enormous financial hardship. 3. Mr. Slatkin is bankrupt and in jail because of what he did. [1] Plaintiffs bring this action to hold the Banks accountable for the devastating harm they helped cause. That harm exceeds $250,000,000. Plaintiffs also seek an award of punitive damages against the Banks. JURISDICTION AND VENUE 4. Jurisdiction is proper under 28 U.S.C. § 1334(b) because this action is related to the bankruptcy case In re Reed E. Slatkin, Bk. No. ND 0111 549-RR. The plaintiffs are the trustee and creditors of Mr. Slatkin's bankruptcy estate, and their eventual recovery against the defendants in, this action will reduce the total amount. of claims against the bankruptcy estate. 5. In addition to the Slatkin bankruptcy case, this proceeding is also related to two other civil cases currently pending in the Central District of California: Wesley West Flexible Partnership, et al. v. Union Bank of California, N.A, et al., Case No. CV-02-964 RSWL, and Rockoff, et al. v. Union Bank of California, N.A., Case No. CV-02-608 MMM. Both cases purport to bring claims based on similar facts as described herein, both involve at least one of the Defendants to this action, and the Wesley West entities in CV-02-964 are plaintiffs and class representatives in this action. 6. Moreover, the Rockoff court already determined the jurisdiction for class plaintiffs' claims against the financial institutions involved in Mr. Slatkin's ponzi scheme. See Ex. 2. 7. Pursuant to 28 U.S.C. § 1391(b), venue in this Court is appropriate. All defendants are subject to personal jurisdiction in the Central District of California, and substantially all of the acts underlying the claims contained in this Complaint occurred in this District. 8. Plaintiff R. Todd Neilson is the Chapter 11 trustee of the bankruptcy estate of Reed E. Slatkin. In his capacity as trustee, Mr. Neilson is the general partner of the Reed Slatkin Investment Club, L.P. (the "Club"). As general partner of the Club, Plaintiff Neilson brings suit for compensatory and punitive damages. Plaintiff Neilson also brings suit as Trustee of the Slatkin bankruptcy estate, general partner of the Club, and as a private attorney general on behalf of the general public of the State of California for restitution, disgorgement, and applicable statutory penalties against all defendants. 9 Plaintiff Wesley West Flexible Partnership is a general partnership organized under the laws of the state of Texas. Wesley West Flexible Partnership seeks compensatory and punitive damages on its own behalf and as a class representative. Wesley West Flexible Partnership also seeks restitution, disgorgement, and applicable statutory penalties against all defendants on its own behalf and as a private attorney general on behalf of the general public of the state of California. Plaintiff Wesley West Flexible Partnership has lost more than $2,500,000 in principal as a result of defendants' aid and assistance in Mr. Slatkin's scheme. 10. Plaintiff Stedman West Family Partnership, Ltd. is the successor in interest to the Wesley West Long Term Partnership, Ltd., and is a limited partnership organized under the laws of the state of Texas. Stedman West Management Company, L.L.C. is the general partner of the West Family Partnership, Ltd. Stedman West Family Partnership, Ltd. seeks compensatory and punitive damages on its own behalf and as a class representative. Stedman West Family Partnership, Ltd. also seeks restitution, disgorgement, and applicable' statutory penalties against all defendants on its own behalf and as a private attorney general on behalf of the general public of the state of California. Plaintiff Stedman West Family Partnership has lost more than $7,900,000 in principal as a result of defendants' aid and assistance in Mr. Slatkin's scheme. 11. Plaintiff Stuart W. Stedman is one of three trustees of the Neva and Wesley West Foundation, which is a charitable trust organized under the laws of the state of Texas. Mr. Stedman has the authority of the other trustees to bring this suit on behalf of the Neva and Wesley West Foundation. Through Mr. Stedman acting as trustee, Neva and Wesley West Foundation ,seeks compensatory and punitive damages on its own behalf and as a class representative. Neva and Wesley West Foundation also seeks restitution, disgorgement, and applicable statutory penalties against all defendants on its own behalf and as a private attorney general on behalf of the general public of the state of California. Plaintiff Neva and Wesley Wesley West Foundation has lost more than $4,200,000 in principal as a result of defendants' aid and assistance in Mr. Slatkin's scheme. 12. Plaintiff George V. Kriste is an individual who resides in California. Mr. Kriste seeks compensatory and punitive damages as an individual and class representative. Mr. Kriste also seeks restitution, disgorgement, and applicable statutory penalties against all defendants on his own behalf and as a private attorney general on behalf of the general public of the state of California. Mr. Kriste has lost more than $1,200,000 in principal as a result of defendants' aid and assistance in Mr. Slatkin's scheme. 13. Plaintiff John K. Poitras is an individual who resides in California. Mr. Poitras seeks compensatory and punitive damages as an individual and class representative. Mr. Poitras also seeks restitution, disgorgement, and applicable statutory penalties against all defendants on his own behalf and as a private attorney general on behalf of the general public of the state of California. Mr. Poitras lost approximately $15,000,000 in principal as a result of defendants' aid and assistance in Mr. Slatkin's scheme. 14. Plaintiff Michael B. Azeez is an individual who resides in New Jersey. Mr. Azeez seeks compensatory and punitive damages as an individual and class representative. Mr. Azeez also seeks restitution, disgorgement, and applicable statutory penalties against all defendants on his own behalf and as a private attorney general on behalf of the general public of the state of California. Mr. Azeez has personally lost more than $20,000,000 in principal as a result of defendants' aid and assistance in Mr. Slatkin's scheme, and the Azeez family's loss is in excess of $50,000,000. 15. Plaintiff Anthony Podell is an individual who resides in California. Mr. Podell seeks compensatory and punitive damages as an individual and class representative. Mr. Podell also seeks restitution, disgorgement, and applicable statutory penalties against all defendants on his own behalf and as a private attorney general on behalf of the general public of the state of California. Mr. Podell has lost more than $5,000,000 in principal as a result of defendants' aid and assistance in Mr. Slatkin's scheme. 16. Plaintiff Gregory B. Abbott is an individual who resides in Colorado. Mr. Abbott seeks compensatory and punitive damages as an individual and class representative. Mr. Abbott also seeks restitution, disgorgement, and applicable statutory penalties against all defendants on his own behalf and as a private attorney general on behalf of the general public of the state of California. Mr. Abbott has lost more than $7,200,000 in principal as a result of defendants' aid and assistance in Mr. Slatkin's scheme. 18. Defendant Comerica Bank-California is the regional banking subsidiary of the national banking corporation Comerica Incorporated, which has over $50 billion in assets and is one of the largest banking companies in the United States. Comerica Bank-California is a California corporation that maintains its principal place of business in San Jose, California. Comerica Incorporated's principal place of business is Detroit, Michigan. Comerica Bank-California wholly owns co-defendant Imperial Management Incorporated, which is the direct successor in interest to Imperial Trust Company. Imperial Trust Company was a wholly owned subsidiary of. Imperial Bank, which merged into Comerica Bank-California. Imperial Management Incorporated currently performs very limited, if any, business functions and likely has minimal assets as a result of the sale of substantially all of its assets and business operations to Union Bank of California, N. A. in 1999. Imperial Management Incorporated'.s sole business function was and/or is to collect income from the sale of Imperial Trust Company's assets and to distribute that income to its parent company, Comerica BankCalifornia. As such, it functioned and/or functions as a business unit of Comerica Bank-California, and both corporations have complete unity of interest and ownership. Imperial Management Incorporated is therefore the alter ego of Comerica Bank-California, and Plaintiffs bring suit against Comerica Bank-California because of Imperial Trust Company's and Imperial Bank's wrongful acts and omissions. 19. Defendant Imperial Management Incorporated is a California Corporation and is the direct successor in interest to Imperial Trust Company. It is a wholly owned subsidiary of Comerica Bank-California. Plaintiffs bring suit against Imperial Management Company because it is responsible for the wrongful acts and omissions of Imperial Trust Company. 20. Defendant Bank of Orange County is a California corporation that maintains its principal place of business in Anaheim, California. As a result of a merger and subsequent name change, Bank of Orange County is the direct successor in interest to Pacific Inland Bank. Plaintiffs bring suit against Bank of Orange County because of the wrongful acts and omissions of Pacific Inland Bank. 21. Plaintiffs, with the exception of Mr. Neilson, who is not part of the proposed Class, bring this action pursuant to Fed. R. Civ. Proc. 23(a) and (b)(1-3) on behalf of themselves and as representatives of all others who are similarly situated and who fall within the following class definition: All individuals or entities who (1) entrusted money to Reed E. Slatkin to invest on their behalf; and (2) received in return less money than they entrusted to Reed E. Slatkin to invest. 22. Those individuals and entities are putative Class Members. The "Class Representatives" are Mr. Stedman (on behalf of the Neva and Wesley West Foundation, the Wesley West Flexible Partnership, and the Stedman West Family Partnership, Ltd.), Mr. Kriste, Mr. Poitras, Mr. Azeez, Mr. Podell, and Mr. Abbott, all of whom fall within the definition of a Class Member. 23. This action also includes the following Subclass: All individuals and entities that (1) were, or reasonably believed that they were, limited partners of the Reed Slatkin Investment Club, L.P. (the "Club"); (2) allowed Reed E. Slatkin to manage and/or direct their investments in the Club through account(s) held at Pacific Inland Bank and/or Imperial Trust Company and/or Union Bank ("Club account(s)"); and (3) received in return less money from Reed E. Slatkin than they entrusted to him to invest. 25. The Class Members and Subclass Members are so numerous and geographically diverse that joinder is impracticable. There are approximately four hundred Class Members spread throughout the United States, and thirty Subclass members who are similarly located throughout the United States. 26. The Class and Subclass Representatives will fairly, adequately, and vigorously represent the interests of the Class and the Subclass. The Class and Subclass Representatives are the members of the Official Committee of Unsecured Creditors of the Estate of Reed E. Slatkin, and as such have functioned in a representative capacity on behalf of all creditors-of Mr. Slatkin's bankruptcy estate for over a year. The Committee members also were Mr. Slatkin's biggest victims. For example, the Class Representatives' claims exceed $ 60,000,000. The Subclass Representatives' claims exceed $15,000,000. As a result,, the Class and Subclass Representatives have the most incentive to vigorously prosecute this action to its conclusion. 27. Questions of law and fact common to all potential Class Members predominate over any questions affecting only individual Class Members. Among the common questions of law and fact to the Class Members are: Whether a fiduciary relationship existed between Mr. Slatkin and Class Members; Whether Mr. Slatkin breached a fiduciary duty to Class Members; Whether damages were caused by Mr. Slatkin's breach of a fiduciary duty to Class Members; Whether the Banks aided and abetted Mr. Slatkin's breach of a fiduciary duty to Class Members; Whether the Banks knew or should have known that Mr. Slatkin was breaching a fiduciary duty to Class Members; Whether the Banks financially gained from aiding and. abetting Mr. Slatkin's breach of fiduciary duty; Whether Mr. Slatkin. intentionally misrepresented material facts to Class Members; Whether Mr. Slatkin misrepresented material facts to induce reliance by Class Members; Whether Mr. Slatkin misrepresented material facts in order to deceive Class Members; Whether Class Members were justified in relying on Mr. Slatkin's misrepresentations of material facts; Whether damages resulted from Class Members' justifiable reliance on Mr. Slatkin's misrepresentation of material facts; Whether the Banks knew or should have known of Mr. Slatkin's material misrepresentations; Whether the Banks actively assisted Mr. Slatkin's fraudulent activities; Whether the Banks engaged in unfair business practices; Whether the Banks committed tortious acts with fraud, oppression or malice. 28. Questions of law and fact common to all potential Subclass Members predominate over any questions affecting only individual Subclass Members. Among the common questions of law and fact. to the Subclass Members are: Whether the Banks misrepresented material facts to Subclass Members; Whether the Banks knew, or should have known, that they were misrepresenting material facts to Subclass Members; Whether the Banks were reckless in their disregard of whether their misrepresented material facts were true or false; Whether the Banks had a reasonable basis for believing that their material misrepresentations were true; Whether the Banks misrepresented material facts to induce reliance of Subclass Members; Whether the Banks misrepresented material facts in order to deceive Subclass Members; Whether Subclass Members were justified in relying on the Banks' misrepresentations of material facts; Whether damages resulted from Subclass Members' justifiable reliance on the Banks' misrepresentation of material facts; Whether the Banks owed a duty of care to Subclass Members; Whether the Banks violated a duty of care to Subclass Members; Whether the Banks owed a fiduciary duty to Subclass Members; Whether the Banks violated a fiduciary duty to Subclass Members; Whether the Banks committed fraudulent, unlawful, or unfair business practices; and Whether the Banks committed tortious acts with fraud, oppression, or malice. 29. These common questions predominate over all Class Members' and Subclass Members' claims, including those of the Class and Subclass Representatives. Indeed, there is essentially no difference between the Class and Subclass Representatives' claims and the other Class and Subclass Members' claims. As a result, the Class and Subclass Representatives' claims are typical of, if not identical to, the rest of the Class and Subclass Members' claims. 30. In addition, the Banks have acted on grounds generally applicable to the Class and Subclass, thereby making final injunctive and declaratory relief appropriate with respect to the Class and Subclass as a whole. 31. Class action treatment is superior to the alternatives, if any, for the fair and efficient adjudication of the controversy alleged in this Complaint. Such treatment will permit a large number of similarly situated persons to prosecute their common claims in a single forum simultaneously, efficiently, and without duplication. Separate trials adjudicating the liability of defendants will be inefficient, and will run the risk of producing inconsistent verdicts. Consolidating the litigation of all Class Members will enhance judicial economy and promote justice. Class treatment will also permit the adjudication of relatively small claims by many of the Class members who could not individually afford to litigate the claims asserted in this Complaint. There are no difficulties that would preclude class action treatment of this lawsuit, and no superior alternative exists for the fair and efficient adjudication of this controversy. 32. Concentrating the Class Members claims in the Central District o California is preferable to maintaining this action in any other venue. This District has a logical connection to the underlying events of this action, as it is where a lion's share of the actions underlying this suit occurred. 33. Litigation against several of the Defendants has begun in other lawsuits in this district. Certain aspects of that litigation have been stayed pursuant to Orders from the Bankruptcy Judge administering Mr. Slatkin's bankruptcy. And the plaintiffs here, and in Wesley West Flexible Partnership et al v. Union Bank, et al Case No. CV 02-964 RSWL, will move to consolidate and/or merge these two actions. GENERAL ALLEGATIONS [2] The genesis of the ponzi scheme 35. Mr. Slatkin began his career as a full-time investment advisor during the mid-1980's. Even at the very beginning, he did not make the investments he said he was making. Despite his failure to invest people's money as promised, Mr. Slatkin created periodic account statements that purported to show exceptional -- albeit entirely fictitious_-- returns. When, from time to time, an investor requested a "withdrawal" Mr. Slatkin paid the withdrawal request, not by selling stock the investor supposedly owned, but by using money Mr. Slatkin had received from more recent investors. 36. Soon after Mr. Slatkin began taking money from others to "invest," he began to operate a classic ponzi scheme. Over the years, Mr. Slatkin was able to substantially increase the magnitude of this scheme. By definition a ponzi scheme is "a phony investment plan in which monies paid by later investors are used to pay artificially high returns to the initial investors, with the goal of attracting more investors." See In re Bonham, 229 F.3d 750, 759 n.1 (9th Cir. 2000). The perceived success of Mr. Slatkin's investment portfolio enhanced his credibility with investors and led to his reputation as a Wall Street guru. In reality, Mr. Slatkin's actual investment portfolio bore next to no resemblance to what he claimed. Instead, Mr. Slatkin spent money on a lavish lifestyle, commingled the investors' money, and paid false returns to some investors with the principal investments from other investors. 37. Mr. Slatkin could not have executed his scheme without substantial assistance from the Banks, for the Banks provided three necessary but missing ingredients for Mr. Slatkin's recipe: (1) a steady flow of new money, (2) a mechanism for Mr. Slatkin to manage custodial accounts he couldn't otherwise handle, and (3) an aura of legitimacy Mr. Slatkin couldn't obtain without the Banks' involvement. 38. As a result of the Banks' participation Mr. Slatkin's scheme flourished. He took in nearly $600,000,000 from investors, nearly $250,000,000 of which has never been returned and is still owed to the Class and Subclass Members. Some of the details of the Banks' involvement follow. 39. One artifice Mr. Slatkin used to carry out his scheme was a limited partnership called the Reed Slatkin Investment Club L.P. Mr. Slatkin was the general partner of the Club, and the limited partners gave Mr. Slatkin money to invest on their behalf. Mr. Slatkin actively operated the Club until he filed his Chapter 11 bankruptcy case on May 1, 2001. 40. Mr. Slatkin learned early in his scheme that he couldn't convince investors to give him money for custodial accounts like their IRA accounts, unless he established relationships with financial institutions who would act as custodians or trustees for these accounts. The Banks, eager to earn fees in exchange for doing little, if any, work, agreed to serve in this capacity for Mr. Slatkin. 41. Once the Banks were on board, Mr. Slatkin induced dozens of investors to transfer millions of dollars to "custodial" or "trustee" accounts at the Banks. Upon receipt of the investors' cash, the Banks. transferred the money into accounts in the name of the Club. Mr. Slatkin then, with the Banks' knowledge and assistance, would commingle the new investors' money with his own and other investors' money. Most of the accounts were held at, in turn, Pacific Inland, Imperial Trust, and starting in May 1999, Union Bank. Santa Barbara Bank & Trust held the remaining Club accounts. 42. Mr. Slatkin's use of the Club and the custodial and trust accounts at the Banks served a critical function in allowing him to abscond with both the Class Members' and the Subclass Members' money. All of the Subclass Members deposited money directly with the Banks. Some of the Subclass Members also gave Mr. Slatkin money directly for investment outside of the Club accounts at the Banks. These Subclass Members would not have made these additional investments, and thus not lost their money, were it not for the Banks' participation in the scam. 43. The Banks' participation also enabled Mr. Slatkin to attract a broad spectrum of investors outside of the Club because of his growing reputation as an investment advisor, and because of the aura of legitimacy the Banks gave him. In addition to lending its prestige to Mr. Slatkin, the Banks vouched for Mr. Slatkin's skill and trustworthiness when asked. 44. Cathy Leider was the administrator for accounts with investments in the Club at Pacific Inland and then at Imperial after Imperial acquired the Club accounts in October 1993. She functioned as the liaison between the investors and Mr. Slatkin, and was a key factor in the growth of the Club and Mr. Slatkin's ponzi scheme in general. Ms. Leider began working with Pacific Inland Bank in June 1992. Just a year prior, Slatkin and a few Subclass Members opened the first Club accounts there. Ms. Leider immediately took over the operation of the Club accounts and was instrumental in getting Mr. Slatkin to open a custodial account at Pacific Inland, and later at Imperial, to facilitate the Club's activities. Ms. Leider acted as a salesperson for Mr. Slatkin by recruiting investors to liquidate their existing investments in order to purchase "shares" in the Club instead. Ms. Leider did this by representing that Mr. Slatkin could obtain high rates of return, that Mr. Slatkin was a man of "high integrity," and that he was an "investment guru." Ms. Leider further represented that investments with Mr. Slatkin were safe, that in fact some of the actual stock certificates for the Club were held in the vault at Pacific Inland, and that the remaining stock certificates were held in a bank's vault in Santa Barbara. 45. Others at Imperial also helped recruit investors for Mr. Slatkin. One other executive even disseminated a false list of "[u]nderlying assets of the Reed Slatkin LP," which led an existing client at Imperial to turn over hundreds of thousands of dollars to Mr. Slatkin. See Ex. 3. 46. Ms. Leider also served as. an important buffer between Mr. Slatkin and the Subclass Members. When Mr. Slatkin was slow to honor withdrawal requests (which he frequently was, as happens in a ponzi scheme), Ms. Leider "covered" for Mr. Slatkin by explaining to investors why it was taking longer than expected to obtain the funds. Had Mr. Slatkin been engaged in legitimate investment activities, he would have been able to provide the requested withdrawal funds much more quickly than he actually did. In fact, however, the delays were caused by Mr. Slatkin's need to raise new funds from new investors, in order to pay the withdrawal requests of old investors. Ms. Leider's role in covering for these delays served the important function of calming potentially irate investors. "Audited financials" based upon "accounting miracles" 47. Ms. Leider represented to investors that the Club was subject to annual audits. See, Ex. 4 at 112.[3] Ms. Leider also told the limited partners that unlike the quarterly statements generated by Mr. Slatkin, the yearly K-1 forms sent to the limited partners by Imperial were "done after all the annual accounting is done on the partnership and the audited figures are completed." Ex. 4 at 112. Ms. Leider has testified that this happened after all of the "accounting miracles" were completed. The truth is that no "accounting miracles" ever took place, and neither Pacific Inland nor Imperial ever audited the Club. Moreover, no "audited figures" ever existed for the Club, and none even purported to exist. In sum, Ms. Leider fabricated the tale that the Club was subject to an audit. 48. The investors relied upon Ms. Leider's false representations regarding the non-existent audits of the Club. To the investors, the representation by a vice-president of a fiduciary institution, such as Imperial Trust, that their investments would be subject to an audit created a sense of security which minimized their risk. 49. Pacific Inland and Imperial were obligated to verify annually the records and assets of the investors' accounts, to ensure the adequacy of internal controls, to ensure compliance with the law, and to determine accurately the market value of the assets in the accounts. Imperial fulfilled these obligations with respect to publicly traded securities in custodial accounts by hiring a third-party vendor to provide the required market values. With respect to more unique assets, such as interests in real estate limited partnerships, Imperial hired third-party appraisers to conduct an appraisal of the underlying assets. With respect to the Subclass Members' accounts, however, Imperial did nothing to determine the market value of each Subclass Members' interest in the Club. 50. Nevertheless, Imperial sent the Subclass Members account statements such as Exhibit 5. Imperial "certified" each of the statements, as is reflected in the cover page of Exhibit 5 (at 113). In regards to this Q. What did you do to certify to the best of your knowledge that the information contained in [Exhibit 5] was true? A. It was not ... This is typically a rubber stamp by the financial institution, and you get a stack of the annual statements on your desk, and you sign them on the line. Unitization process 51. When the Banks reported a "market value," they routinely advised investors that they owned a certain numbers of "units" in the Club. Mr. Slatkin, though, never told the Banks or the investors that they owned "units" in the Club. The Banks created the "unitization" process to minimize the amount of work the Banks had to do to earn their hefty fees. 52. The Banks calculated the total amount of the supposed assets of the Club, both in accounts held at the Banks and at Santa Barbara Bank & Trust, and then determined how many "fractional units" any particular investor owned. See Ex. 6. Each and every periodic statement the Banks sent to the members of the Club falsely represented the market value of the account. See, e.%, Exs. 5,7, and 8. Imperial encouraged investors not to rely on Mr. Slatkin's data, but on Imperial's instead. 53. Further vouching for Mr. Slatkin's integrity, Imperial advised investors that the periodic statements they received from Mr. Slatkin were "informal," an "approximation of market values," and for "informational purposes only." Ex. 4 at 111. The import of this written representation was that the investors should not rely directly on Mr. Slatkin. Instead, Imperial told investors they could rely on the information Imperial provided in its "certified" statements, which Imperial advised were sent after "all the accounting is done on the partnership and the audited figures are completed." Ex. 4 at 112; Ex. 5 at 113. 54. Imperial was also aware of several highly unusual circumstances, all of which were sufficient to provide Imperial with knowledge that Mr. Slatkin was engaged in illegal activity and operating a ponzi scheme. 55. For example, Pacific Inland and Imperial knew that Mr. Slatkin purported to manage other people's money for a living, but that he wasn't registered with the Securities and Exchange Commission to do so. And while Pacific Inland and Imperial had from time to time referred clients to brokers or investment advisors before, they had never before referred clients to an unregistered investment advisor such as Mr. Slatkin. Further, neither Pacific Inland nor Imperial had ever dealt with a securities based limited partnership, such as the Club before. 56. Pacific Inland and Imperial had to create special procedures to handle certain of the odd operational issues presented by the Club. They created "dummy CUSIP numbers" to ease the strain on their accounting systems. The manner in which they paid themselves trustee's fees was unusual. See Ex. 9. Typically, they would simply deduct the fees from the accounts, but since the subject accounts were almost completely invested in supposed limited partnership interests of the Club, thus leaving no cash in the account to pay fees, they followed the highly unusual procedure of. taking money from the Club's checking account to pay fees for other accounts. This allowed Mr. Slatkin and the Banks to drain the limited partners' accounts of all cash, and instead left only the worthless shares of the Club in each limited partner's account. This arrangement was unique at each of the Banks. 57. Pacific Inland and Imperial also supposedly believed that Mr. Slatkin charged no fees for managing other people's money. But Pacific Inland and Imperial had never heard of a money manager who didn't charge a fee. Pacific Inland and Imperial also knew that while Mr. Slatkin in essence worked out of his garage in Santa Barbara, his bookkeeper worked in Santa Fe, New Mexico. 58. Finally, Pacific Inland and Imperial were "in complete awe" of the supposed exceptionally high returns Mr. Slatkin reported. These claimed but fictitious returns were even substantially higher than those Pacific Inland and Imperial had seen even from very experienced and reputable money managers. 59. Ms. Leider effectively joined Mr. Slatkin's payroll. Ms. Leider asked for, and Mr. Slatkin gave her, money on several occasions: money she used to keep her daughter in private school, to pay her living expenses, and to bail her out of potential legal trouble with the police. All in all, Mr. Slatkin gave Ms. Leider at least $30,000 between 1994 and 1998. 60. In summary, Pacific Inland and Imperial, through Ms. Leider and other executives, made the following oral and written representations to investors, all of which were false and upon which the investors relied to their detriment: That Mr. Slatkin was honest and professional; That checks and balances were in place to insure the safety of the investments; That investments with Mr. Slatkin would be safe; That the Club's books and records would be audited; That the Club had substantial assets; That Imperial's periodic statements were "certified" and were reliable; That stock certificates for the assets of the Club were in a vault maintained by the Banks; That "units" of the Club had a "market value;" That the Banks would determine the market value of the investments in the Club. 61. Pacific Inland and Imperial provided substantial acts of assistance to aid Mr. Slatkin in the execution of his ponzi scheme. In addition to their fraudulent misrepresentations, these acts of assistance include, but are not Rubber stamping Mr. Slatkin's valuation of assets as true without any investigation or audit; Creating dummy CUSIP numbers for the Club's accounts; Establishing special procedures to administer the Club's accounts; Ignoring their fiduciary duties; "Unitizing" the Club's investments; Allowing Mr. Slatkin to commingle all of the Club's assets; Sending periodic statements to investors "certifying" the values of each Club member's shares of the club; Maintaining a custodial account for Slatkin that facilitated payments to limited partners; Providing Mr. Slatkin with the ability to handle custodial accounts, which gave Mr. Slatkin a large source of money needed to continue the ponzi scheme; Turning its collective head from the multitude of red flags while Mr. Slatkin conducted his illegal operations. 62. While Pacific Inland and Imperial made false representations to Mr. Slatkin's victims, and while Pacific Inland and Imperial provided substantial acts of assistance to Mr. Slatkin with respect to the execution of his scheme, Pacific Inland and Imperial knew, or should have known, that Mr. Slatkin was in fact engaged in actions amounting to a fraud and a breach of his fiduciary duty to all Class Members. For example, Pacific Inland and Imperial knew that: Mr. Slatkin paid "withdrawal" requests to investors through his commingled checking accounts, and not through any actual sales of securities; Mr. Slatkin couldn't pay withdrawal requests upon demand; Mr. Slatkin acted as an investment advisor even though he was not registered with the SEC; Mr. Slatkin paid the investors' trustee fees through one of his personal checking accounts; Mr. Slatkin's bookkeeper lived and worked in New Mexico; Mr. Slatkin did not charge fees for managing his clients' money; Securities-based investment partnerships, like the Club, were unheard of within Pacific Inland and Imperial. Union Bank's two hats 63. Union Bank, and its predecessor Bank of California, was Mr. Slatkin's personal bank of choice during the life of his ponzi scheme. In fact, due to the vast sums of money Mr. Slatkin commingled at Union Bank, he became one of Union Bank's most profitable individual customers. As a result of his high personal checking account balances alone, Union Bank earned net profits of more than $8,000 per month. Union Bank thus showered Mr. Slatkin with many perks, including an unsecured line of credit up to $4,000,000. Union Bank, in violation of its own internal policies, also allowed Mr. Slatkin to routinely overdraw the Club's checking account he used to return money to investors by hundreds of thousands dollars. Without Union Bank's substantial assistance -- described in detail below -- Mr. Slatkin couldn't have continued his ponzi scheme. As Trustee 64. In May 1999, Union Bank acquired the trust business of Imperial, which included the Club accounts. Upon acquiring Imperial's trust business, Union Bank chose not to retain certain Imperial executives, including Ms. Leider. Union Bank did, however, offer a job to her immediate superior at Imperial, Karl Lessey. And although Mr. Lessey was Ms. Leider's supervisor, he had no familiarity with the direct administration of custodial accounts. In preparation for the switch to Union Bank, Ms. Leider trained Mr. Lessey to perform the unitization process, and Mr. Lessey unitized the limited partners' shares of the Club for May 1999. Mr. Lessey thereafter trained Gina Southgate, Vice President and Regional Manager of Union Bank's Beverly Hills Trust Division, regarding the Club. In most respects, it was just business as usual for the Club accounts after they moved to Union Bank. Valuations 65. Like Imperial, Union Bank was obligated to verify annually the records and assets of the investors' accounts, to ensure the adequacy of internal controls, to ensure compliance with the law, and to determine accurately the market value of the assets in the accounts. Like Imperial, Union Bank fulfilled these obligations with respect to publicly traded securities in custodial accounts by hiring a third-party vendor to provide the required market values. With respect to more unique assets, such as interests in real estate limited partnerships, Union Bank, like Imperial, hired third-party appraisers to conduct an appraisal of the underlying assets. 66. Union Bank even acknowledged its obligation to evaluate the market value of the investments in the Club. Kenneth Eisen, the senior analyst in the "closely held securities department," which was charged with determining the market value of unique assets such as the Club, wrote to Mr. Slatkin on January 4, 2000 and advised Mr. Slatkin that "federal banking regulations require that all assets held in trust be reviewed annually. In order to be in compliance, we ask that you provide us with" five categories of documents. Ex. 10 at 164.[4] Mr. Eisen never got the documents. And Mr. Eisen never even made a follow-up call to obtain them even though he said Union Bank needed the documents in order to be in compliance with federal banking regulations. 67. Ms. Southgate, the trust administrator for the Subclass Members' accounts, did little better. She once asked Mr. Slatkin for a list of assets in the Club. When Mr. Slatkin told Ms. Southgate that she didn't need such a list, Ms. Southgate just "dropped it." Ms. Southgate even told Mr. Eisen that there were "no backup docs on portfolio." Ex. 11 at 165. 68. It appears that like the banks before it, Union Bank failed to do anything to verify or value the investments in the Club. Account statements 69. Also like Imperial, Union Bank sent periodic account statements to investors regarding the value of their investments with the Club. Union Bank also adopted the same "unitization" process followed by Imperial. Union Bank's corporate designee testified that the market values reflected on investors account statements were input from the bank's operations department, in reliance solely on information received from Mr. Eisen' closely held securities department. Neither Mr. Eisen nor anyone else in his department ever verified the Club's assets or purported market values, and never performed any kind of audit. Examples of account statements prepared by Union Bank are attached as Exhibits 7 and 8. 70. Union Bank had considerable difficulty getting the unitization process right. Indeed, Union Bank once told an investor that the market value of his account was "$7,547,099,383.47." Ex. 8 at 148. (Yes, more than $7.5 billion). 71. Union Bank administered the investors' accounts during the time Mr. Slatkin was having the most difficulty keeping his ponzi scheme afloat, the last two years. All ponzi schemes will inevitably collapse under their own weight. The only way the scheme can be prolonged is if someone provides the money to pay for investor withdrawal requests. Union Bank's trust department, in violation of the bank's own policies, funded Mr. Slatkin's ponzi scheme, which allowed him to keep his scheme alive longer, which caused even more harm. 72. From time to time, many of Mr. Slatkin's investors requested withdrawals. For those with investments in the Club at the Banks, they made withdrawals from the Banks. Normal operating procedure for Union Bank would be that if an account holder requested a withdrawal, or partial liquidation, from his or her account, the operations department would "settle the trade." Upon settlement (i.e. Union Bank's receipt of the funds obtained from the sale of the asset), Union Bank would then transfer the cash into the account holder's account, whereupon the account holders were free to use the cash as they wished. 73. Union Bank did not follow normal operating procedures with respect to the investments in the Club. Union Bank disbursed money to the Subclass Members before it received the funds from the Club's checking account, which Mr. Slatkin maintained at Union Bank. When Mr. Slatkin had sufficient funds in the Club's checking account, this presented no problems. However, Mr. Slatkin frequently didn't keep much money in the Club's checking account. 74. This didn't stop Union Bank, however, as it simply paid the investors' withdrawal requests, and then waited for Mr. Slatkin to replenish the funds in the Club's checking accounts. Union Bank's head of operations confirmed that this procedure should not happen. Ms. Southgate agreed that Union Bank's funding of Mr. Slatkin's operations through these overdrafts was unusual. 75. In a world where banks charge ever-increasing fees to customers who bounce $10 checks, Union Bank's actions are all the more telling. Union Bank did not overdraw the Club's checking account by tens, hundreds, or even thousands of dollars. Instead, Union Bank routinely overdrew the Club's account by hundreds of thousands of dollars. For example, on June 2, 2000, Ms. Southgate politely wrote Mr. Slatkin and advised him that on account of withdrawal requests "over the past few months ... the referenced account is overdrawn in the amount of $400,000+." Ex. 12 at 166. Ms. Southgate then asked Mr. Slatkin to return the money "[a]t your earliest convenience." Mr. Slatkin replenished the account, but a few months later he was in the red again. In October 2000, he had to make a $725,000 deposit "to cover overdraft." Ex. 13 at 167. 76. Like Imperial, Union Bank was also aware of the unusual circumstances surrounding Mr. Slatkin's strange business practices. See 62,69-75. Union Bank as Mr. Slatkin's private bank 77. Union Bank assigned Sandi Otto to be the "relationship manager" for Mr. Slatkin. In performing her job, Ms. Otto followed the mantra to. "get to know your customer." Ms. Otto and her department frequently met, spoke and corresponded with Mr. Slatkin. She had access to all of his bank records and to Union Bank's internal databases. And Ms. Otto analyzed Mr. Slatkin's profitability to Union Bank on a regular basis. But in all her dealings with Mr. Slatkin, Ms. Otto now claims that she did not know what the Club was, or even that Union Bank held any accounts related to the Club. Had she looked at all of the information in Union Bank's possession she could have only reached one conclusion -- Mr. Slatkin was engaged in illegal activities. 78. Mr. Slatkin borrowed money from Union Bank regularly. Union Bank's loans were in the form of extensions of unsecured lines of credit. Union Bank gradually increased the limit on these lines of credit, until at the end of 1999, Mr. Slatkin had a $2,500,000 unsecured line of credit. 79. In November 1999, the SEC began a formal investigation of Mr. Slatkin, and served the first of many subpoenas on Union Bank. These subpoenas sought virtually all documents regarding all of Mr. Slatkin's accounts, and all accounts relating to the Reed Slatkin Investment Club. See Ex. 14 at 173-174. In response to this subpoena, Ms. Otto turned over some, but not all, of the documents she had which were called for by the subpoena. Ms. Otto even spoke to Mr. Slatkin about the SEC's investigation, and he told her it was nothing to worry about. Ms. Otto then dropped the subject. 80. At the same time, Mr. Slatkin's line of credit was up for renewal. Ms. Otto recommended to her superiors that Union Bank renew and even increase Mr. Slatkin's line of credit. See Ex. 15. Despite the SEC's investigation of Mr. Slatkin, Union Bank approved the further extension of credit to Mr. Slatkin, in part because of the high profits Union Bank earned from Mr. Slatkin. Accordingly, in February 2000, Union Bank extended Mr. Slatkin $4,000,000 in unsecured credit. 81. Union Bank's last-minute extension of credit gave Mr. Slatkin 82. To nurture the Slatkin relationship, Ms. Otto performed what can only be called favors for Mr. Slatkin so that he might give additional banking business to Union Bank. These favors included, but are not limited to, inappropriately responding to SEC subpoenas, lowering the interest rate Union Bank charged Mr. Slatkin even without any request by Mr. Slatkin, and providing Mr. Slatkin with a variance from Union Bank's wire transfer procedures because of the unusually large number of wire transfers Mr. Slatkin used. 83. In summary, Union Bank made the following oral and written representations to investors, all of which were false and upon which the investors relied to their detriment: - That periodic account statements accurately reflected "market values" of "units" of Club; - That "units" of the Club had a "market value." 84. Union Bank also provided substantial acts of assistance to Mr. Slatkin in execution of his ponzi scheme. In addition to their fraudulent misrepresentations, these acts of assistance include, but are not limited to, the following: Failing to follow its own internal trust administration procedures during its administration of the Club; Ignoring its fiduciary duties to the Subclass Members; Making no effort to verify the nature or existence of the purported assets of the Club; Loaning Mr. Slatkin millions of dollars so he could continue to operate his ponzi scheme; Allowing Mr. Slatkin to overdraw his accounts by hundreds of thousands of dollars for months at a time without penalty or any written agreement allowing him to do so; Paying Club members' "withdrawals" when Mr. Slatkin didn't have the money to do so; Treating Mr. Slatkin as Union Bank's client even though Union Bank was the trustee for each of the limited partner's accounts; Continuing the "unitization" and other administrative procedures established by Pacific Inland and Imperial; Allowing Mr. Slatkin to commingle all of the Club's assets; Maintaining a custodial account for Mr. Slatkin that facilitated payment to limited partners; Providing Mr. Slatkin prestige so that he could recruit new investors; Providing Mr. Slatkin with the ability to handle custodial accounts, which gave Mr. Slatkin a large source of money needed to continue the ponzi scheme; Turning its collective head from the multitude of red flags while Mr. Slatkin conducted his illegal operations. 85. While Union Bank made false representations to Mr. Slatkin's victims, and while Union Bank provided substantial acts of assistance to Mr. Slatkin with respect to the execution of his scheme, Union Bank knew, or should have known, that Mr. Slatkin was in fact engaged in actions amounting to a fraud and a breach of his fiduciary duties to all Class Members. For example, Union Bank knew that: the SEC subpoenaed Mr. Slatkin's files multiple times; Clients relied on the accuracy of Union Bank's statements; Mr. Slatkin refused to provide a list of the Club's assets when asked to do so by Union Bank; Mr. Slatkin didn't have the money to fund investor withdrawal requests when made; Investors made an unusually large number of withdrawals through the Club's accounts; Mr. Slatkin did not pay investors "withdrawals" by actually selling stock; Mr. Slatkin acted as an investment advisor even though he was not registered with the SEC; Mr. Slatkin personally paid the Club's limited partners' trustee fees, which was extremely unusual; Mr. Slatkin's bookkeeper lived and worked in New Mexico; Mr. Slatkin did not charge fees for managing his clients' money; None of the Banks had ever dealt with a securities-based investment partnership, like the Club. 86. The Banks treated Mr. Slatkin -- not the trust account holders for whom the Banks were trustees -- as their client. And the Banks did what they did to curry favor with Mr. Slatkin and cater to his desires, not the desires of the limited partners of the Club, and certainly not the hundreds of other investors damaged by the Banks' participation in the ponzi scheme. The Banks all parted with their established procedures, ignored obvious signs that Mr. Slatkin was engaged in illegal activity, and partnered with Mr. Slatkin to provide him with necessary professional and fiduciary services. No Bank ever audited or tried to audit the Club or any aspect of Mr. Slatkin's investment activity. No Bank ever verified or even attempted to verify the existence of any purported assets of the Club or any of Mr. Slatkin's investment activity. The Banks never asked for or received any documents from anyone other than Mr. Slatkin relating to the purported assets of the Club. And the Banks commingled the Club's funds. 87. In short, the Banks "rubber-stamped" the false information Mr. Slatkin provided to them and treated their own clients' accounts as one common pool of fungible and liquid assets. Each Bank, in its own right or through its predecessor in interest, actively participated in Mr. Slatkin's ponzi scheme with constructive and/or actual knowledge of Mr. Slatkin's crimes. Moreover, the Banks either knew that Mr. Slatkin was operating a ponzi scheme, or they should have known it. 88. Why then, did the Banks lend Mr. Slatkin the hand he needed? The Banks' Motive: GREED 89. All of the Defendants had identical motives, and all bent over backwards to get a bigger piece of the financial services pie that Mr. Slatkin needed to operate his ponzi scheme. Mr. Slatkin, and the Club, paid the Banks over $1,000,000 in trustee fees. The Banks had incentive to inflate the market value of the Club's assets since the fees they earned were based on a percentage of the Club's market value. 90. Because of Mr. Slatkin's many personal and business accounts at Union Bank, he was one of Union Bank's most profitable customers in all of Southern California, and received his banking services from Union Bank's specialized Private Banking unit. Union Bank earned hundreds of thousands of dollars per year in net profits from his checking accounts. Union Bank made even more money with respect to the fees and interest it charged on the letters of credit Mr. Slatkin had. The Banks also profited from Mr. Slatkin's relationships with other actual and potential customers, including Earthlink, and University Village, LLC. Harm Caused By the Banks' Conduct 92. The Banks' assistance to Mr. Slatkin allowed him to perpetrate a ponzi scheme that caused over $250,000,000 in out of pocket damages alone. 93. Without the Banks' aid and assistance, Mr. Slatkin's ponzi scheme would not have been as extensive as it eventually became, and would not have lasted nearly as long as it unfortunately survived. The access to large sums of cash the Banks gave Mr. Slatkin allowed Mr. Slatkin to pay fake returns to all of his investors. Without the constant influx of capital, a ponzi scheme cannot survive. Fraudulent returns to investors have to be paid when demanded, or else the ponzi scheme's victims-will soon catch on. In addition, because many of the investors through the Club did not need their returns for many years after their initial investments, Mr. Slatkin did not have to worry about the possibility of having to return those funds until some distant point in the future. Consequently, Mr. Slatkin was able to prolong the life of his ponzi scheme. And as a result of the increased longevity of Mr. Slatkin's fraud, hundreds of investors like Class Representative John Poitras - who invested $15 million less than four months before Mr. Slatkin declared bankruptcy -- entrusted their money to Mr. Slatkin. 94. The Banks' participation in the ponzi scheme had an even more direct effect on the Subclass Members. The Subclass Members believed that the Banks were monitoring the existence and value of the assets of the Club. SPECIFIC ALLEGATIONS Count I: 96. Mr. Slatkin was an investment advisor to all of the Class Members. As a result, Mr. Slatkin` owed the Class Members, who were in effect his clients, and the Club, of which he was General Partner, fiduciary duties.. Mr. Slatkin breached the fiduciary duties he owed to all of the Class Members, as detailed in his plea agreement. 97. The Banks either knew or should have known that Mr. Slatkin was violating his fiduciary duties to his clients and the Club. The Banks, however, were more than just constructively aware of Mr. Slatkin's criminal scheme -they actively participated in the operation of his ponzi scheme. 99. As a proximate result of the Banks' conduct, the Class Representatives, the Class Members, and the Club suffered damage in excess of $250,000,000. 100. The Banks' actions were malicious, fraudulent, oppressive, and intended to injure the Plaintiffs. Consequently, Plaintiffs are entitled to punitive damages. Count II: 101. Mr. Slatkin intentionally defrauded every Class Representative and Class Member. 102. The Banks gave substantial assistance to Mr. Slatkin during the course of his fraud. The Banks knew or should have known that Mr. Slatkin was engaging in fraud. The Banks' actions breached the duty of due. care they owed to those receiving periodic statements, as well as the fiduciary duties it owed to those same investors as trustees of their trust accounts. The Banks' conduct was additionally wrongful in that they provided substantial assistance to Mr. Slatkin's overall operation of the ponzi scheme. 103. As a proximate result of the Banks' conduct, the Class Representatives, the Class Members, and the Club suffered damage in excess of $250,000,000. 104. The Banks' actions were malicious, fraudulent, oppressive, and intended to injure the Plaintiffs. Consequently, Plaintiffs are entitled to punitive damages. Count III: 105. As a custodian and/or trustee of the Subclass Members' and Club's accounts, the Banks owed fiduciary duties to the Subclass Members and to the Club itself. These duties include, but are not limited to: the duty not to commingle assets; the duty to maintain accurate accounting records; the duty to refrain from accepting illegal investment directions; the duty to audit the assets of the Club; the duty to verify the assets of the Club; the duty to review the adequacy of internal controls; and the duty to perform accurate valuations of the assets of the Club. 106. The Banks breached their fiduciary duties to the Subclass Representatives, the Subclass Members and the Club by not performing any of the above-described acts. And as a proximate result of the Banks' failures, the Subclass Representatives, the Subclass Members, and the Club suffered damage in excess of $26,000,000. 107. The Banks' actions were malicious, fraudulent, oppressive, and intended to injure the Plaintiffs. Consequently, Plaintiffs are entitled to punitive damages. Count IV: 108. The Subclass Members opened and/or maintained trust accounts with the Banks in reliance on representations by the Banks. 109. Further, as part of their duties as trustee of the Subclass Members' accounts, the Banks sent periodic statements to each Subclass Member purporting to list the market value of the assets held by the Subclass Members. These statements were materially false. The Banks were either aware of the falsity of the representations, or were reckless in their belief that the representations were truthful. 110. The Banks sent correspondence and periodic statements to induce the Subclass Members to open and/or maintain their accounts, and the Subclass Members acted in reliance on the Banks' false statements. The Subclass Members suffered damages as a consequence of their reliance. Every Subclass Member, upon receipt of the false statements from the Banks, believed that the statements were accurate and relied upon the false information to their detriment. Because the Subclass Members believed the Banks to be reputable financial institutions whose business it was to administer and supervise. the Subclass Members' accounts, the Subclass Members' reliance on the banks' representations was reasonable. 111. As a proximate result of the Banks' conduct, the Subclass Representatives and the Subclass Members, and the Club suffered damages in excess of $26,000,000. 112. The Banks' actions were malicious, fraudulent, oppressive, and intended to injure the Subclass Members. Consequently, Subclass Members are entitled to punitive damages. 114. As a proximate result of the Banks' conduct, the Subclass Representatives, the Subclass Members, and the Club suffered damage in excess of $26,000,000. Count VI: 115. The Banks engaged in the above described acts while in a fiduciary relationship with all of the Subclass Members, and with the Club itself. As a custodian and/or trustee of Subclass Members' accounts, and of the Club's accounts, the Banks' conduct constitutes a breach of their fiduciary duties and of their respective duties of reasonable care. The result of these breaches was to convince the Subclass Members that their money was safe, that the periodic statements issued by the Banks accurately reflected the values of their accounts, and that Mr. Slatkin was a legitimate investment advisor. Such reliance was reasonable, and resulted in significant damage to the Subclass Members and to the Club. 116. As a proximate result of the Banks' conduct, the Subclass Representatives, the Subclass Members, and the Club suffered damage in excess of $26,000,000. 117. The Banks' actions were malicious, fraudulent, oppressive, and intended to injure the Plaintiffs. Consequently, Plaintiffs are entitled to punitive damages. Count VII: 118. The Banks breached a duty of reasonable care to their own clients, including to the Club, to ensure the accuracy, legitimacy, and existence of the assets of the Club. The Banks further breached their duties of reasonable care by commingling the assets of the Club, and by allowing Mr. Slatkin to take the Subclass Members' funds even though the Banks were aware that Mr. Slatkin was not a registered investment advisor. These breaches of duty resulted in the Subclass Members loss of all of the money entrusted to Mr. Slatkin. All Defendants are thus liable to the Subclass Representatives, the Subclass Members, and the Club for the amount actually and proximately caused by the above-described negligence. 119. As a proximate result of the Banks' conduct, the Subclass Representatives, the Subclass Members, and the Club suffered damage in excess of $26,000,000. Count VIII: 120. The Banks' actions constitute unfair, illegal, and fraudulent business practices within the meaning of Cal. Bus. & Prof. Code §§ 17200 et seq. Accordingly, Plaintiffs may obtain all remedies and penalties authorized by the statute, including without limitation, restitution, disgorgement, and other penalties for each unfair, illegal, or fraudulent business practice, and attorneys' fees. 121. For aiding and abetting breach of fiduciary duty, plaintiffs seek compensatory damages in an amount in excess of $250,000,000, the exact amount of which will be proved at trial, interest on that amount, and punitive damages pursuant to California Code of Civil Procedure § 3294. 122. For aiding and abetting fraud, plaintiffs seek compensatory damages in an amount in. excess of $250,000,000, the exact amount of which will be proved at trial, interest on that amount, and punitive damages pursuant to California Code of Civil Procedure § 3294. 123. For breach of fiduciary duty, plaintiffs seek compensatory damages in an amount in excess of $26,000,000, the exact amount of which will be proved at trial, interest on that amount, and punitive damages pursuant to California Code of Civil Procedure § 3294. 124. For fraud, plaintiffs seek compensatory damages in an amount. in excess of $26,000,000, the exact amount of which will be proved at trial, interest on that amount, and punitive damages pursuant to California Code of Civil Procedure § 3294. 125. For negligent misrepresentation, plaintiffs seek compensatory damages in an amount in excess of $26,000,000, the exact amount of which will be proved at trial and interest on that amount. 126. For constructive fraud, plaintiffs seek compensatory damages in an amount in excess of $26,000,000, the exact amount of which will be proved at trial, interest on that amount, and punitive damages pursuant to California Code of Civil Procedure § 3294. 127. For violation of California Business and Professions Code § 17200 et seq., Plaintiffs seek all remedies to which they are entitled under the statute, including but not limited to monetary penalties, disgorgement, and attorneys' fees. 128. For all counts, Plaintiffs request attorneys' fees, costs of suit and any other order or measure of relief that the Court deems just and proper. DATED: September 4, 2002 Respectfully submitted, [Wynne Signature] Richard L. Wynne Attorneys for Plaintiffs [1] Attached as Exhibit 1 is a copy of Mr. Slatkin's plea agreement. [2] Plaintiffs have conducted substantial investigation, the results of which form the basis for the following allegations. Plaintiffs' investigation to date has included the following: review and analysis by attorneys, accountants and expert witnesses of nearly two million pages of documents recovered by the FBI, the United States Attorneys' Office, and the bankruptcy trustee; review and analysis of tens of thousands of pages of documents obtained from dozens of subpoenas served pursuant to Bankruptcy Rule 2004; and obtaining sworn testimony from current and former officers of the Banks pursuant to subpoenas served pursuant to Bankruptcy Rule 2004. As a result of this investigation, Plaintiffs not only have evidence to support the allegations contained herein, but also have the most complete information available to compile an accurate list of Class Members. As a result, Plaintiffs are best situated to provide notice to any potential member of the Class. [3] Exhibit 4 is merely representative. Imperial Trust considered it to be a "form letter" which it sent to many investors. [4] Today, Mr. Eisen says he "didn't really mean it" when he wrote Mr. Slatkin that letter. |